As US and Europe push climate policies, Middle East and Russian state oil producers stand to benefit

Reposted from the South China Morning Post

The View by Tilak K. Doshi

  • In the long term, US and EU green policies to reduce fossil fuel investments will increase the market share of Middle Eastern and Russian oil and gas producers
  • Global demand for fossil fuels shows no sign of slowing as developing countries aim to grow rapidly to meet the aspirations of their citizens

In mid-May, the International Energy Agency – the rich world’s pre-eminent adviser on energy affairs – issued a bombshell report calling for an immediate end to all new investments in the global oil and gas sector, so the world could reach net zero carbon emissions by 2050.

A few days later, the Group of 7 confirmed its support for the net zero goal, “by 2050 at the latest”. Yet, less than a month later, the IEA bafflingly called on OPEC+ countries to increase oil output to avoid an upward price shock as Brent crude prices – the international benchmark – hit three-year highs.

The resumption of economic growth around the world, as countries ease pandemic-related restrictions on business and travel, is driving global energy demand.

Global oil demand is now back at about 95 per cent of the pre-Covid-19 high of just over 100 million barrels a day in 2019, and is expected to be higher in 2022. Oil has been trading at over US$70 a barrel in recent weeks.

Falling inventories and the improved demand outlook have led market observers to suggest that oil priced at US$100 per barrel by the end of the year is entirely possible.

The Middle East’s oil exporters stand to gain from higher prices over the next two years, especially since in the US, the Biden administration has adopted an “all-of-government” approach to hobble domestic oil and gas production and fight climate change.

In the long term, the green policies pushed by the US and Europe to reduce investments in fossil fuels will increase the market share of Middle Eastern and Russian oil and gas producers such as Saudi Aramco, Abu Dhabi National Oil Company (ADNOC) and Rosneft.

Given the combined government and shareholder pressure on international oil companies – including Exxon, Chevron and BP – to reduce greenhouse gas emissions, the national oil companies of the Middle East and Russia will gladly step in to fill the supply gap.

The international companies, whose management now have to apologise for their core business activities, seem on the path to extinction. Shell recently lost a lawsuit in Holland, where a court found it was within its jurisdiction to determine that the company must cut emissions by 45 per cent by 2030 compared to 2019 levels.

Last month, both Exxon and Chevron lost key shareholder votes as pressure mounted on them to cut emissions.

The national oil companies in the oil-producers’ cartel OPEC+ face no such pressure. Their government owners require them to maximise the value of their assets in the national interest.

As the international oil companies shrink, national producers will welcome the opportunity to increase their global market share. Demand for fossil fuels shows no sign of slowing and will continue to rise for decades as developing countries seek rapid growth to meet the aspirations of their citizens.

This view was perhaps best articulated by India’s power minister, Raj Kumar Singh. He described the “net zero” mantra pushed by the developed world as “pie in the sky”, and also unfair.

He pointed out that in the developing world, “you have 800 million people who don’t have access to electricity.

“You can’t say that they have to go to net zero, they have the right to develop, they want to build skyscrapers and have a higher standard of living, you can’t stop it.”

Despite the hype around renewable energy and electric vehicles, it is very likely that energy policies in major developing countries such as China, India, Brazil, South Africa and Indonesia will not be determined by the predilections of the climate commissariats in Washington, London and Paris.

Oil Pump on California Prairie.

The Opec+ producers are well aware of the need for fossil fuels outside the developed West.

Both Saudi Aramco and ADNOC plan to significantly increase their production capacity, while Qatar has committed to spending billions of dollars to expand liquefied natural gas by 50 per cent.

Russia’s Rosneft has started investing in an Arctic oil megaproject, which is expected to cost US$170 billion over a decade and will employ 400,000 workers, create 15 new industrial towns and build 800km of new pipeline.

Russia also plans to massively increase its coal production, modernise its railways and double its coal exports over the next 15 years.

There has been much debate about the energy transition in the Middle East recently. It is clear that oil and gas, and energy-intensive sectors such as aluminium and petrochemicals in the region, remain highly profitable. They are likely to remain so in the coming decades.

A premature exit from oil and gas and their derivative industries will deprive governments of export revenues and is unrealistic.

To the extent that customers in the West demand “moral” energy commodities such as green hydrogen, the national oil companies in the Middle East and Russia can always oblige, provided that the prices they command make it worthwhile.

The Middle East producers must hope that the rich member countries of the IEA continue on their net-zero path, thereby putting the international oil corporations out of business.

The rest of the world is growing fast enough to keep the oil producers in the Middle East, Russia, Africa and elsewhere in the money for at least the next few decades.

