The projections for oil and gas demand impact the clean energy transition- This is what’s slowing down the clean energy transition

Source: The post the projections for oil and gas demand impact the clean energy transition has been created, based on the article “This is what’s slowing down the clean energy transition” published in “Indian express” on 4th March 2024.

UPSC Syllabus Topic: GS Paper 3-economy-infrastructure (Energy)

News: This article discusses how major oil companies’ projections for oil and gas demand in 2050 could slow down the transition to clean energy and affect achieving net-zero carbon emissions. It highlights concerns about their investment strategies reinforcing reliance on fossil fuels.

What are the projections of major oil companies for 2050?

ExxonMobil’s Projection: They predict oil consumption in 2050 will be the same as today’s level, around 100 million barrels per day (mbd).

Chevron’s Projection: Chevron estimates oil consumption by 2050 to range between 75-112 mbd, showing some variation but not a significant decrease.

European Companies’ Scenarios:

Shell’s “Archipelago” scenario suggests slow electrification leading to a demand of about 90 mbd.

In Shell’s “Sky 50” scenario, faster electrification reduces demand to around 40 mbd.

BP and Total Energies project oil demand to be between 50-70 mbd, assuming a moderate pace of transition to clean energy.

How could these projections impact the clean energy transition?

1. If these companies plan based on high fossil fuel demand, they might invest more in oil and gas, making it harder to switch to clean energy.
2. ExxonMobil and Chevron have already invested heavily in oil and gas. ExxonMobil bought Pioneer Natural Resources for about $60 billion. Chevron acquired Hess Corporation for $53 billion.
3. Despite acknowledging the need for clean energy, European oil companies are also focusing on their existing petroleum businesses. The CEOs of Shell and BP plan to use their petroleum portfolios to improve returns, indicating a continued emphasis on fossil fuels.

What do these trends mean for global warming and energy transition?

Recognition of Global Warming: These companies recognize global warming but also consider economic and social realities, like the current dependence on fossil fuels.

Rising Energy Demand: They argue that energy demand, especially in the Global South, will rise and will likely be met by fossil fuels because clean energy infrastructure is lacking.

Challenge in Transitioning: They suggest that transitioning to clean energy will be costly and challenging, especially without a significant carbon tax.

Way forward

The way forward must include a significant reduction in oil demand, as the International Energy Agency (IEA) states it must drop by at least 75% to meet the net-zero target. This underscores the need for a rapid shift to clean energy and strong policy measures like carbon taxes to encourage this transition.

Question for practice:

Evaluate how the projections of major oil companies for 2050 could impact the global transition to clean energy and the achievement of net-zero carbon emissions.