Oil could become scarce at times

oil production

Despite climate change, the demand for fossil raw materials continues to rise.

(Photo: dpa)

Berlin A year ago, given the business forecasts under pressure from the energy transition, the fossil raw material giants already declared the end of the oil age. Since then, however, the market has shown a clear recovery. “What we see here is the answer to the corona crisis. Demand is rising again, so prices are rising as well,” explains Philippe Ducom, European boss of the US oil company Exxon Mobil, on Monday at the Handelsblatt energy summit in Berlin.

This is not a contradiction. Ducom explained that the industry is facing one of the biggest challenges in generations: “We have to satisfy the world’s thirst for energy, but at the same time we have to see. how we can achieve the goal of climate neutrality.” To this end, the company wants to invest 15 billion US dollars in hydrogen, CO2 storage and biofuels by 2027. However, the majority of money at Exxon Mobil and its competitors still flows into oil and gas.

Good business can currently be done with the extraction and sale of fossil energy. The price for a barrel of North Sea Brent rose by 50 percent last year, the highest it has been in three years. On Monday, a barrel cost $85.90.

Where there was still a minus of more than 35 billion dollars at the end of 2020 due to the corona-related economic crisis, Exxon Mobil, Chevron, Shell, BP and Total Energies are now making a profit of 53 billion dollars again. The end of the fossil fuels oil and gas has at least been postponed with the economic upswing. “We will also need gas in the coming years, there is no question about that,” said Wintershall CEO Mario Mehren at the Handelsblatt Energy Summit. The Kassel-based company therefore wants to continue to concentrate mainly on the natural gas business.

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So the signs are now back to gray instead of green. No wonder: the billion-dollar corporations earn a lot from the high energy prices. The International Energy Agency (IEA) surprisingly revised its forecast for oil demand in 2022 upwards. The demand dynamics are stronger than many market observers thought given the milder consequences of the omicron variant of the corona virus, says IEA boss Fatih Birol.

Less investment in exploration – so far

At the same time, the Organization of the Petroleum Exporting Countries (OPEC) continues to keep supply on the oil market tight. Although demand is already at pre-crisis levels, OPEC intends to further curb oil production by September. Markets and consumers will therefore have to adjust to high oil and energy prices for longer.

Also because the big oil companies are now reluctant to invest in drilling projects in view of the strict climate protection requirements. The analysis house Rystad Energy assumes that the investments are therefore not keeping pace with the increase in demand.

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In fact, Shell, BP, Chevron, Exxon and Total Energies spent significantly less on their exploration projects in the first nine months of 2021 than they did a year ago. That could worsen the price situation, at least in the short term. In the long term, however, enough oil will flow, the promoters assure: “We must and will continue to invest in oil production,” said Exxon Mobil Europe boss Ducom.

Experts also reckon that the frugality of “Big Oil” will only be short-lived. Investments could pick up again as early as this year – if companies have fully recovered from the pandemic and both demand and prices are still high.

All of the major corporations in the industry have vowed to invest significantly more in wind, sun and bioenergy. However, in view of the business development, it remains to be seen whether the investments will really increasingly flow into renewable energies instead of into new oil and gas projects.

More: Opec plus sticks to subsidy policy – ​​The commodity rally is likely to continue.

Handelsblatt energy briefing

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