The authors of this article on Climate change and elaborate on how to avert it through experts’ notable advice of a ditch of 90% of the world’s coal and 60% of oil and gas to limit warming to 1.5°C. Would it be feasible if some of the MENA countries economic life sustenance depends on fossil fuels related revenues? Here is what these authors are saying.
Climate change: ditch 90% of world’s coal and 60% of oil and gas to limit warming to 1.5°C – experts
Global mean surface temperatures reached 1.2°C above the pre-industrial average in 2020, and the Intergovernmental Panel on Climate Change warned in its recent report that Earth could hit 1.5°C in as little as a decade. The 0.3°C separating these two temperatures make a world of difference. Scientists believe that stabilising our warming world’s temperature at 1.5°C could help avoid the most serious effects of climate change.
Fossil fuels such as coal, oil and natural gas are the source of just over 80% of the world’s energy. Burning them accounts for 89% of human-derived CO₂ emissions. To avert catastrophic warming, the global community must rapidly reduce how much of these fuels it extracts and burns. Our new paper, published in Nature, revealed just how tight the world’s remaining carbon budget is likely to be.
In order to hold global warming at 1.5°C, we found that nearly 60% of global oil and fossil gas reserves will need to remain in the ground in 2050. Almost all of the world’s coal – 90% – will need to be spared from factory and power plant furnaces. Our analysis also showed that global oil and gas production must peak immediately and fall by 3% each year until mid-century.
Even meeting these stringent limits may not be enough on its own to stabilise global warming at 1.5°C, however.
That’s because we based our estimates on a carbon budget compatible with just a 50% probability of limiting warming to 1.5°C. Our model simply could not be pushed to a greater chance of achieving the 1.5C target because it was already at its limit, given our projections of fossil fuel demand in the near future.
Our analysis also relies on the large-scale deployment of technologies capable of removing CO₂ from the atmosphere sometime in the future. By 2050, our scenario expects around four gigatonnes a year will be being captured by so-called negative emission technologies. There remains a lot of doubt about whether it is even possible to sufficiently scale these technologies up in time.
So, to aim for a better chance of achieving the Paris Agreement’s goal and to lower the risk of relying on as yet unproven technologies, we argue that our estimates of how much of the world’s fossil fuels cannot safely be extracted should be treated as cautious underestimates. The world may need to be even more ambitious.
Fossil fuel rationing
We estimated how much fossil fuel production in each region must fall and how fast based on a global energy system model. We allocated the remaining shares of fossil fuel production allowed within the budget based on the costs and carbon intensity of producing different oil and gas assets, and how cheap low and zero-carbon technologies are in different parts of the world.
Our analysis showed that total fossil fuel production is limited by a global carbon budget. Production growing in one region of the world will require a decrease in another to keep the global trajectory pointing downwards. A mechanism such as the Global Fossil Fuel Registry – a public database of all known reserves – could provide the necessary transparency for an international effort, with the cooperation of governments and fossil fuel producers.
The US and Russia sit on half of the world’s coal but must leave 97% of it in the ground. Australia, which recently pledged to keep producing and exporting coal beyond 2030, would need to keep 95% of its reserves underground. Oil-producing states in the Middle East must not extract around two-thirds of their reserves, while most of Canada’s tar sand oil must not be burned, along with all of the fossil fuel buried beneath the Arctic.
Our analysis suggests that many countries will need to move out of fossil fuel production relatively quickly, which raises concerns about how the transition can be managed fairly. Countries such as Iraq and Angola have a high dependency on fossil fuels for government revenues. They will need support to diversify their economies in a managed way – including financial and technological assistance to develop new low-carbon industries – and to decarbonise domestically to reduce their own reliance on fossil fuels.
The necessary energy transformation highlighted in this research will require a range of policy levers, including measures that drive down fossil fuel consumption, such as banning petrol cars or promoting renewable electricity generation, and those targeting production itself, including restrictions on new fossil fuel extraction licenses.
