As the world reels from spikes in oil and gas prices, the fallout from Russia’s invasion of Ukraine has laid bare a dilemma: Nations remain extraordinarily dependent on fossil fuels and are struggling to shore up supplies precisely at a moment when scientists say the world must slash its use of oil, gas and coal to avert irrevocable damage to the planet.
While countries could greatly reduce their vulnerability to wild swings in the oil and gas markets by shifting to cleaner sources of energy such as wind or solar power and electric vehicles — which is also the playbook for fighting climate change — that transition will take years.
So, for now, many governments are more urgently focused on alleviating near-term energy shocks, aiming to boost global oil production to replace the millions of barrels per day that Russia has historically exported but which is now being shunned by Western nations.
The two goals aren’t necessarily at odds, officials in the United States and Europe say.
Yet some fear that countries could become so consumed by the immediate energy crisis that they neglect longer-term policies to cut reliance on fossil fuels — a shortsightedness that could set the world up for more oil and gas shocks in the future as well as a dangerously overheated planet.
“In the short term we have to try to prevent this crisis from creating an economic catastrophe,” said Sarah Ladislaw, a managing director at RMI, a nonprofit that works on clean energy issues. “But there are also longer-term steps we need to take to reduce our underlying energy vulnerabilities.” Otherwise, she said, “we’ll end up right back in this situation several years down the road.”
Oil prices were already high even before war broke out in Ukraine, as the global economy rebounded from the pandemic and demand outstripped supply. But Russian President Vladimir Putin’s invasion in late February caused the price of crude to skyrocket, approaching $130 per barrel this week. On Tuesday, U.S. President Joe Biden said the United States would ban oil imports from Russia, which before the war produced 1 out of every 10 barrels of oil the world consumed, a move that further roiled markets.
“The decision today is not without cost here at home. Putin’s war is already hurting American families at the gas pump,” Biden said.
Administration officials, who have often clashed with domestic oil and gas producers over Biden’s climate change policies, took a different tone Wednesday and asked the industry for help. The move came as gasoline prices averaged $4.25 per gallon nationwide, the highest levels since 2012 after adjusting for inflation.
“We are on a war footing, an emergency, and we have to responsibly increase short-term supply where we can right now to stabilize the market and to minimize harm to American families,” Energy Secretary Jennifer Granholm told oil and gas executives Wednesday at an industry conference in Houston. “That means you producing more right now, where and if you can.”
Granholm said that ramping up oil and gas production in the short term would not mean abandoning the administration’s goal of moving away from fossil fuels in order to fight global warming. Biden has vowed to slash America’s greenhouse gas emissions at least 50% below 2005 levels by 2030.
“Yes, right now, we need oil and gas production to rise to meet current demand,” Granholm said. But, she added, “we’re serious about decarbonizing while providing reliable energy that doesn’t depend on foreign adversaries.”
Oil use in industrialized countries dropped between 2005-12, the last time prices were high, but consumption has flatlined since, save for a dip during the pandemic.
It remains uncertain how much the United States will actually do to curb its dependence on fossil fuels in the years ahead. In its most recent annual outlook, the U.S. Energy Information Administration said that oil and gas were expected to remain the nation’s leading energy sources through 2050 without a major shift in policy. That is the same year by which, scientists say, nations need to largely eliminate fossil fuel emissions if they want to prevent the most catastrophic effects of global warming.
The administration’s main legislative proposal for speeding up the transition to cleaner energy, the Build Back Better Act, remains in limbo. That bill includes $555 billion in spending to deploy low-carbon technologies like wind, solar, geothermal and nuclear power. Buyers of electric vehicles would receive up to $12,500 in tax credits. The bill also has billions of dollars to make buildings more energy efficient and replace gas-powered furnaces with electric versions.
In theory, those measures could go a long way toward shrinking America’s reliance on oil and gas, although they would take time to work. A recent analysis by think tank Energy Innovation estimated that the bill’s electric vehicle provisions could cut U.S. oil consumption by 180 million barrels per year by 2030, more than double what the nation imported from Russia last year. Other provisions to clean up power plants, buildings and industry could cut U.S. natural gas use by 4.7 trillion cubic feet per year by 2030, equivalent to 85% of what Europe imported from Russia last year.
But the legislation is stalled in the evenly divided Senate. No Republicans support it, and Sen. Joe Manchin, D-W.Va., a key swing vote, has said he opposes the current version.
