Will the energy transition really fail because of the demand for oil?


US President Joe Biden began his tenure in early 2021 with the revocation of the presidential license for the Keystone XL oil pipeline, clearly declaring his goal of promoting clean energy solutions at the expense of oil and gas. Back in the fall of 2021, the Biden administration asked the OPEC + group to produce more oil than planned to help American households see some relief at the pump where gasoline prices soared to a seven-year high.

The apparent clash of energy policies made it clear once again that the last year before the pandemic, 2019, was not the year of peak oil demand, as some had suspected in early 2020, considering that global oil consumption picked up again in 2021 as economies grew recovered, lockdowns were lifted, and the US saw record high demand. Total implied oil consumption in the United States rose to a record 23.191 million bpd for the week ending December 10. The previous record was set in the week ending August 27 last year, which had hit new highs of 22.820 million bpd.

Oil demand is falling

While pushing for green energy and a moratorium on state oil and gas drilling, the Biden administration struggled with high gasoline prices – a pain for any president’s approval ratings – as a result of the recovery in US and global oil demand international crude oil prices.

The US government’s struggle is one of the best examples of the dilemma most world leaders faced in 2021, years, possibly decades, to come: the need for affordable energy, including fossil fuels , while advances in energy transition and technologies make it possible to replace a significant part of the oil and gas demand with green energy. The energy crisis in Europe, which has contributed to higher energy commodity prices in recent months, has shown that oil and gas will continue to play a critical role in meeting rising global energy needs. It also showed that renewables cannot replace fossil fuels overnight and that the transition and all net zero aspirations will not take place for decades.

Long-term push for green energy sources is an admirable endeavor, but households / voters tend to appreciate short-term corrections to high gasoline prices and rising energy and heating bills.

US slate disappointed by Biden

The US government has tried to do everything possible to bring the highest gasoline prices down in America. It has not had a spectacular success since the summer of 2021. That’s largely because international oil prices are usually the main driver of US gasoline prices, and oil has seen quite a spike last year, with Brent Crude prices hitting an annual high of $ 86 a barrel in late October before breaking pulled back to around $ 80 in the last few days.

“That duality – finding more oil to keep the economy going while pushing for low-carbon alternatives – has been a constant theme for 2021,” notes Dan Graeber, Houston Chronicle correspondent.

The theme continues through 2022, especially after the U.S. government asked OPEC + for help in curbing high gasoline prices in late 2021, rather than first turning to domestic industries, which rest on huge oil and gas reserves.

However, the US shale sector appears reluctant to reinvest too much in drilling new wells to reward shareholders after years of poor investor returns. The American oil industry is also frustrated by the neglect and proposed policies of the Biden administration that weighs on the sector and makes domestic oil production more expensive, while increasing reliance on foreign oil, including producers with lower environmental standards.

The US shale was not satisfied with the government’s continued engagement with OPEC + in oil supplies, while there are – and plentiful – in America.

“I think first you stay home, ask your friends and ask your neighbors to do so. And if we can’t make it, call other countries, ”Vicki Hollub, CEO of Occidental, told CNBC in November.

Related: White House praises OPEC for production decision

Since then, the government has announced it will release 50 million barrels of oil from the US Strategic Petroleum Reserve (SPR) to bring gasoline prices down, and continues to urge and praise OPEC + to bring more supply to market every month.

“We applaud the decision by OPEC Plus to increase production even further,” White House press secretary Jen Psaki said this week after the group decided to increase its oil production by an additional 400,000 barrels a day in February to increase production Cuts continue to loosen month.

“Our goal is to make sure that the supply out there matches the demand,” Psaki said at a press conference.

This goal of now having an affordable and reliable energy supply and to work for more renewable sources in the energy mix in the longer term should give the administration food for thought as to how and from where it handled its own oil and gas industry in the past year, the world’s largest oil consumer , America, sources the oil to meet demand.

By Tsvetana Paraskova for Oil Genealogie

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