Alliances between countries are also likely to be important to build political support for reducing fossil fuel production. The Beyond Oil and Gas Alliance, formed by Denmark and Costa Rica, has pressured other countries to halt investment in new oil and gas projects.
Phasing out global fossil fuel production at the rate suggested in our study is possible, but it will rely on some of the measures we’ve described expanding and gaining the support of large producing countries and companies – those which have benefited most from the fossil fuel era.
Before a critical Opec conference, Iraq’s finance minister, one of the founding members of the global oil cartel Opec, issued an unusual plea to fellow oil producers to shift away from fossil fuel reliance and toward renewable energy.
Ali Allawi, Iraq’s deputy prime minister, urged oil producers to seek “an economic rejuvenation based on ecologically sound policies and technology,” such as solar electricity and even nuclear reactors, to lessen their reliance on fossil fuel exports.ADVERTISING
“To stand a chance of minimizing the worst consequences of climate change, the world has to radically transform the way it produces and uses energy, burning less coal, oil, and natural gas,” he wrote alongside Fatih Birol, executive director of the International Energy Agency. Livelihoods would be lost, and poverty rates will rise if oil earnings begin to fall before producer countries have properly diversified their economies.”
Ministers from the 13 Opec member states will meet virtually on Wednesday to discuss possible output cuts as oil prices fluctuate. Opec had agreed to raise output as nations recovered from the Covid-19 epidemic, but sluggish markets have led some to propose that the rise be halted.
Last month, US President Joe Biden made a contentious appeal for Opec to raise oil output, even more, keep oil prices from increasing and help the US economy recover. But, unfortunately, his appeal was turned down.
Fuel Step Up
In an unprecedented step for the fossil fuel companies, the Opec summit may also address the climate problem ahead of the crucial UN climate negotiations, known as Cop26, set for Glasgow in November.
According to Allawi and Birol, current oil price instability, fueled by the pandemic, is merely the beginning of troubles for producers. The climate issue will not only need a shift away from oil, but it will also have a particularly negative impact on the Middle East and North Africa, where increasing temperatures are already causing severe problems.
According to the International Energy Agency’s (IEA) recent global roadmap to net-zero by 2050, global oil demand is expected to fall from more than 90 million barrels per day to fewer than 25 million barrels per day by 2050, resulting in a potential 85 percent drop in revenues for oil-producing economies.
According to Allawi and Birol, economic hardship and rising unemployment risk causing greater discontent and instability in a region with one of the world’s youngest and fastest-growing populations.
Investing in renewables, particularly solar electricity, is an alternative to dependent on increasingly volatile oil prices. They added, “The energy industry might play a role here by utilizing the region’s tremendous potential for generating and supplying clean energy.”
Iraq is a founding member of the cartel, including Saudi Arabia, Kuwait, the United Arab Emirates, Venezuela, Nigeria, and several other African oil-producing countries. In addition, Russia and a few minor producers are included in the Opec+ alliance.
Most have been antagonistic to demands for action on climate change, while some have dismissed climate science, and Saudi Arabia, in particular, has often obstructed UN climate discussions.
The International Energy Agency (IEA) cautioned in May that if the world remains below 1.5 degrees Celsius over pre-industrial levels, as laid forth in the Paris Agreement – to which all Opec members are signatories – all new oil drilling must end this year.
When asked about the findings, Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, said at an Opec meeting in June, “I would have to voice my perspective that I feel it is a sequel to [the] La La Land movie…” But, “What makes you think I should take it seriously?”
Saudi officials have toyed with climate action in the past, claiming, for example, that the nation might eventually power itself with solar energy. However, no one has urged that oil shipments be halted.
Some oil producers, on the other hand, have chosen a more dovish attitude. For example, Oman, no longer an Opec member, looks at hydrogen as a future low-carbon fuel. The UAE also focuses on hydrogen and renewable energy and has just opened a new nuclear power plant. Other nations in the area with significant renewable energy programs include Egypt, Morocco, and Jordan.
