Thursday, January 27

Saudi Aramco predicts social unrest and high inflation if oil falls

Social unrest and high inflation rates. That is the future that awaits us in the event of an abrupt halt to investments in oil and other fossil fuels, according to the CEO of Saudi Aramco, the world’s largest oil producer.

“I understand that publicly admitting that oil and gas will continue to play a significant role during and beyond the energy transition may be tough for some,” said Amin Nasser, at the World Petroleum Congress (an industry congress held In Houston).

“But admitting this reality may be much easier than having to face energy insecurity, rampant inflation and social unrest if prices become intolerably high,” adds this manager.

The energy transition itself, in danger due to the lack of investment in oil

In fact, his warning goes even further, stating that this situation could jeopardize the energy transition itself.

“The commitments of zero emissions by the countries could begin to crumble” if the social situation becomes too tense, he warns.

“The world is facing an even more chaotic energy transition, centered on unrealistic scenarios and assumptions about the future of energy,” continues Nasser.

These comments from the Saudi Amramco executive come amid the boom in socially responsible investments, which are prioritizing companies with commitments to reduce greenhouse emissions.

Some portfolios, in fact, exclude oil and fossil fuel companies from their investable universe by virtue of these commitments to fight climate change.

Oil companies committed to fighting climate change are a minority

In this context, some oil companies have jumped on the bandwagon of the energy transition, as in the case of Repsol, which is considerably increasing its investment in renewable energy (although fossils continue to represent the majority of the business).

In fact, The International Energy Agency (IEA) has come to warn that energy companies will have to stop any new exploration projects for fossil fuels if they are to meet the goal of net zero emissions by 2050.

Although, only three of the big oil companies in the world have joined the Paris objectives (to limit global warming to 1.5 degrees). These are Total Energies, Eni and Occidental Petroleum, which represent $ 39 trillion in assets, according to data from the Transition Pathway Initiative published by Bloomberg.

Saudi Aramco is not aligned with the Paris goals

The rest of the large companies (some 60) remain outside these commitments. One of the companies that has not joined this trend is precisely the aforementioned Saudi Aramco, the world’s largest oil producer.

Beyond his particular interests, he asserts that there is a real danger of access to energy if prices continue to rise due to an energy transition that he considers too accelerated.

And this can happen if you stop investing in the industry, according to several voices during the Houston conference (in the United States).

Discussions aside, the truth is that “for investors, there is still a great distance between the rhetoric of zero emissions and a reality of zero emissions in the case of the main fossil fuel companies,” as Adam Matthews, president of the Transition Pathway Initiative.