Today’s energy system has become a liability we can no longer afford. As dependence on oil and gas restrains the response to Vladimir Putin’s war on Ukraine, scientists on the Intergovernmental Panel on Climate Change this week issued yet Another urgent warning Society is running out time to prevent dangerous climate change from being caused by fossil fuel emissions.
Politicians and pundits say we must choose which problem to solve — protect the economy or protect the planet. The solution to both the energy and climate crises is the same: the fastest possible transformation in our global energy system.
If you want to prioritize the energy crisis, you must accept the fact that there are not many big spigots that will be open. Pre-Covid, oil production was at an all-time high. Recent company announcements only offer marginal bumps in production. This is not enough to replace Russian oil and change the pump prices.
Despite their rhetoric, neither producers or financiers are interested in making the huge investments necessary to change these fundamentals.
Industry hasn’t forgotten crashing prices during the pandemic, or the deep plunge in 2014 and 2015. Investors are now clear that they want dividends and stock purchasebacks after witnessing huge amounts of capital disappear. To see that producers are listening, one only has to check the most recent earnings call.
Despite its ambitious climate goals on other fronts and openly encouraging the drilling of oil and gas, the Biden administration encouraged the sector. It has approved new oil-and-gas permits faster than any of its predecessors. However, thousands of these leases remain undeveloped. The government is not the only obstacle.
Even the most powerful companies are beginning to realize that oil and gas providers are losing their power in the face a warming planet. Even the lowest-cost companies in South Asia and the Middle East have begun to plan for a different future. However, many companies are telling governments they would rather delay it.
Time is not on our side. The International Energy Agency says that achieving a “net-zero” carbon neutral energy system by 2050 that ensures stable, universal access at affordable prices effectively requires companies to stop developing new oil and gas fields now.
Meanwhile, at current prices, analysts at Wood Mackenzie say the five supermajors — ExxonMobil, Chevron, Shell, TotalEnergies and BP — could generate over $200bn of free cash flow on upstream production by the end of this calendar year. That’s 50% more than the previous record in 2021 and three times the annual average since 2000.
This report also notes that these five companies have committed just $25bn to energy transition investments between now- 2030.
Simply putting money into fossil fuel production does not make it any safer.
Nobody is asking energy companies for their graves to be dug. We do expect them to use the enormous windfall that they are receiving now to deploy the technologies that the IPCC states are necessary to avoid a crisis in the climate and to put our economies back on a stronger footing.
The global energy system’s successful transition is no small feat. It is not the intention of anyone to see their citizens in the dark or stranded at fuel pumps. But we all know that every extra ton CO2 or methane that is released now must be addressed later. While slowing down the inevitable process gives us a false sense that we are in control, it makes our fight to protect the climate even more difficult.