“More than at any other time in history, significant adjustments to the economic model in resource-rich nations are unavoidable,” Birol, one of the world’s leading energy economists, told the Guardian. Countries in the region have made energy transition initiatives. There are encouraging attempts [among oil producers], but attaining net-zero emissions would need far bolder steps and much larger international coordination, as it has for many other nations across the world.”
We can expect more emissions from oil refineries in the near-term future, analysis finds. It is by Cell Press and published in Phys.org as well as other media. Oil refineries are, as we all know, mostly within the US, Chinese and Russian territories but crude oil and gas that were mainly from the MENA region are nowadays explored all over the world. It is consequently not a matter of refining only but of transporting the crudes to the refineries various locations as well as doing with all those stranded assets. Anyway, let us see what is this story is about
A global inventory has revealed that CO2 emissions from oil refineries were 1.3 Gigatonnes (Gt) in 2018 and could be as large as 16.5 Gt from 2020 to 2030. Based on the results, the researchers recommend distinct mitigation strategies for refineries in different regions and age groups. The findings appear August 20 in the journal One Earth.
“This study provides a detailed picture of oil refining capacity and CO2 emissions worldwide,” says Dabo Guan of Tsinghua University. “Understanding the past and future development trends of the oil refining industry is crucial for guiding regional and global emissions reduction.”
Climate change is one of the most fundamental challenges facing humanity today, and continuous expansion of fossil-fuel-based energy infrastructure may be one of the key obstacles in achieving the Paris Agreement goals. The oil refining industry plays a crucial role in both the energy supply chain and climate change. The petroleum oil refining industry is the third-largest stationary emitter of greenhouse gases in the world, contributing 6% of all industrial greenhouse gas emissions. In particular, CO2 accounts for approximately 98% of greenhouse gases emitted by petroleum refineries.
In the new study, Guan and his collaborators developed a publicly available global inventory of CO2 emissions from 1,056 oil refineries from 2000 to 2018. CO2 emissions of the refinery industry were about 1.3 Gt in 2018. If all existing and proposed refineries operate as usual, without the adoption of any low-carbon measures, they could emit up to 16.5Gt of CO2 from 2020 to 2030. Based on the findings, the authors recommend mitigation strategies, such as improving refinery efficiency and upgrading heavy oil-processing technologies, which could potentially reduce global cumulative emissions by 10% from 2020 to 2030. The inventory will be updated and improved in the future as more and better data become available.
The study also showed that the average output of global oil refineries gradually increased from 2000 to 2018, in terms of barrels per day. But the results varied by refinery age group. Specifically, the average capacity of young refineries, which are mainly distributed in Asia-Pacific and the Middle East, increased significantly from 2000 to 2018, while the average capacity of refineries older than 19 years remained stable. “Given the greater committed emissions brought about by the long remaining operating time of young refineries, there is an urgent need for these refineries to adopt low-carbon technologies to reduce their CO2 emissions,” Guan says. “As for middle-aged and old refineries, improving operational efficiency, eliminating the backward capacity, and speeding up the upgrading of refining configuration are the key means to balance growing demand and reducing CO2 emissions.”
Taking a stand that the energy transition to cleaner sources is underway, Petroleum Minister Dharmendra Pradhan of India said that fossil fuels would not have acceptability forever. “Fossil fuels will be a bad word in the decades to come. There is a growing shift towards the clean energy ecosystem.” India, a would-be global leader, is one of many and counting throughout the world who are keen to jump ship ending up Investments in fossil fuels to retreat as the climate crisis increases pressures on producers.
There will soon be a time when all producers are made responsible for all the damage caused by climate change and be forced to pay for it; this applies equally to the Big Oils and to all OPEC+ countries.
