Is It Time To Abandon the Idea of Phasing Out Oil and Gas?

Big Oil companies are skeptical of the green transition and believe it is failing.
Oil majors continue to heavily favor fossil fuel production despite investments in green energy.
There are challenges to achieving a successful global green transition, but progress has been made in renewable energy and clean technology.

Despite feigning interest, Big Oil still appears to oppose the global green transition and could well stand in its way. As Saudi’s state oil company leader condemns the green transition and calls for long-term oil production, other major industry players are voicing their scepticism around renewable energy and clean tech. Despite large investments into green energy and carbon-cutting projects from several oil and gas majors, Big Oil still appears to be heavily favouring fossil fuel production.

This month, the CEO of Saudi Arabia’s state-owned oil company Aramco, Amin Nasser, said that the energy transition was failing and called for policymakers to abandon the “fantasy” of phasing out oil and gas, with the demand for fossil fuels expected to continue growing in the coming years. During a panel interview at the CERAWeek by S&P Global energy conference in Houston, Nasser stated, “In the real world, the current transition strategy is visibly failing on most fronts as it collides with five hard realities.” He went on to say, “A transition strategy reset is urgently needed, and my proposal is this: We should abandon the fantasy of phasing out oil and gas and instead invest in them adequately reflecting realistic demand assumptions.”

Nasser has previously caught the energy world’s attention by claiming that oil and gas demand will not peak any time soon, contrary to claims by many energy experts. This came in response to an International Energy Agency (IEA) which predicted that oil, gas and coal demand would peak in 2030. Nasser believes that the IEA view is overly U.S. and Europe-centric, and discards growing demand for fossil fuels in other areas of the world, particularly those countries in the Global South undergoing industrialisation.

The CEO of the world’s largest oil producer does not believe alternative energy sources will be rolled out on the scale required to displace hydrocarbons in the short- to mid-term, despite massive levels of investment in the sector in recent decades. At present, wind and solar energy contribute just three percent of the global energy supply, while electric vehicle (EV) penetration stands at around three percent, Nasser emphasised. In contrast, hydrocarbons continue to account for around 80 percent of the world’s energy supply, falling by just three percent in the last quarter of a century. While the demand for coal is expected to fall, this will be largely replaced by a higher global demand for natural gas – the ‘cleaner’ fossil fuel. Nasser believes that governments are in denial and that a shift to green will not provide enough energy to meet the growing global demand.

During the Houston Conference, other oil and gas executives echoed Nasser’s views on the need for more investment in oil and gas. The CEO of Shell, Wael Sawan, highlighted the difficulties faced by the energy industry due to government bureaucracy in Europe, which was slowing the rollout of renewable energy projects. Meanwhile, Exxon Mobil’s CEO Darren Woods emphasised the continued high demand for petroleum products. He stated, “I think one of the things the policy to date and a lot of the narrative has been very focused on is the supply side of the equation and hasn’t addressed the demand side of the equation. And the impact that price has on demand.” He explained, “At the same time, the cost of converting and moving to a lower-carbon society if that cost is too high for consumers to bear, they won’t pay. And we’ve seen that play itself out in Europe, with some of the farm protests and the yellow vest protests a year or so ago.”

Following the conference, green campaigners criticised Big Oil for undermining the importance of the green transition and global efforts to tackle climate change. David Tong, the global industry campaign manager at advocacy group Oil Change International, stated “It’s no surprise to see misleading claims like this coming at CERAWeek, because fossil fuel companies are the biggest cause of the climate crisis, and their continued political influence is the biggest obstacle to solving it.”

Many energy experts believe that oil majors should not be given such an important part to play in the global green transition, given their significant role in producing greenhouse gas emissions. The oil industry has long fought to quash the development of green energy projects for their own financial benefit, and it seems unlikely that they would give up their healthy oil and gas revenues in favour of a green transition. The oil industry has fought governments for decades over the development of clean technologies. A recent analysis shows that the industry lobbied lawmakers to block support for low-carbon technologies such as solar panels, electric cars and heat pumps as far back as the 1960s.

There are several challenges to achieving a successful global green transition, and it still appears a long way off – given the current contribution of renewable energy to the global energy supply. However, significant progress has been seen in renewable energy and clean technology over the last decade, strongly supported by high levels of public and private funding in the sector, which is expected to continue. Further, while demand for oil and gas is growing, much of this demand is expected to shift to green alternatives as they become available.

By Felicity Bradstock for Oilprice.com