Are high oil prices driving renewables?

Amid rising global demand and concerns over key supplies, global oil prices are approaching $ 100 a barrel for the first time since 2014. But, with prices on the rise, what does this mean for the transition to renewables , especially in the Gulf countries ?

After opening the year at around $ 78 a barrel, Brent crude prices rose sharply in the first six weeks of 2022 to surpass $ 94 as of February 14, the highest price in more than seven years.

Driven mainly by a lack of supply and a recent increase in global post-lockdown demand, the increase closes a dramatic recovery in prices, which had fallen to less than $ 20 a barrel in April 2020.

Given the low oil price environment of the past two years, the recent hike has sparked discussions about the implications for investing in renewable energy, particularly for Gulf oil exporting countries.

Although investment in oil and gas has fallen by around 30% since the outbreak of the pandemic, there are signs that rising demand and rising prices could lead to a turnaround.

Carbon Tracker, a London-based think tank focused on climate change, noted last month that rising oil prices could encourage energy companies to invest in new exploration and production projects.

Indeed, on February 1, the energy giant ExxonMobil announced a 45% increase in its budget for drilling and other activities this year, while the next day, members of the Organization of Petroleum Exporting Countries and other major producing nations. of oil, an alliance known as OPEC + – have agreed to meet the pre-planned goal of increasing oil production by 400,000 barrels per day.

At the same time, there are fears that rising oil prices could incentivize coal consumption, which hit an all-time high in 2021 and is on track to reach even higher levels this year, according to the International Agency for energy.

In addition to its lower price, the use of coal is driven by rising energy demand, led by China and India, and insufficient levels of investment in renewable energy.

While high oil prices have the potential to incentivize new investments in oil and gas projects, renewables could, and in theory should, benefit from the current situation.

Rather than directly challenging renewables and slowing the energy transition, many energy sector analysts believe that the current high prices – and related financial revenue – could lead governments and oil majors to invest over the long term and further increase their investments. in renewable energies.

For example, in September last year, French energy giant Total said it would take advantage of high oil prices to buy back $ 1.5 billion in shares to boost investments in renewable energy, while earlier this month BP, after announcing its highest annual profit in eight years, at $ 12.8 billion – it said it would increase low-carbon energy spending to 40% of total spending by 2025 and 50% by 2025. 2030.

A prime example of an oil-producing region that has recently reaffirmed its commitment to renewable energy is the Gulf.

Indeed, many Middle Eastern countries have identified renewable energy development as the key to their long-term economic diversification plans.

For example, Saudi Arabia aims to generate 50% of its electricity from renewable sources by 2030 and has set a net zero target for 2060.

To achieve these goals, the government announced in December that it would invest SR 380 billion ($ 101.3 billion) in renewable energy production by the end of the decade, while in April last year it inaugurated the solar power plant in Sakaka, the country's first utility-scale renewable energy project.

Meanwhile, in October the UAE pledged to invest Dh 600 billion ($ 163.4 billion) in renewable energy by 2050, at which point it hopes to achieve net zero emissions.

The announcement came a few weeks after the inauguration of the first stop of the Mohammed bin Rashid Al Maktoum Solar Park in Dubai. The park is expected to have a capacity of 5 GW by 2030.

Elsewhere in the region, in late January Oman inaugurated the 500 MW Ibri 2 solar field, the country's largest industrial-scale renewable energy project, while Qatar, one of the world's largest exporters of natural gas, also increased its focus on renewables.

In October last year, Qatar Petroleum, the national energy company, changed its name to Qatar Energy, to better reflect the company's strategy of focusing on renewable energy.

Major projects include the 800 MW Al Kharsaah solar plant, located approximately 80 km west of the capital Doha.

Once completed, the project will be the largest renewable energy development in the country. The inauguration is scheduled for the first half of this year.

Therefore, the higher energy prices, linked to gas and oil, have also allowed the Gulf countries to invest in renewables. The problem is that we are paying for these investments, and they are bringing our economy to its knees.

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The article Are high oil prices driving renewables? comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/i-prezzi-alti-del-petrolio-stanno-spingendo-le-rinnovabili/ on Mon, 21 Feb 2022 07:00:54 +0000.