The picture above is for illustration and is of Bloomberg’s. Private equity investors are pouring capital into fast-growing sectors such as solar energy. Photographer: Jeremy Suyker/Bloomberg
Investments in fossil fuels to retreat as climate crisis increases pressures on producers
Saudi and Russia believe fossil fuel demand will only increase, and cuts to investments in that sector are not in the offing. But major oil producers are feeling the pressure of meeting emissions targets
Almost 200 countries, including Russia and Saudi Arabia, ratified the Paris climate accord in 2015
The world was facing an acute oil shortage in the long-term due to underinvestment
Between 2010 and 2020, the cost of wind power fell by about 70%, and solar power by 89%
Almost 200 countries, including Russia and Saudi Arabia, ratified the Paris climate accord in 2015, agreeing to pursue efforts to limit the planet’s temperature increase to 1.5 degrees Celsius above pre-industrial levels. The agreement requires net-zero greenhouse gas emissions by 2050.
Remarkably, the IEA delivered its starkest warning yet on global fossil fuel use last month, saying the exploitation and development of new oil and gas fields must stop this year if the world wants to reach net-zero emissions by the middle of the century.
Speaking at the St. Petersburg International Economic Forum on Thursday, Russian Deputy Prime Minister Alexander Novak said the IEA had ostensibly arrived at its findings “by using reverse calculations” on how to achieve net-zero emissions by 2050.
“It is a sequel of the ‘La La Land’ movie. Why should I take it seriously?” Abdulaziz said, according to Reuters.
His reaction to the report came shortly after OPEC and non-OPEC partners agreed to gradually ease production cuts in the coming months amid a rebound in oil prices.
Igor Sechin, the head of Russian oil major Rosneft, said recently that the world was facing an acute oil shortage in the long-term due to underinvestment, amid a drive for alternative energy while demand for oil continued to rise.
Rosneft is the world’s second-largest oil-producing company by output after Saudi Aramco. It produces more than 4 million barrels of oil per day.
He expected some shortages to kick in from the second half of 2021.
Meanwhile, a court order to deepen carbon cuts for Shell was a new form of risk for oil majors, he said.
A quarter of Exxon’s board of directors is now composed of critics who have argued the company has been too slow in moving away from traditional carbon power.
Chevron also saw its own investors vote for a proposal to cut emissions from their customers at a recent conference, even after its board urged them not to.
Meanwhile, Shell recently lost a major case in a Dutch court. It recently ordered the Anglo-Dutch company to slash its global greenhouse gas emissions, which stood at around 1.6 billion tons of CO2 equivalent in 2019, by 45% by 2030 in keeping with European climate promises.
More lawsuits demanding other companies to cut back their emissions are likely to follow, in Europe and elsewhere.
The world is in the middle of a rapid energy transition. The use of coal in utility-scale American electricity generation has fallen by 62 percent since 2007. Much of that slack has been taken up by natural gas, but wind and solar account for most of the rest, and renewables are starting to make inroads into gas too.
The main reason being prices: Between 2010 and 2020, the cost of wind power fell by about 70%, and solar power by 89%. Other technologies like energy storage will also contribute to making renewables easier to deploy.
It may take decades, but the long-term business prospects of oil and gas are weak.
The world’s most important oil-importing region, Asia, is showing signs of weaker physical demand with lower cargo arrivals in May and crashing refining margins as a COVID resurgence depresses fuel demand in India and other South Asian markets.
Imports into the Asian region are estimated to have dropped in May to the lowest monthly level so far this year. Asia imported 23 million bpd of crude oil last month, down from more than 24 million bpd in each of April and March, and from 25.2 million bpd in February, according to data from Refinitiv Oil Research cited by Reuters’ Russell.
Still, crude oil futures prices rallied to a two-year high last week after OPEC+ reaffirmed plans to unwind another 840,000 barrels per day (bpd) of its total cuts in July.
Most analysts, forecasters, OPEC, and the IEA continue to expect strong global oil demand in the second half of this year that would offset weakness in some Asian markets this quarter.
