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Rocketing demand for fossil fuels could deal blow to climate goals, report says

Rocketing demand for fossil fuels could deal blow to climate goals, report says

Global oil prices have climbed to $90 a barrel, which could tempt investors to pile more cash into long-term fossil fuel projects, dashing the world’s hopes to limit carbon emissions in line with climate targets and wasting billions in investment, according to a report.  Recent price rises could mean more potential projects appear to be lucrative investments in the short-term, the report by the financial thinktank Carbon Tracker says. But the analysis suggests demand for fossil fuels could begin to dwindle by the time these projects begin, creating “a nightmare scenario” for investors and climate campaigners.

Demand for oil and gas has rebounded strongly as the global economy bounces back from the economic slowdown triggered by the Covid-19 pandemic in 2020, leading to a global gas supply crunch and rocketing energy market prices.

The international oil price climbed from lows of about $20 a barrel in April 2020 to seven-year highs of $90 a barrel on Wednesday, and may reach $100 by the end of the year. Meanwhile gas prices have reached all-time highs in markets across Europe and Asia, fuelling a cost of living crisis.

But the increase was unlikely to last over the lifetime of a long-term fossil fuel investment, Carbon Tracker said, because government climate commitments combined with the rapid switch to electric vehicles and renewable energy would drive down demand for oil sharply from the late 2020s to 2040.

“You can see the same over-investment story for gas,” said Mike Coffin, the head of oil and gas at Carbon Tracker and a co-author of the report. He advised oil and gas companies and their investors to “resist the temptation” to make long-term investments in new fossil fuel projects based on current market prices.

Axel Dalman, a Carbon Tracker analyst and the lead author of the report, said: “Companies may see high prices as a huge neon sign pointing towards investment in more supply. However, this could become a nightmare scenario if they go ahead with projects which deliver oil around the time that demand stars to decline.”

A failure to acknowledge “the sea change risks” facing fossil fuel developers from the global transition to low-carbon energy risked locking in carbon emissions, which would dash the Paris climate goals as well as investor returns, Coffin added.  The warning follows a call this week from Fatih Birol, the executive director of the International Energy Agency, for governments to triple their investment in low-carbon energy sources over the next decade to cut their reliance on gas as a safeguard against a future energy market crisis.  “The world has not been investing enough to meet its future energy needs – and that remains the case today. Clean energy investment is gradually picking up but remains far short of what is required to meet rising demand for energy services in a sustainable way,” he added.

Source – The Guardian

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