Dr Tilak K. Doshi is a visiting senior research fellow at the Middle East Institute, National University of Singapore. This article solely reflects the views of the author

5 7 votes
Article Rating
34 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Scissor
July 1, 2021 2:10 pm

It’s almost as if our enemies are determining policy.

Gregory Woods
Reply to  Scissor
July 1, 2021 2:49 pm

Energy should be affordable, abundant and reliable: Any politician attempting to sabotage our economy is a traitor in my book…

Christopher Hanley
Reply to  Scissor
July 1, 2021 3:27 pm

Just a few pertinent Sun Tzu quotes from The Art of War:
“The supreme art of war is to subdue the enemy without fighting”.
“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win”.
“The greatest victory is that which requires no battle”.
“To know your Enemy, you must become your Enemy”.
“The opportunity of defeating the enemy is provided by the enemy himself”.

Reply to  Scissor
July 2, 2021 5:01 am

“It’s almost as if our enemies are determining policy.”
 
They are – we have been infiltrated – it’s called the “Long March of the
Institutions”.
 
It’s never been about the climate – it’s always been about destroying our economy and our
society.
 
 
HYPOTHESIS: RADICAL GREENS ARE THE GREAT
KILLERS OF OUR AGE 
By Allan M.R. MacRae, B.A.Sc., M.Eng., April 14, 2019
https://wattsupwiththat.com/2019/04/14/hypothesis-radical-greens-are-the-great-killers-of-our-age/
 
SCIENCE’S UNTOLD SCANDAL: THE LOCKSTEP MARCH OF PROFESSIONAL SOCIETIES TO PROMOTE CLIMATE CHANGE
By Tom Harris and Dr. Jay Lehr, May 24, 2019
https://wattsupwiththat.com/2019/05/25/sciences-untold-scandal-the-lockstep-march-of-professional-societies-to-promote-the-climate-change-scare/
 
CO2, GLOBAL WARMING, CLIMATE AND ENERGY
by Allan M.R. MacRae, B.A.Sc., M.Eng., June 15, 2019 
https://wattsupwiththat.com/2019/06/15/co2-global-warming-climate-and-energy-2/
Excel: https://wattsupwiththat.com/wp-content/uploads/2019/07/Rev_CO2-Global-Warming-Climate-and-Energy-June2019-FINAL.xlsx
 
THE COST TO SOCIETY OF RADICAL
ENVIRONMENTALISM
By Allan M.R. MacRae, B.A.Sc., M.Eng., July 4, 2019
https://wattsupwiththat.com/2019/07/04/the-cost-to-society-of-radical-environmentalism/
 
WHAT THE GREEN NEW DEAL IS REALLY ABOUT —
AND IT’S NOT THE CLIMATE
By Allan M.R. MacRae, B.A.Sc., M.Eng., July 19, 2019
https://wattsupwiththat.com/2019/07/20/what-the-green-new-deal-is-really-about-and-its-not-the-climate/
 
THE LIBERALS’ COVERT GREEN PLAN FOR CANADA – POVERTY AND DICTATORSHIP
by Allan M.R. MacRae, B.A.Sc., M.Eng., October 1, 2019
https://wattsupwiththat.com/2019/10/01/the-liberals-covert-green-plan-for-canada-poverty-and-dictatorship/
 

July 1, 2021 2:11 pm

Parts of the article seem to be posted twice

TonyL
Reply to  Krishna Gans
July 1, 2021 2:22 pm

seem to be posted twice
posted twice

Gordon A. Dressler
Reply to  TonyL
July 1, 2021 2:57 pm

You Only Live Twice . . . featuring Bond, James Bond

TonyL
Reply to  Gordon A. Dressler
July 1, 2021 4:47 pm

Classic. Outstanding.

Gordon A. Dressler
July 1, 2021 2:53 pm

From the above article:
“. . . the International Energy Agency – the rich world’s pre-eminent adviser on energy affairs – issued a bombshell report calling for . . .”

Methinks the article’s author, Tilak K. Doshi, is too infatuated with the IEA, which has shown, years ago, that its publications are better suited for the bottoms of bird cages than for scholarly reading.

As for Doshi’s use of the word “bombshell”, my take is “(Yawn) . . . what else is new?”

John Hultquist
Reply to  Gordon A. Dressler
July 1, 2021 9:06 pm

 Hyperbole is the use of exaggeration as a rhetorical device or
figure of speech meant to get your attention.
It worked!

markl
July 1, 2021 3:03 pm

Like turning Venezuela into a Socialist dream/hell hole wasn’t due to its’ petroleum resources?

Alan Watt, Climate Denialist Level 7
July 1, 2021 3:17 pm

Vladimir Lenin is credited with observing:

The Capitalists will sell us the rope with which we will hang them.