For over a century, burning fossil fuels has helped propel our vehicles, power our businesses, keep the lights on, and warm our homes and to this day still provide many of our energy needs. We are paying the price in terms of extreme weather fluctuations and the increased intensity of natural disasters. The latter’s impact, coupled with advancements in technological knowledge and implementation on the hydrocarbons market in parallel to a specific social movement of divesting off all fossil fuel industries, could not have begun if no palliative industry can procure all that necessary energy. At this conjecture, a story of a looming oil price super cycle will likely be the last produced in the IMF blog titled ‘End of the Line‘ only manages to highlight a change in the game. Here it is.
A looming oil price super cycle will likely be the last
Rabah Arezki, chief economist at the African Development Bank and a senior fellow at Harvard University’s Kennedy School of Government.
Per Magnus Nysveen, senior partner and head of analysis at Rystad Energy.
After a pandemic and a price war sent petroleum prices tumbling in 2020, they are again on the rise. A new oil price super cycle—an extended period during which prices exceed their long-term trend—seems to be in the making, driven by pervasive supply shortages from the lack of investment that has continued since the 2014 collapse in oil prices and, more recently, reduced investment in shale oil production; and demand growth triggered by a strong recovery in countries such as China, a big stimulus package in United States, and global optimism about vaccines.
Some of these factors have persistent components and will likely more than offset any downward pressure on consumption that becomes part of a new normal post–COVID-19 environment.
Nevertheless, this could be the last super cycle for oil because major economies appear committed to replacing fossil fuels, and mass car manufacturers have responded by committing to replacing internal combustion engine vehicles with electric vehicles over the medium term. This shift will transform the oil market into one consistent with climate goals, but poses a risk of disorderly adjustment for economies dependent on oil, with far-reaching effects that in some cases could spill over their borders.
Oil investment crunch
Even with relatively lower oil prices, extraction and exploration companies have been highly profitable. At the same time, perhaps in recognition of a less buoyant future, they have reduced their investment. Production in oil fields and the number of wells are declining, and reserve depletion is rapid. The drop in both capital expenditure and replacement of oil reserves has persisted since 2014.
COVID-19 has exacerbated the investment decline. For example, shale oil output—which has a shorter production cycle and therefore is more sensitive to changes in investment—is now increasing by half a million barrels a year, compared with 2 million barrels a year before the onset of the pandemic. While the Biden administration’s announced ban on drilling on federal land in the United States will have little direct impact on shale production, it signals a shift in federal government sentiment against the oil industry.
Shale producers have adopted a noticeably more cautious investment posture. As a result, they will be operating with positive cash flows—cash flow was previously directed toward investment spending. This reduced investment will lessen the role of shale as swing production and plants the seeds of a price super cycle. On the other hand, the Organization of the Petroleum Exporting Countries will likely increase production to counter that upward pressure on price.
The debate over peak demand
Several commentators and major oil market players, including BP and Shell, argue that global demand for oil peaked in 2019 at about 100 million barrels a day and that it will never again reach that level because of pandemic-related structural changes. That view seems supported by the sharp reduction in oil consumption for transportation, including jet fuel. After travelers started cancelling flying plans in March 2020, jet fuel consumption collapsed and only began to creep up as travel restrictions started to ease.
Those who believe consumption has peaked still anticipate that gasoline consumption will rise in mid-2021, despite higher prices as a result of the inevitable lag between any demand-induced increase in crude oil production and the increase in refined products to meet demand. With vaccine developments and optimism from a proximate reopening of the global economy, it is expected that oil consumption will continue to recover, but to a level lower than what prevailed before the pandemic—effectively the peak of oil consumption.
Yet proponents of the view that oil demand has peaked overlook the structural increase in consumption that will eventually offset any downward shift from COVID-19. Rising living standards and a growing middle class in China and India will lead to increased demand for individual cars and air travel. So even if economic growth slows, the large numbers of people crossing the income threshold that enables them to afford a car will support demand for travel. In emerging markets such as China and India, any shift toward electric vehicles will likely be slower than in advanced economies given concerns over the availability of charging stations. The rate of adoption of electric vehicles will, by and large, be the major driver of future oil demand because road fuel accounts for half of global oil demand.
