The world’s biggest gathering of energy industry leaders kicked off in Houston Monday, as Russia’s invasion of Ukraine delivers an oil price shock to the global economy and embattled executives face growing criticism for the industry’s role in climate change.
Global oil prices have reached levels not seen since the 2008 financial crisis as disruption to crude and fuel exports from Russia has left the world short of supply, threatening the biggest disruption in energy markets worldwide in decades – one that oil producers say requires a swift response.
“Everybody that is an oil producer has to accelerate efforts to bring more oil to the market,” Hess Chief Executive John Hess said at a panel.
This year’s CERAWeek was expected to attract more than 4,500 attendees, with a program drawn up long before Moscow’s invasion of Ukraine focused on the energy transition, with numerous panels centered around hydrogen and carbon capture.
“CERAWeek was planned to discuss the energy transition, renewables, hydrogen … the future. But we were thrown back to the last century, discussing oil supply,” said Ricardo Savini, chief executive officer of Brazilian oil company 3R Petroleum.
Russia’s invasion was addressed by several speakers, beginning with US climate envoy John Kerry, who addressed the invasion, calling Russia’s actions “abhorrent”.
Global benchmark Brent crude briefly surpassed US$139 on Monday – not too far off its all-time high of US$147.50, and analysts believe the high prices could last for months. It was last trading around US$123.
“This is a defining moment for this century,” Kerry said, noting that people would need to live with higher energy costs for a time as a result.
The United States and the European Union are now considering an outright ban on buying energy from Russia, with the Washington considering going ahead alone, sources said, a step until now, the White House had not wanted to take.
Russian oil sales amount to about 4-5 million barrels per day (bpd) of crude, more than any other nation besides Saudi Arabia. European countries account for roughly half of those purchases, according to the US Energy Information Administration.
Saudi Arabia is part of a grouping known as OPEC+ – members of the Organization of the Petroleum Exporting Countries and allies including Russia – that has maintained its current program of boosting supply by 400,000 bpd every month to restore pandemic-related output cuts dating back to 2020.
The United States and others have called for OPEC+ to boost output – but producers are consistently falling short of targeted increases, and nations with spare capacity, such as Saudi Arabia, have been wary of using it.
OPEC+ sources said on Monday that the oil market’s fundamentals remained sound, downplaying the prospect of any further extra supply from the producer group.
That has tightened supplies that are already short, adding pressure on oil companies to increase output. But after cutting spending and production during the depths of the COVID-19 pandemic, the industry has been in no shape to match the growth in consumption: The United States is still producing more than a million barrels below its 2019 peak of 13 million bpd.
“US shale is no longer the world’s swing supplier,” said Hess. “It has gone from a growth business to a harvest business.”
Advocates of greater use of renewables say that additional fossil-fuel investment now will only increase the world’s dependence on oil and gas at a time when the climate continues to warm – and Russia’s actions makes transitioning to cleaner fuels more desirable.
“You already see what’s happening with global temperatures up by 1.2 degrees (Celsius),” Kerry said.