He underestimated their stupidity. He should have said:

The Capitalists will give us the rope with which we will hang them, and then will also pay the executioner’s fee to perform the service.

Gerry, England
Reply to  Alan Watt, Climate Denialist Level 7
July 2, 2021 6:37 am

As an interesting aside, when Lenin stole the Baku oilfields from their owners and murdered most them bar a member of the Nobel family who was protected by his workers – former workers, the output slumped massively. Lenin then had to get on his knees and beg the Western oil companies such as Shell etc, to come and run them for him as he was desperate for the income.

beng135
Reply to  Alan Watt, Climate Denialist Level 7
July 3, 2021 8:12 am

The Capitalists home-grown marxists foolishly allowed to infiltrate the capitalist country will give us the rope with which we will hang them, and then will also pay the executioner’s fee to perform the service.

Fixed.

Last edited 28 days ago by beng135
DMacKenzie,
July 1, 2021 3:56 pm

Investment firms will soon be changing their tunes, as investors point out that their job is to make money, not virtue signal by selling energy stocks at a discount, plus they’ve already conned as many as possible gullible greenies into transferring their accounts.

Last edited 29 days ago by DMacKenzie,
Gary Pearse
July 1, 2021 6:07 pm

Tilak you can’t be faulted for not covering your subject and I have enjoyed many of your fine reports. But watch that you don’t become to captivated by utterings of EIA, UN and current stuff coming out of a muddled US Administration and broken Democrat Party. Pay attention to nuances more in the background that signal all is not well with “The best laid plans of mice and men …”

For example, the recent G7 communiqué about no more coal investment etc., was completely blanked by Europe’s announcement that it was opening three coal mines and power plants. Three cold winters in a row had depleted stored gas and failures with several wind turbine arrays had raised concern for future home and industrial needs.

Germany, the world’s greenest country opened a new coal mine for cheap power and completed the Nordstream gas pileline from Russia to rescue its manufacturing industry (note, these aren’t short term stopgaps). Also their windturbine installations have dropped off markedly over several years and the old arrays are now being decommissioned. There seems little taste for replacing them. If the undisputed king of renewables moves out of renewables, who wants to try to do better?

So far, we have discussed the easiest part of decarb – electric power. Now consider transportation and shipping. There is a reason for all the handwaving and wishful thinking about magic new technology for the biggest fossil fuel using sector and so far not a lot has been done to replace the internal combustion engine (nor the FF backup for renewables to provide despatchable power). To electrify trucking, cars, and shipping,
enormous volumes of electric batteries are needed, both to backup renewables for reliable power for all societies needs but for motive power for trucks cars ships (ships only alterative to diesel/fuel oil is really nuclear).
Recently, EV enthusiasts have suffered another huge setback. EU’s energy and environment authorities commissioned a study to evaluate the electric car’s lifetime CO2 emmissions – for its manufacture and lifetime operation. The report, the work of 171 German Scientists and engineers found the a VW EV lifetime footprint was 30 MT, not the EU estimate of 14 MT. They also found that a diesel-electric hybrid had a smaller footprint and was therefore greener than an equivalent EV!!

Finally, the anti -FF/CO2, save the planet folk. Are relatively silent but deeply despairing about the 5 billion people not in the “West” who are spawning hundreds of coal power plants in a rush to bring prosperity to their people. The success in a few years has been spectacular (Bangladesh 15% GDP growth over the past half dozen years). Pakistan ~10% a year, Africa Sif Sahara~3% etc. (World Bank). Nothing will stop it and CO2 will be over 600ppm by 2100 removing the rationale in the next few years for the “West” to destroy its societies, economies and civilization.

I have one more huge new development to report that stops all this madness brilliantly. In a word ‘Blue Oil’. It solves all the problems of the New Green Deal and meets the Paris Accord and it’s almost free. It makes gasoline cars greener than EVs.

https://wattsupwiththat.com/2021/06/29/energy-transition-blue-oil-edition/

I have a comment in the last quarter of the comments section

Tarquin Wombat-Carruthers
Reply to  Gary Pearse
July 2, 2021 1:28 am

Let’s consider those ships that are transporting woodchips from the US to the UK. Should they be electric-powered? Or burn part of their cargo to provide propulsion? The later leads to the first law of pellet propulsion. “Mae sure that you have sufficient cargo, not only to propel you to your intended destination, but also sufficient residual cargo to have made the voyage profitable!”

griff
Reply to  Tarquin Wombat-Carruthers
July 2, 2021 3:55 am

We should stop importing woodchips: they aren’t green, sustainable or renewable…

All UK green organisations (Greepeace, etc) oppose this trade: it is good to see Watts readers joining them

Andrew Wilkins
Reply to  griff
July 2, 2021 6:02 am

they aren’t green, sustainable or renewable

Woodchip burning is a hopelessly daft concept. That’s why green zealots in the government loved it. Wherever there is a greenie there is idiocy.

