Oil-Rich Nations Face Growing Pressure To Go Green

Governments in long-established oil-rich nations around the world are coming under fire for their decisions over oil and gas versus renewable alternatives. The once-coveted natural resource is now a question of great contention. But how will the oil industry fare over the coming decades as governments strive for green while managing the ongoing need for fossil fuel to power the world?  A strong oil industry used to guarantee countries with employment opportunities, strong revenues, and geo-political power. However, the recent push to curb oil and gas exploration has shifted this privilege to become somewhat of a burden. 

This has been exacerbated further during the Covid-19 pandemic, which drove down global demand for oil and gas, and made many question whether the reliance on fossil fuels should ever return to pre-pandemic levels. In 2021, international organisations such as the IEA and the UN’s IPCC have pushed the idea of decarbonisation and the need to curb fossil fuel use, seeing the lull in demand from 2020 as a useful stepping stone towards the transition to renewable alternatives.

But as the governments to many North American and European countries respond to this pressure, they face the ongoing challenge of the growing demand for oil and gas as Covid restrictions are lifted and people return to work and travel, as well as the significant under-preparedness of the renewable energy industry. With limited supply and rising prices, governments are coming under fire both for doing too little to respond to climate change and for not supplying enough low-priced energy to the market in a time of economic hardship. 

In the U.S., President Biden has done a 180 on his predecessor’s energy choices by re-joining the Paris Agreement, cancelling a key pipeline development and halting drilling auctions within his first six months in government. This was all part of his election policy promise to take climate change more seriously.  

But now Biden is being accused of looking to OPEC+ for oil provisions, after cutting back on national developments and the further expansion of North American oil. 

Likewise, the U.K. government has announced aims of net-zero carbon emissions by 2050, responding to international calls to decarbonise. However, the Conservative government is continuing to develop North Seaprojects, with many highlighting the hypocritical nature of these actions. 

The potential movement away from fossil fuels is of particular significance for Scotland as questions around independence following Brexit rise to the surface again, but with what financial backing? North Sea oil has fuelled the Scottish independence movement since the 1970s, but a movement away from fossil fuels could quash this opportunity.  

In addition, while much of the British public is calling for greater action on climate change, many Scots are questioning the U.K.’s preparedness for living without fossil fuel. At present, renewables only provide an average 30 percent of current electricity demand, meaning if the country was to switch to purely renewable power households would have to decrease their electricity usage by 70 percent. 

Meanwhile, Norway continues to back its strong oil sector as it also develops a world-leading renewables programme. Norway produces some of the highest levels of carbon emissions in the world across its overseas oil and gas operations, while at the national level, Norway runs almost entirely on renewable power. 

This is perhaps the best example of good governance, as Norway does, at the very least, appear to be successfully pursuing oil and gas developments to bring in revenue which will be largely invested in the non-oil sector, while also leading the world in the energy transition.  

So, how do governments respond to pressures from international organisations, voters and environmentalists around the world while maintaining their national economies and employment levels – several of which continue to rely on energy revenues, as well as responding to the ongoing demand for fossil fuels during the long-term transition to renewable alternatives?  

Workers, investors and big oil are criticising governments for moving away from oil too quickly, before the world is ready for renewables, with growing populations and industries that continue to rely on fossil fuels. While environmentalists and international organisations criticise Western governments for their slow progress in line with The Paris Agreement and decarbonization targets.  

One way in which we are seeing governments respond to pressures from both sides is in the development of carbon capture and storage technologies, in an attempt to reduce carbon emissions from the oil and gas industry, and encourage CCS use for the development of hydrogen projects.  

But as the challenges mount, governments are left in limbo. Should they team up with Big Oil to encourage decarbonisation through greater investment in CCS and other technologies, while continuing to produce fossil fuels well into the next decades. Or should they call it quits and push their investments towards renewable alternatives? It seems, at present, that a balance of the two is required and governments across North America and Europe will inevitably face criticism from both sides for the foreseeable future. 

Source: https://oilprice.com/Energy/Crude-Oil/Oil-Rich-Nations-Face-Growing-Pressure-To-Go-Green.html