A Transition for Those With Most at Stake

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It would be easy to blame current global energy problems on the situation in Ukraine. The conflict has exposed newly resurgent global economic forces like rising inflation, higher interest rates, the threat of a recession and the fragility of our global commodity supply chains. But the energy sector was being undermined well beforehand, particularly by a lack of investment. Upstream capital spending has fallen by some $400 billion since 2014. Long chastised for pumping too much oil, producers are now facing increasing pressure to pump more. Such whipsaw energy policy-making has contributed to uncertainty and supply crunches worldwide, with the biggest price now being paid by those least able to afford it. This uncertainty stems from the binary belief that we must swiftly pivot to renewables and forego investment in the oil and gas sector, as reflected in the rapid departure of capital from the conventional energy industry.

Little thought has been paid to how we manage energy supply and demand during this crucial period of transition. But as events over the past few months demonstrate, maintaining the equilibrium of energy markets will be critical as the world gradually recalibrates energy production systems and moves to a lower-carbon future. Exiting conventional energy pathways prematurely risks upsetting that balance.

That is why an inclusive and pragmatic approach must nurture multiple transition pathways to ensure the pace of change does not trigger global energy shocks, or punish those least able to adjust.

For context, nearly 90 million people in Asia and Africa with previous access to electricity could no longer pay for basic energy needs as a result of the pandemic, according to the UN. Furthermore, some 730 million people globally — about 1 in 10 — lack access to electricity to light their homes or refrigerate their food. The world needs continued investment to serve a population that is expected to grow to 9.8 billion by 2050, with most of that growth coming from the developing world.

We therefore have a collective responsibility not only to speed our energy transition, but also to cater to rising global energy needs. And despite the challenges, opportunities abound to drive the sustainable development of economies worldwide through principled investment.

Global business leaders have a unique responsibility to leverage the power of business and finance to create meaningful, measurable and sustainable growth. When harnessed appropriately, global investment can be a powerful force for equality and inclusion, creating a more sustainable and encompassing future for our planet.

At Aramco, we have embarked on the largest capital spending program in the company’s history. Our intention is to help meet the world’s growing energy demand and address greenhouse gas emissions. We intend to be a leading player in the low-carbon hydrogen market, as well as carbon capture and storage and other sustainable technologies.

But we deeply believe that the transition will require a multi-stakeholder approach, and that meaningful change can only be achieved through collaboration between customers, governments, industry partners and investors. That is why we must partner with different stakeholders to achieve our transition goals, and work with them to ensure we are moving at a pace that is sustainable, just and serves all.

History tells us that energy transitions do not always unfold as expected, and that several competing sources of energy and transportation can co-exist at any given point. At the turn of the 20th Century, horses shared the streets of the world’s biggest cities with vehicles powered by both gasoline and steam. In fact, the best-selling car in the US in 1897 was an electric vehicle — more than a century before anyone had heard of the term “range anxiety.”

There is no single pathway for our energy transition. Different countries will inevitably move at different speeds, as they seek to reduce emissions. Society will need solutions that are practical and that crucially do not exclude the most disadvantaged members of society.

Global companies must therefore ensure we are strategically approaching the transition and creating value for all of our stakeholders, not only a select few, long into the future. Only then can we achieve a truly sustainable transition for everyone.

Yasir al-Rumayyan is chairman of Aramco.

Low-Carbon Policy, Policy and Regulation, Carbon Capture (CCS), CO2 Emissions
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