The structural increase in oil demand, together with a persistent reduction in production from insufficient investment, will likely precipitate—and keep alive for some time—an oil price super cycle. But will an increase in oil prices prompt more investment and lead to another price bust as has happened in the past?
Technology and its consequences
Technological innovation may make things different this time. Large investments will likely be discouraged by the new technology at the heart of carmaker plans to replace internal combustion engine vehicles with those that run on electricity. The stock market capitalization of electric carmaker Tesla points to the imminence of the transformation of the automobile market. Tesla’s capitalization dwarfs that of traditional carmakers—even though those manufacturers produce vastly more cars than Tesla. That disparity has prompted traditional car manufacturers to commit to replacing vehicles powered by internal combustion engines with those powered by electricity, which in turn has triggered massive research and development on electric vehicles by manufacturers seeking to grab shares of the new market (see table).
A frenetic ramping up of production of electric vehicles is not without risk, however. It could cause supply to exceed demand—which would lead to negative cash flows, illiquidity, and bankruptcies of car manufacturers. The automakers’ bet is driven both by the commitment of governments to achieving zero net carbon emissions and by the belief that consumers will want to adopt cleaner modes of consumption—transportation accounts for about a quarter of global energy-related carbon dioxide emissions. But it is unclear whether consumers will merely pay lip service to cleaner consumption or actually change their behavior. Will higher carbon prices become less important to consumers than concern about an inadequate charging infrastructure for automobile batteries?
That said, mass manufacturing will eventually make the price of electric cars attractive, and a spike in oil prices would hasten the conversion to electric vehicles. This last oil price super cycle will be consistent with climate goals and associated with commitments by large economies to net zero carbon emissions in the medium term. However felicitous a development that will be for the global climate, however, it poses a risk that the oil reserves so many oil-dependent economies count on will be less valuable—especially for reserves where extraction costs are high. The reserves and the investment surrounding them become, in effect, stranded assets. That could lead to severe economic woes, including bankruptcies and crises, in turn leading to mass migrations, especially from populous oil-dependent economies, many of them in Africa. Other larger oil-dependent economies in the Middle East, central Asia, and Latin America are also an important source of remittances, employment, and external demand for goods and services that benefit many neighboring countries. The end of oil, then, could not only devastate oil-dependent economies but could also overwhelm their neighbors. It is not all bad news for countries with mineral deposits important to the energy transition. Cobalt, essential for car batteries, will be in much higher demand. Uranium could be valuable as well as electricity generation moves away from fossil fuels and nuclear power becomes more attractive.
The end of oil thus makes economic transformation imperative. Oil-rich countries must diversify to become resilient to the changes in energy markets. An appropriate governance framework to manage proceeds from oil in good and bad times has always been important to fostering economic diversification. But with stranded assets a new risk, radical shifts in governance in oil-dependent economies are urgent. Dubai, for example, facing the depletion of its oil reserves, transformed itself into a global trade hub. Countries and businesses reliant on these markets must formulate policies to address this transformation, including the development of renewable energy. To jettison their hidebound economies, which have led to low productivity and waste, oil-rich economies should commit to reforms that lessen obstacles to innovation and entrepreneurship. Reforming corporate governance and legal systems, promoting markets that have no barriers to entry and exit, and ending favoritism for both state-owned enterprises and politically connected private firms will help attract investment and change attitudes toward innovation (Arezki 2020).
Originally posted on MENA Solidarity Network: By Anzar Atrar and David Karvala At 4 am on Saturday 21 August, Spanish authorities took Mohamed Abdellah —along with around 30 other Algerians— from the migrant custody centre in Barcelona and deported him. This was bad news for all of them, of course. But Abdellah, an Algerian anti-corruption…
Privacy & Cookies Policy
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.