Despite the continuing development of oil-extraction technologies, the trend for finding a new competitive renewable green source of energy has been high on the agenda in recent years, as eco-activists like Greta Turnberg have been pushing hard to abandon fossil fuels. At the same time, even the most optimistic forecasts predict that peak demand for crude might come as early as in 20 years, after which it will start to decline as relatively cheap oil wells run dry globally.
These facts are bound to have oil companies thinking about their prospects on the market and how to keep their market share in the post-carbon fuel world, if and when it comes, energy markets analyst for Skolkovo business school Alexander Sobko believes. Yet, these companies go to different lengths, as they try to figure out their place in a future without cheap hydrocarbon fuel.
All energy companies are investing in different sorts of green energy, such as solar panels or wind farms, but their investments vary from around 1% up to 15% of capital investments, with 3% being an average level.
The US oil companies, such as ExxonMobil and Chevron, invest the least amount of money into developing my green energy sources. Instead these companies chose another path to resolve the problem of declining profits from typical oil wells, as Sobko points out – they have sold their global assets and focused on shale oil and gas drilling in the US. The analyst stresses that such crude can sometimes be cheaper than that which is extracted from the off-shore wells. In addition, investment cycles in shale oil wells are much shorter than those for off-shore drilling, which is more lucrative for the energy companies, he adds.
The European companies, such as Shell and Total, on the other hand, invest heavily in the renewable energy sources, complying in the EU's political endorsement of an eventual complete green energy shift, Sobko says. Until this shift happens, these companies, however, focus on gas as the less pollutant fossil fuel of all – a so-called transition energy source.
Total has 50% of its assets devoted to gas extraction and invests heavily in LNG projects globally. But they are not limited to gas. The same Total signed a contract with Peugeot on investing in the creation of batteries for electric cars deemed less polluting.
With all that in mind, Sobko stresses that the profits from the green energy industry projects still remain low, especially in comparison to those in the oil sector, which gives high returns as long as the crude prices remain relatively high. The latter, however, doesn't necessarily come as a given – they depend on number of factors, from the supply/demand rate to OPEC+ agreements.
At the same time, green energy sources are still riddled with issues preventing their mass use. Namely, solar panel efficiency is highly dependent on the weather and day and night cycle, while their own production requires a lot of electricity and the use of poisonous chemicals. Wind farms in turn are criticised for the noise they are generating and potential damage to the ecology from their construction, especially since they take a lot of land to generate any substantial amount of energy.
Sobko sums up that different energy companies brace for the long-forecasted dawn of fossil fuels at different tempos. He argues that the matter is not yet pressing and they have time to decide where to go next in the post-carbon world, but adds that it's high time to start the discussions on the topic at least. The analyst further stated that in any case the transition from one energy source to others won't be as rapid as Greta Turnberg suggests, but instead gradual and slow. Otherwise it will only spark an oil deficit and other underlying consequences.