The 2022 energy crisis has created uncertainty about global energy security. However, it has not been all negative, as the financial results of many oil companies show. Indeed, in 2022, the five major oil companies reported record profits with a total net profit of $180 billion for these five giants, an increase ranging from 28% for Total Energies to 142% for Exxon compared to FY2021 profits.
Today, it is likely that these impressive results, driven in large part by soaring oil and gas prices combined with energy needs, could be a barrier to the energy transition, given the multiple challenges:
– Ensuring energy security, which is now top of the agenda in the current context, has seen many oil companies adjust their fossil fuel investment strategies, with BP claiming that “without continued investment in the oil and gas sector over the next three decades, the world faces increased risks of energy price fluctuations and shortages.”
– Although climate finance has almost doubled over the past decade to an average of $632 billion in 2019/2020, the Climate Policy Initiative (CPI), in the Global Lanscape of climate finance 2021, reveals that an annual climate finance requirement almost 6X greater than current investments is needed to meet climate change targets by 2030, with likely significant involvement of private finance aligned with these targets
– Return on investment and dividends. The good performance of oil companies on their oil and gas activities could lead investors to put pressure on the investment strategies of these companies, which were already concerned about the declining returns on their investments in renewable energy such as wind and solar.
I believe that it is possible to achieve both energy transition and energy security, as these objectives are not contradictory, they are not mutually exclusive, and the oil & gas industry has a big role to play. But, if short-term returns are added to the objectives, the road to decarbonisation of energy could be longer than expected, even with various measures being taken today to reduce investment in fossil fuels.