Even as the world tries to shift to green energy, the demand for fossil fuels remains high. Now, with prices of oil and gas skyrocketing, it’s becoming obvious that renewable energy isn’t ready to take over.
World Continues to Depend on Fossil Fuels, Not Green Energy
The current global energy crisis is pushing oil and gas prices to record highs. As a result, many are beginning to realize that the world continues to depend on fossil fuels.
Unusual weather conditions and reopening economies are now causing energy shortages all over the world. In addition, a cartel controlling worldwide oil production remains hesitant in providing enough supply for all. As a result, oil, natural gas, and even coal prices are climbing up steadily.
The present energy crisis is driving home a point. The threat of climate change is pushing countries to pivot from fossil fuels to green energy.
However, many industries and governments continue to remain resistant to the transition. This is despite the fact that many governments and investors are accelerating their renewable energy programs.
Green Energy Is Not Ready, That’s Why Demand For Fossil Fuels Continue to Increase
Many energy executives estimate the transition to take years to achieve. They came upon a stark reality that is holding up the change. Fossil fuel investments are decreasing, but investments in green energy aren't filling up the gap.
As supply chains for power continue to strain against demand, demand for power is increasing. However, renewable energy resources such as solar, wind, and hydroelectricity are falling short of estimates. As a result, many companies are buying more fossil fuels to fill the demand.
Meanwhile, the International Energy Agency projected that demand for fossil fuels will continue to accelerate. Projected oil demand will rise to nearly a hundred million barrels of oil a day next year.
This is near pre-pandemic levels. Meanwhile, demand for coal will exceed 2019 levels and will continue to rise until 2025. Until governments decide to phase out coal entirely, growth remains possible.
No Balance In Supply and Demand
Exxon Mobil CEO Darren Woods spoke at a conference in Russia Wednesday. “A lot less product is available to meet this now rapid growth we’re seeing.
“If we don’t balance the demand equation and only address the supply, it will lead to additional volatility,” he said. While the world’s oil production is rising, it has yet to reach the levels of present demand. Presently, a surge of consumption is coming in from countries recovering from the pandemic.
However, global oil and gas exploration is about to ta out. They used to average around $100 billion between 2010 and 2015. Now, spending for fossil fuel exploration has dropped to around half at $50 billion per year.
Meanwhile, total global oil and gas investment for this year will go down about 26% from pre-pandemic levels to $356 billion.
Meanwhile, investments in green energy need to grow from $1.1 trillion a year to $3.4 trillion until 2030. This is the minimum needed by green energy to fulfill global energy demand.
Green Energy Needs to Increase Their Investments
According to an IEA report, “The world isn’t investing enough to meet its future energy needs. Uncertainties over policies and demand trajectories create a strong risk of a volatile period ahead for energy markets”.
However, even ramping up green energy production will require using fossil fuels. Manufacturers will need to source raw materials from mining operations.
Still, there remains a long road ahead for green energy to take over. According to the International Renewable Energy Agency, global green energy capacity totaled 1.5 million megawatts in 2020. This is far from the 55,000 megawatts generated in 2000.
Watch the Bloomberg Markets and Finance video report: Solving the Global Energy Crisis:
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