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 that society is running out of time to avoid dangerous climate change caused by fossil fuel emissions.
Politicians and pundits say we must choose which problem to solve — protect the economy or protect the planet. But the twin crises of energy and climate have the same solution: the fastest possible transformation of our global energy system.
To those who want to prioritize the energy crisis, they must contend with the reality that there are no big spigots likely to be opened. Pre-Covid, oil and gas production were near record highs. Recent company announcements offer only marginal bumps in production, not enough to replace Russian oil or change prices at the pump.
And despite their rhetoric, neither producers nor their financiers show any interest in making the massive investments necessary to change these fundamentals.
Industry hasn’t forgotten crashing prices during the pandemic, or the deep plunge in 2014 and 2015. Having seen vast amounts of capital evaporate, investors are clear they want dividends and stock buybacks, not new wells. One need only check the latest earnings call to see that producers are listening.
And despite its ambitious climate plans on other fronts, the Biden administration has openly encouraged the energy sector to drill. It has even approved new oil and gas permits even faster than its predecessor. Still, thousands of these leases sit undeveloped. Government is certainly not the roadblock here.
The twin crises of energy supply and climate have the same solution Share on XAs oil and gas providers sit on their hands (and cash) in the face of an ever-warming planet, even top companies largely acknowledge that the end of their preeminence is nearing. Even the lowest-cost operators in the Middle East and South Asia have started planning for a different future. But many companies are letting governments know they would prefer to put it off a little longer.
Alas, 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.
The same report notes these same five companies have collectively committed a total of just $25bn for energy transition investments between now and 2030.
Simply plowing money back into fossil fuel production only gets us more of the same: devastating bouts of volatile prices, geopolitical crisis and unsavory compromise, and an increasingly dangerous climate.
No one is asking energy companies to dig their own graves. What we do expect is that they will put the massive windfall they are currently receiving to work deploying the technologies the IPCC says is necessary to avoid a climate crisis, and which put our economies on a more stable footing.
Successful transition of the global energy system is no small feat. No one wants governments to leave citizens shivering in the dark or stranded at the fuel pump. But we know that every extra ton of CO2 or methane released now will have to be reckoned with later. Slowing the inevitable process offers a false sense of near-term security, while making our fight to preserve the climate even harder.