LdB
Reply to  griff
July 2, 2021 7:44 am

Nope I am all for it because it highlights just how stupid the UK policies are and gives us a good giggle.

Earthling2
Reply to  LdB
July 4, 2021 12:41 am

And Drax sits atop a perfectly good coal mine! That’s the funny/tragedy part. Biomass should be dealt with locally to energy and not shipped halfway around the world to replace coal with wood pellets.

Wood waste should be made into biogas that can be burnt in a CCGT burner at 60%+ and kill two birds with one stone. Not burning in a perfectly good coal burner, and satisfying the future requirements for having to have some green gas in your nat gas.

n.n
July 1, 2021 7:06 pm

Insidious benefits with collusion.

Eric Vieira
July 1, 2021 11:13 pm

Shell has affiliates all over the world. Shell could just move their headquarters from the Netherlands to another country. That would surely make some Dutch legislators and judges think twice…

Vincent Causey
July 1, 2021 11:42 pm

All that will happen is that as the West grinds their oil majors into the dust, they will be picked off one by one by Chinese capital, while the European car manufacturers shrink to provide a niche market for EVs, while other countries will provide the automobiles for the rest of the world. And that’s just for starters.

Rusty
July 2, 2021 12:45 am

Oil at $100 a barrel means increased costs for the West (which will help drive inflation) and a boon for our enemies who need the oil price that high to balance their books.

The West is committing suicide with its ‘green policies’ (amongst others).

Kiwi Gary
July 2, 2021 12:55 am

Russia almost certainly believes its own climate scientists ahead of IPCC. The Climate model by the Marchuk Institute of Numerical Mathematics [ part of the Russian Academy of Sciences ] runs very closely in agreement with the satellite information delivered by John Christy at UAH. Marchuk run forward, and Christy extrapolated both indicate no climate emergency. So, Russia will sell fossil fuels to whomever wants them.

griff
July 2, 2021 3:51 am

If – and I accept it is an if – the EU achieve their targets for EVs in 2030, there will surely be a considerable drop in EU petroleum product consumption?

so who is going to be buying all the oil?

China actually has a lot of EVs and growing…

Dave Andrews
Reply to  griff
July 2, 2021 6:11 am

Griff,

There are around 1.4 billion cars in the world today and this number is expected to grow to 2 billion by 2050.

Currently there are approaching 5million EVs worldwide and this number is expected to grow to around 115 million in 2030 ie less than 10% of the cars in use today.

There is thus a plentiful demand for petrol and diesel.

Remember also that it may never be possible to fully electrify the huge HGV fleets that are vital for the movement of goods.

LdB
Reply to  Dave Andrews
July 2, 2021 7:52 am

Griff doesn’t do maths and the largest increasing markets for cars have no commitment because they are classed developing nations.

beng135
Reply to  Dave Andrews
July 3, 2021 8:26 am

Like LdB says, griff and his ilk don’t know much ’bout numbers. In fact, they don’t know much about history. They don’t know much about biology. They don’t know much about a science book. They don’t know much about the French they took.

ht/ Sam Cook

Last edited 28 days ago by beng135
Patrick Hrushowy
Reply to  griff
July 2, 2021 6:36 pm

Is Griff a real person or is it a BOT that trolls WUWT that spews out progressive and woke energy propaganda?

c1ue
July 2, 2021 8:28 am

How much of this is due to the banks wishing to recover assets from foreclosed fracking companies? A high oil price increases oil production net profit and valuation of undeveloped assets…

Bruce Cobb
July 2, 2021 8:58 am

$100 oil? Thanks Obiden!

Abolition Man
July 2, 2021 9:19 am

The Western nations aren’t committing suicide, they’re just doing everything in their power to destroy that pesky class leveling rascal; the middle class! Apparently our elites feel that everything would be smoother sailing if the prosperity and liberty of the common citizen was abridged a wee bit!
They seem to really like the model built by the ChiComs, where all businesses are under more or less government control depending on their social score and the greed/needs of the CCP! Here in the US we can look forward to gulags for anyone with patriotic and/or conservative thoughts, and your right to work or travel will depend on your adherence to consensus beliefs!
This can be seen already in our dumbed down education system, where majorities think that climate alarm is justified, and that socialism can work without a capitalist foundation supporting it! China, Russia and other repressive nations around the world are laughing their asses off, and are beginning to look at the West the same way a starving man looks at a Christmas feast!

%d bloggers like this: