On his way to the presidency, Joe Biden has not been one to mince words regarding his plans for the oil and gas business. While he was on the campaign trail, he vowed not to approve new drilling for oil and gas on federal lands. In fact, he proved he meant business by suspending new oil and gas leasing and drilling permits on public lands shortly after taking over the Oval Office.
But those were rosy days before tougher realities, including COVID and the consequences of Russia’s war in Ukraine. Biden will be forced to go against his core ethos when he urged US oil producers to increase production amid record crude and gas prices. When pushing the IRA bill, Democrats were forced to make a major concession by including a provision that would allow the government to set aside specified acreage of federal onshore and offshore holdings for oil and gas leases to allow onshore and offshore renewable development. need to be offered. but that’s not all. In March, the Biden administration left environmentalists confused and angry after issuing the green signal ConocoPhillips’ (NYSE:COP)’s long-controversial $8 billion Willow project in Alaska. Activists described the project as a “carbon bomb” and completely inconsistent with US climate goals and said it would nearly prevent the country from meeting its goal of halving C02 emissions from 2005 levels by 2030. It will be impossible. ConocoPhillips remains the largest producer in Alaska. , with extensive stakes in the National Petroleum Reserve-Alaska (NPR-A) and Prudhoe.
But now some climate and environmental experts are saying Biden should never have been so intent on cutting US production of fossil fuels in the first place. The Energy Security and Climate Initiative (ESCI) at Brookings has released a new paper arguing that curbing oil demand rather than production is the best strategy to fight climate change. The think tank says that if the US cuts production significantly, other global producers will make up for the shortfall by increasing their production. Meanwhile, the United States would lose energy security while greenhouse gas emissions would be easily shifted to another country. ESCI says that as long as there is demand for oil, someone will produce it. For example, the Tilenga project in Uganda and the Eridu project in Iraq are set to come online soon, with production capacities of 190,000 and 250,000 barrels of oil per day respectively, ~40% more than the Wilo project. Oil demand has bounced back from pandemic lows, with the International Energy Agency revealing that global oil demand hit an all-time high of 103 million barrels per day in June. According to the global energy watchdog, strong demand was driven by better-than-expected economic growth in OECD countries, increased oil consumption in China, particularly petrochemical production, and strong summer air travel.
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,Pressing for cuts in US oil production is like squeezing a balloon – production will “pop out” elsewhere.,” the newspaper noted.
ESCI has lauded the EV transition as one of the more effective ways to reduce oil demand. The transportation sector is responsible for about 60% of global oil demand, with passenger vehicles and trucks taking the largest share. EV sales are rising due to a combination of new attractive models from automakers, improvements in battery technology, policy support and more charging infrastructure. Electrification is also beginning to spread into new areas of road transport.
That said, it’s going to be a long road, given that only 26 million of the 1.4 billion light vehicles globally are EVs. According to BNEF, more than half of passenger cars sold in the US by 2030 will be electric vehicles. Forecasts by more than a dozen experts predict EV penetration to range from 11% to 63% of total passenger car sales by 2030. % is at a high level while projections for 2050 range from 31% to almost 100%. In carbon constrained forecasts, BNEF predicts that passenger vehicle oil demand will fall from about 25 million barrels per day today to 3-6 million barrels per day by 2050. However, most other forecasts are much less bearish and see demand for passenger vehicle oil picking up. 10 million to 20 million barrels per day by 2050.
Finally, the recent move by the EU to move towards green aviation fuels could also play a big role in reducing emissions, as the global aviation industry consumes ~15% of global oil production. On Wednesday, EU lawmakers approved new rules that require at least 2% of jet fuel used by airlines to be sustainable by 2025, with the share increasing every five years to 70% by 2050. % will be reached. Widespread adoption of such measures could prove decisive in the fight against climate change. However, the high cost of sustainable aviation fuel is likely to be a burden for a large portion of passengers.
By Alex Kimani for OilPrice.com
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