Some oil and gas executives in Houston this week said that while they acknowledge the need to tackle climate change, that effort should take a back seat to the more urgent need to increase fossil fuel production and avoid economic disruption.
“Since the consequences of climate are going to be 30 or 40 years down the road, people are going to focus a lot more on what is happening now. As they should,” said Charif Souki, chair of Tellurian Inc., a developer of liquefied natural gas projects. “We can come back to climate.”
The consensus among scientists is that the dangers of climate change are already apparent now and affecting every corner of the planet, from destructive storms to fatal heat waves to record drought.
At the same time, oil executives conceded that they may face limits to how much additional oil and gas they can produce in the short term. U.S. oil production is already nearly back to pre-pandemic levels, just below 12 million barrels per day. The Energy Information Administration predicted Tuesday that output could rise to 13 million barrels per day by 2023.
“Nobody really anticipated needing to grow significantly,” Vicki Hollub, CEO of Occidental Petroleum, said during a panel discussion at the conference. “That’s the challenge now. If you didn’t plan for growth, you’re not going to be able to achieve growth today.”
Hollub said that supply-chain constraints were hampering the ability for U.S. oil and gas producers to rapidly increase production and that labor shortages were making it difficult to find qualified workers. At the same time, investors burned by previous price crashes have demanded that companies focus more on returning cash to shareholders instead of investing in growth.
Europe faces an even bigger challenge. Since 2010, the continent has made major investments in renewable energy and efficiency measures that have helped reduce its consumption of natural gas. But domestic production of gas has declined even faster, which means that it is increasingly reliant on exports from places like Russia, which supplies nearly 40% of the gas that Europeans use for heat and electricity.
On Tuesday, the European Union outlined a proposal to cut Russian gas imports by two-thirds this year. In the short term, the plan envisions that Europe would secure liquefied natural gas supplies shipped from elsewhere around the world. Further out, it would require speeding up deployment of cleaner alternatives, such as wind and solar power, implementing energy efficiency measures and accelerating production of green hydrogen to power heavy industry instead of gas.
But Nikos Tsafos, an energy expert at the Center for Strategic and International Studies, said that there are major questions as to how quickly Europe can get off Russian gas. For one, the continent’s domestic gas fields are steadily declining, which means there is more to replace each year. And importing more liquefied natural gas from abroad might mean rerouting shipments from places such as Pakistan, Thailand or Bangladesh, forcing those countries to adjust.
Europe also faces tensions between short-term energy security needs and its overarching climate goals, officials said.
Frans Timmermans, vice president of the European Commission, acknowledged that some countries may need to rely more on coal in the near term as they cut back on natural gas consumption. Coal, the dirtiest fossil fuel, typically produces twice as many heat-trapping carbon dioxide emissions as gas when burned for energy.
“Let me be crystal clear. There is no future in coal,” Timmermans said in a recent interview. But, he said, some EU countries are likely to keep burning it longer as a substitute for Russian gas until they can build out enough renewable energy to replace it. “Then we will have to do the math to see what that means for emissions,” he said.
John Kerry, Biden’s climate envoy, said that ramping up oil and gas production now to help Europe replace Russian gas is not incompatible with climate goals. “Look, supply is for obvious reasons necessary; it’s front and center, and it has to be,” he said, adding, “We’ve never seen providing energy security as running against the idea of a transition and getting to net zero by 2050.”
Kerry said that there is still time to curb consumption of fossil fuels despite the short-term push to pump more oil.
“If it’s six, seven months now that we’re trying to adjust to volatility, we can still move forward,” he said. “We’re not talking about unabated burning for the next 10 years. That would be absurd and unacceptable.”
Russia’s invasion of Ukraine in late February came just as the Intergovernmental Panel on Climate Change, a body of scientists convened by the United Nations, published an exhaustive report finding that the dangers from climate change are bigger and unfolding faster than previously expected and that humanity may struggle to adapt to the consequences unless greenhouse gas emissions are quickly reduced in the next few decades.
“They are two sides of the same coin,” said John Doerr, a venture capitalist now focused on the energy transition. “We need energy security because we’ve got an energy crisis. We’ve also got a climate crisis. The same week that Putin unleashed his army, the IPCC put out yet another report that mounted even more evidence that we are out of time.”
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