Surging global demand for fossil fuels in the wake of the Ukraine crisis is threatening the transition to renewable energy
by Fred Heritage
Saudi Arabia’s state-owned oil and natural gas company, Saudi Aramco, has become the world’s most valuable company, taking the title from Apple after generating income of US$39.5bn in the first quarter of 2022, according to an article for CityAM by Louis Goss.
Volatile global commodity prices since the start of 2022 have resulted in Aramco’s soaring income, writes Goss. The firm’s Q1 takings are an 82% increase compared to the same period in 2021 and have set a record for the company in terms of highest quarterly earnings since it first floated on the stock market in 2019.
According to Goss, Aramco’s stated reasons for its income boost are “buoyant prices caused by low stocks, geopolitical turmoil, and returning demand”. He adds that crude prices surged from lows of US$75 per barrel in January to highs of more than US$125 per barrel in March.
Crude control
Aramco becoming the world’s most valuable company underlines the critical role that oil and gas still plays in the world, according to an article for Bloomberg UK by Kevin Crowley.
He writes: “Buying the future through tech stocks is taking a back seat to the concerns of the present, as fossil fuels reassert their critical importance in all aspects of daily life ... The global economy still runs on oil and gas, and surging demand after the pandemic combined with Russia’s invasion of Ukraine is causing a shortfall in supplies that plays right into the hands of traditional energy producers … nine of the top ten stocks in the S&P 500 Index this year are oil and gas companies.”
Game changer
While the slowing of global oil production during the Covid-19 lockdowns in the past two years was seen by some as the start of a faster transition to renewable energy, journalist Philippa Nuttall, in the New Statesman writes: “The war in Ukraine has changed the discourse on energy, but not necessarily in the way that climate activists were hoping for.”
Rather than spurring the West into taking greater action on transitioning to renewables, Nuttall argues that the war, as it’s gone on, has broken the environmental resolve of certain EU leaders and caused some countries, like the UK, to “double down” and start increasing domestic oil and gas production, while also asking big oil producers like Saudi Arabia to increase output.
She adds: “In addition to calls, on paper at least, to accelerate the energy transition, ‘security’ is gaining ever greater prominence.” Nuttall highlights comments from UK business and energy secretary Kwasi Kwarteng who, after being interrupted by climate activists at a recent business lunch, tweeted:
Renewing goals
In contrast to the UK, Germany is saying it will accelerate its renewable energy transition because of Russia’s war in Ukraine. In an article in National Geographic, writer Andrew Curry says that along with recently renewed pledges to stop importing oil from Russia by the end of 2022, and to give up coal entirely by 2030, it also aims to get 80% of its electricity from renewable energy by then.
“In the long term, the crisis has only reinforced Germany’s determination to get off fossil fuels entirely, and to accelerate the Energiewende – the clean-energy transition it began some 30 years ago”, he adds.