The boss of the world’s biggest oil producer has called time on the energy transition, saying it’s time for policymakers to focus on affordability and lowering emissions instead of phasing out oil and gas entirely.
Speaking in Houston this week at the CERAWeek conference, Aramco’s CEO Amin H. Nasser said consumers need immediate access to affordable energy without disrupting their daily routines.
But according to Nasser—who took on the top job at the oil giant in 2015—these demands are at odds with the current priorities of governments attempting to turn their nations towards greener alternatives.
“The current transition strategy is visibly failing on most fronts,” Nasser said Monday.
“The first is that, despite the world investing more than $9.5 trillion on energy transition over the past two decades, alternatives have been unable to displace hydrocarbons at scale.
“Today, wind and solar combined, supply under 4% of world energy. Meanwhile, the total penetration of EVs is less than 3%. Three to 4% is not nothing, and we welcome the progress in both renewables and EVs. But 3% to 4% is not everything either.”
On the other hand—according to the U.K.-based Energy Institute—fossil fuels made up 82% of the world’s energy consumption in 2022.
Although this proportion is down from 85% five years prior, global primary energy consumption is still growing with oil consumption rising almost three million barrels per day (b/d) to 97.3 million b/d in 2022.
Nasser added there is still “significant demand growth potential” to be explored in developing countries, where demand is between one and two barrels per person, per year. This is a fraction compared to the U.S. And the EU, which demand 22 barrels and nine barrels respectively, Nasser pointed out.
Shortfalls such as this led the boss of the company—which has a market cap of approximately $2 trillion at the time of writing, per Bloomberg—to double down: “A transition strategy reset is urgently needed and my proposal is this. We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately, reflecting realistic demand assumptions.”
The Aramco boss, who leads a team of more than 70,000 people, also took aim at those who painted the oil industry as the “archenemy” of the energy transition, arguing the sector had a “starring role” in global prosperity.
As well as ramping up carbon emission efforts, improving efficiency, and exporting lower carbon emissions, Nasser added, policymakers should “phase in new energy sources and technologies when they are genuinely ready, economically competitive, and with the right infrastructure.”
The affordability issue
Hearing Nasser—a petroleum engineering graduate from the King Fahd University of Petroleum and Minerals in Dhahran—calling for affordability to be made a priority will be welcome news to consumers who are battling inflation, higher base rates, and unpredictable energy costs.
In the U.K.—which has a price cap—regulators have increased energy caps by up to 80% in the past couple of years, prompting the government to step in with fiscal support to prevent a deepening of the nation’s cost-of-living crisis.
In the U.S. The price of crude oil has been volatile—spiking at $113.77 in June 2022 before falling to $71 by December 2023.
A January report from the Labor Department cited higher energy prices remaining as a major driver of inflation—leading to price rises in December of 0.3% from November and 3.4% from 12 months earlier.
The fluctuations are down to trade wars with major producer Russia over its invasion of Ukraine, as well as OPEC+ nations voluntarily deciding to cut production levels.
But Nasser, as well as pushing for efficiencies to improve affordability in his own industry, also fired a shot at other energy types and parallel products.
He said: “Despite its significant long-term potential, hydrogen still costs in the range of $200 to $400 per barrel of oil equivalent, while oil and gas remain much cheaper.
“Meanwhile, without subsidies, EVs are up to 50% more expensive than an average internal combustion engine car. They cannot be subsidized forever and increasing consumer doubts about their cost and benefits is preventing mass adoption.”
As a result, Nasser said, consumers are waking up to a “reality” he claims many in the industry are accustomed to: “The world has been trying to transition in fog, without a compass, on a road to nowhere… Consumers are demanding a transition that is affordable, reliable, and flexible, and that supports our climate ambitions.”