The geopolitical fight to come over green energy

The struggle for sustainable energy will soon put China, the US and Europe on a geopolitical collision course. But moving away from fossil fuels is a Herculean task, and a greener politics will not transcend tragedy.

The world is cornered in a Janus-faced energy crisis: one generated by the speed with which it is necessary to replace fossil fuel energy to stop global temperatures rising, and one around oil, on which in three decades’ time, even if carbon neutrality is achieved, the world economy and everyday life will still depend. For all the hope often expressed that the acute problems facing the oil sector are a vindication of the seismic shift in green ambitions over the past couple of years, there is in reality no escape from either side of this predicament.

An oil crisis was first evident in the middle years of the 2000s when stagnant supply and sharply escalating Chinese demand sent oil prices soaring to an eventual peak, in real terms a third higher than their previous apex during the early part of the Iran-Iraq war. Since early in the last decade, the shale oil boom has prevented a repeat price shock. But it will prove a temporary lull on the supply side. A report HSBC published in 2017 suggested that more than 80 per cent of existing conventional liquids production – non-shale and tar sands oil – is in decline. Once Saudi Arabia reacted to shale’s ascent by inducing a price slump in late 2014, oil companies severely cut their investments. In 2019, oil production fell for the first time in a decade, even as consumption rose by almost one million barrels per day. Now, having stood for nearly a decade between the world economy and energy-driven recessions, the shale oil industry is in some trouble, savaged by the pandemic shock to demand, low investment, and high debt costs.

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