PCK Schwedt Refinery in Schwedt, Germany on Monday, May 9, 2022.
Krisztian Bocsi | Bloomberg | beautiful pictures
ABU DHABI, United Arab Emirates – Politicians and governments around the world are battling potential civil unrest as many countries grapple with rising energy costs and inflation increased.
The global economy is facing an onslaught from many sides – a war in Europe, oil, gas and food shortages, and high inflation, each of which is getting worse next.
Concerns are focused on the coming winter, especially for Europe. The cold weather, combined with oil and gas shortages stemming from Western sanctions against Russia for its invasion of Ukraine, threatens to affect lives and businesses.
Still, there are concerns ahead of this winter, it’s really the winter of 2023 that everyone should be worried about, major oil and gas executives have warned.
Energy prices are “closer to affordability”, with some already “spending 50% of their disposable income on energy or more,” BP CEO Bernard Looney told CNBC’s Hadley Gamble during a panel at the Adipec conference in Abu Dhabi.
We are in good form for this winter. But like we said, the problem is not this winter. It will be the next one, because we won’t have Russian gas.
Claudio Descalzi
CEO of Eni
But through a combination of high gas reserves and government spending packages to subsidize people’s bills, Europe may be able to get the crisis under control this year.
“I think it’s settled for this winter,” Looney said. “It’s next winter, I think many of us worry, in Europe, there could be more challenges.”
CEO of the Italian oil giant Eni expressed similar concerns.
According to the International Energy Agency, this winter, Europe’s gas reserves are about 90% full, providing some assurance against severe shortages.
But a large part of that is made up of Russian gas imported in previous months, as well as gas from other sources that are easier to buy than usual as major importer China buys less due to economic activity. Slower.
“We are in good form for this winter,” Eni division head Claudio Descalzi said at the same conference. “But as we said, the problem is not this winter but the next one, because we won’t have Russian gas – 98% [less] next year, probably nothing. “
The protests have begun
This can lead to severe social unrest – there have been small and medium-sized protests across Europe.
Anti-government protests in Germany and Austria in September and in the Czech Republic last week – the latter of which saw household energy bills increase tenfold – may be part of it. little of what’s to come, analysts warn. Several energy executives agreed.
Yes, there is a real risk that governments with no stability in shaping policy in Asia can deal with instability.
Datuk Tengku Muhammad Taufik
CEO of Petronas
“We’ve seen that any shock to pump prices, or something as simple as LPG [liquefied petroleum gas] for cooking, could cause unrest,” said Malaysian oil company Petronas’ CEO, Datuk Tengku Muhammad Taufik.
He described how a stronger dollar and rising fuel prices pose serious risks to many Asian economies – whose huge populations are among the world’s largest importers of oil and gas. And this is happening while subsidies have been introduced to help lower prices for people.
Inflation in the euro area remains very high. Protesters in Italy used empty shopping carts to demonstrate the cost of living crisis.
Stefano Montesi – Corbis | Corbis News | beautiful pictures
Many Asian economies have already reeled from the pandemic, causing “a wide range of [small and medium enterprises] “So there’s a real risk that governments that don’t have the stability to shape policy in Asia can deal with the unrest,” says Taufik.
Anger at the huge profits of oil companies
Much of the protesters’ anger is also directed at energy companies, which have been making record profits as bills climb.
In response to this, many CEOs who spoke to CNBC said it’s a matter of market supply and demand, and it’s up to governments to implement policies that are more conducive to energy investment. They highlight that investment has been a hit in recent years as countries accelerate the transition to renewable energy.
The world must face “the realities and realities of today and tomorrow,” said BP’s Looney, stressing the need to “invest in hydrocarbons today, because the energy system is today. now a hydrocarbon system.”
Many policymakers and institutions still decry the use of fossil fuels, warning that the much larger crisis is climate change. In June, United Nations Secretary-General Antonio Guterres called for a abandonment of fossil fuel finance, calling any new funding for exploration “an illusion”.
Oil executives argue that this approach is simply not practical, nor an option if countries want economic and political stability.
However, it also acknowledges that the energy transition itself needs more focus and investment to prevent a bigger crisis next year and beyond, without Russian gas in the pipeline. stockpiles and other options are increasingly expensive.
“In Europe, we pay at least six, seven times to [as much as] ENI’s Descalzi says it costs 15 times more energy than the US.
“So what we’ve done in Europe, each country, has been to put incentivized subsidies to try to reduce costs for industry and for people. That could continue for as long as possible. long?” he asks.
“I don’t know, but there’s no way it can go on forever. All these countries have a very high debt,” he said. “So they had to find a structured way to deal with this. And the structured way is what we’ve been talking about up until now – we have to be up and faster in the transition. that’s correct.”
“But,” he added, “we have to understand, from a technical point of view, what is affordable and what is not.”
