PARIS agreement of Climate Change emphasise decreasing dependence on the use of carbon emitting energy inputs as response option to the tackle global warming. But switching over to carbon free energy sources is not easy to predict for various reasons. Currently, global economy is largely dependent on the consumption of fossil fuel for speedy growth to generate output and employment. Industry, thermal power generation and means of transport are the major users of petroleum products such as oil and gas and coal both in developed and developing countries, which emit carbon dioxide of great proportion
A new Moody’s Investor Service report analyses how energy transition creates risks and opportunities for state owned oil and gas companies like Saudi Aramco, Russia Gazprom and Chinese CNPC. West European countries meet thirty percent of their gas demand supplied by through pipeline by Gazprom. The report states that these state owned oil and gas companies exposure to carbon transition risk will vary. Some oil and gas companies will change strategies for business reason and align with governments’ climate efforts. Other may find it difficult to invent and use new technologies to make transition possible to produce less carbon intensive petroleum products, either due to constraints of fiscal obligations or the social objectives of their sponsoring governments. While giving cost-benefit analysis of demand -supply fluctuations of crude oil and petroleum products, the report says that economies that are greatly reliant on petro-exports like “OPEC” members will face the financial crunch with steep fall in demand, which will be offset by reducing production and supplies. But even in the steep fall in demand these economies will absorb the shock because of low crude oil production cost.
Jason Bordoff, head of Columbia University energy think-tank opines in his essay that even demand for crude oil shrinks, “OPEC” share of global production could rise as a result of its members’ lower production cost and low carbon emission volume of their petroleum products, which will strengthen the cartel’s grip on global market that will remain sizeable for some time. But at the same time he advises the “OPEC” member countries to reduce reliance on petro exports and diversify their economies as they will eventually face decline in demand for crude oil in a carbon dioxide constrained world.
