ExxonMobil expects all new cars sold in two decades to be electric vehicles. But the US major major also believes that people will “pay a high price” in this rush for renewable energy without providing the energy that society currently needs, Exxon CEO Darren Woods told CNBC’s David Faber in an interview in last week.
Exxon joins many other oil producers, who say governments and policy makers need to balance the pursuit of lowering CO2 emissions with the population’s current energy needs at an affordable price. The recent underinvestment in traditional energy sources is a blow to energy supplies, leading to high prices and record-high gasoline prices, Exxon’s CEO told CNBC. It is the latest warning from the oil industry that politicians should look at short-term energy needs as they plan for a low-carbon future.
Of course, it is not unheard of for a major oil company to warn of a hasty transition. Yet the current global energy crisis with record-high gasoline prices justifies all those leaders and officials from Middle Eastern oil-producing countries who for over a year have warned that reduced investment in oil and gas would return to bite consumers and governments.
After the first COVID lockdowns, many industry analysts predicted that this was the end of global growth in oil demand, and that we would never again see oil demand as high as it was in 2019. But people returned to travel, and demand is on track to exceed levels before COVID next year, analysts say. Even the International Energy Agency (IEA), which last year said it would not invest in new supplies if the world wants to reach net zero by 2050, predicted in its latest monthly report that global demand would average a record 101, 6 million barrels. day (bpd) and exceed levels before COVID-19 in 2023. In addition, market turmoil due to the Russian invasion of Ukraine may even lead to supply struggling to keep pace with demand next year, as sanctions against Russia would limit more supply, when they officially enter into force at the end of this year.
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The industry says the supply struggle is not just the result of the ever-changing global oil market with the Russian war in Ukraine and the Western sanctions against Russia’s oil exports. It is also the result of several years of low investment in delivery, and so is Exxon’s view.
The record high gasoline prices in America are a source of renewed confrontation between the US government and the oil industry.
Earlier this month, President Joe Biden called Exxon and other oil companies for exaggerating profits, saying “Exxon made more money than God this year.” President Biden wants companies to produce more gasoline and lower gasoline bills for U.S. consumers.
“In a time of war, refinery profits that are far above normal are not acceptable to be transferred directly to American families,” President Biden said in a letter to the industry.
Exxon said in response to the letter that the U.S. government could in the short term adopt measures often used in emergencies after hurricanes or other supply disruptions, such as exemptions from Jones Act provisions and some fuel specifications to increase supplies.
“In the longer term, the government can promote investment through clear and consistent policies that support U.S. resource development, such as regular and predictable rental sales, as well as streamlined regulatory approval and support for infrastructure such as pipelines,” said the U.S. major.
Michael Wirth, CEO of the second major major in America, Chevron, responded to President Biden’s letter, saying that despite Chevron’s efforts to increase oil and gas production over the past year, “your administration has largely tried to criticize and sometimes slander our industry. “These actions are not conducive to meeting the challenges we face and are not what the American people deserve.”
Looking beyond the short-term challenges – as the industry says, could be avoided in the future if the US government changed pace and stopped pointing the finger at oil companies and stifling their willingness and ability to invest in supplies – even Exxon believes that everything sales of new cars in 2040 would be electric cars. However, this is not expected to affect Exxon’s business significantly, as chemicals and industrial fuels will be the primary driving forces for oil demand in the future, Exxons Woods tells CNBC.
Referring to the progress of electric cars, Woods said: “That change will come at some rate, but it will not do or destroy this business or this industry quite frankly.”
By Tsvetana Paraskova for Oilprice.com
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