Amin Nasser, chief executive of Saudi Aramco, expressed his view during the Saudi Capital Market Forum in Riyadh on the current state of new investments in oil and gas. He said that an increased focus on climate was undermining investment in oil and gas which may pose a threat to energy security.
“Proponents of the popular energy transition narrative paint a picture of a Utopian world where alternatives are ready to replace oil and gas almost overnight,” he said.
He also stated that the focus on Environmental, Social and Governance criteria in investment is raising the cost of capital for oil and gas projects which makes them carry higher risk.
The statement made by Amin Nasser follows a rush of callings from the oil and gas sector that wants to preserve its sufficient investments that are already in disparity with the target of limiting global warming to 1.5 degrees Celsius. They base their statements on the foundation that fossil fuels will be needed for years due to energy security.
According to researchers, however, that statement is corrupted as data shows the main driver of clean energy investment is energy security rather than climate change. The war in Ukraine has increased fossil fuels prices which caused energy market havoc, deepened the financial crisis and brought instability to the global economy. It also showed fossil fuels dependence hides enormous geopolitical risks that were previously unforeseen.
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According to Bloomberg’s analysis, global investments in the clean energy transition hit $1.1 trillion in 2022 and equaled the investments in fossil fuel production for the first time ever. Still, the amount is not sufficient to cut greenhouse gas emissions to mitigate climate change.
Even though investments in the energy transition are just a fraction of what they need to be to avoid the worst consequences of climate change, the fossil fuels industry seems eager to divert them away from renewable energy to protect its whopping capital that’s been poured into the industry for decades.
Similar statements are also provoked by data showing renewables are set to dominate the construction of new power infrastructure in the coming years as costs continue to fall. Research from the International Energy Agency also shows investments in renewable energy will increase about up to $2 trillion a year by 2030.
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Investments in clean energy are considered one of the most secure ways of alleviating pressure on energy costs as solar, wind and other renewables’ prices are forecasted to move in a downward trajectory. Furthermore, if renewables are to be able to replace fossil fuels, investments will need to increase and outrun those of fossil fuel new development. Additionally, more capital is needed for research and development of renewables and energy storage to ensure strengthened stability and reliability in the clean energy economy.