“The idea that we can turn off the taps and shut down fossil fuels tomorrow is obviously ridiculous and naive,” Standard Chartered CEO Bill Winters told CNBC this week. “Well, first of all, it is not going to happen and secondly, it would be very embarrassing.” The reason why this is not going to happen should be obvious and can be gleaned from a quick glance at any oil price chart. Global demand for oil is currently greater than supply. so the prices are high. What followed the loss of only a relatively tiny fraction of the global supply of anti-Russian sanctions should suggest what would have happened if all oil production had stopped. However, the pressure on the oil industry remains and is intensifying. Two years ago, the International Energy Agency said that investment in new oil and gas exploration should be phased out by the end of 2020 because we would not need more oil and gas in the future. And now, the Secretary-General of the United Nations is calling the oil-producing countries “dangerous roots” for increasing fossil fuel production. The IOC, for its part, has turned to calls for less investment in oil and gas. Within months, the industry reversed its message: it is now calling on oil producers to produce more oil and gas. How long will it take for UN Antonio Guterres to join these calls for more oil and gas because prices have become unbearable? Demand for oil, meanwhile, remains strong despite protests from environmentalists, despite complaints and calls for less investment in oil and gas. In its report on the oil market in March, the IEA said oil demand in 2022 would increase by 2.1 million bpd from last year. This, in context, is roughly the same as Nigeria and Venezuela’s combined oil production since March this year, according to the latest OPEC Monthly Oil Market Report. However, oil demand is not static and this month the International Energy Agency revised its demand forecast to 1.9 million bpd from last year. This is about the same as the combined production of Libya and Algeria. OPEC also revised its demand forecast downwards, although it still expects a stronger increase in demand from the ILO, to 3.7 million bpd. The reason for the revisions is not the action of climate NGOs and the European Government on the transition from oil to renewable energy. In contrast, the reason for the reviews has nothing to do with climate-related issues. Instead, it has to do with inflation forecasts. The demand for crude oil is a rather inelastic kind of demand. This means that this demand is rather stable even when prices are rising or falling. The reason for this inflexibility is the global economy’s dependence on oil – a dependence that so many organizations and governments have tried to challenge for years with limited success. The longevity of oil demand is also supported by the emerging debate to make the energy transition fair. An idea that was out of the public eye as students protested across Europe for urgent action on climate change, the idea of a fair transition finally came to the fore. The idea, as described by Greenpeace, is “to move to a more sustainable economy in a way that is fair to everyone – including people working in polluting industries.” Indeed, advocates of a fair transition focus on the most important aspect of turning to less fossil fuel use from an individual’s point of view: that no one suffers the adverse consequences of this change. However, in addition to “people working in polluting industries”, the idea of a fair transition also applies to entire nations in the developing world. Unlike proponents of climate change in the so-called First World, these nations have not had the opportunity to reap all the economic and social benefits of oil-based economies that many say were industrialized and even post-industrialized precisely because of their generous use. fossil fuels. The developed world, advocates of a just transition, argue, has no right to deny the developing world these benefits simply because it has reached a level where it is financially comfortable enough to deal with issues such as the impact of human activity on the environment. It is this idea of a fair transition that will help secure the future of fossil fuels for quite some time. Despite promoting renewable energy as cheaper than fossil fuels, the fact is that large, rich economies have the largest capacity, with poorer nations lagging far behind, even in the EU. Oil, however, is everywhere – even in the poorest of the poorest countries. And it will stay there for decades. By Irina Slav for Oilprice.com More top readings from Oilprice.com:
