Big Oil’s political flavor is weakening as governments take over green energy

In 2007, Tony Blair, the Prime Minister of the United Kingdom and Muammer Gaddafi in the desert, did not have the moment when the Libyan leader tightened relations with an old enemy. Moreover, the “Big Oil” was a crude symbol of the role played in foreign policy.

BP closed a major exploration deal on the same trip, which put an end to efforts to push the UK government to re-establish ties with the North African dictator, opening access to huge hydrocarbon resources on the European front.

The struggle for fossil fuel resources has had an impact on geopolitics over the decades, from the emergence and shaping of conflicts between the West and the Middle East to the current Nordstream 2 pipeline to the debate from Russia to Western Europe.

But now the relationship between western oil companies and their governments is changing dramatically as governments commit and put aside fossil fuels when US President Joe Biden called an international in April climate peak to reduce emissions by putting pressure on countries.

“There has always been a great deal of geopolitical power linked to access to oil,” said Greg Priddy, a former U.S. government energy analyst. “Even though it was as late as the US administration in the US, it seemed that important producers abroad were strategically important. But all that is changing. “

It was their turn when they went home last month International Energy Agency he published the report arguing that if the world were to transport zero greenhouse gas emissions by 2050 – the goal of the Paris climate agreement was to limit global warming to 1.5 C from previous industrial levels – arguing that exploration for new oil fields should stop immediately.

Even before the report, oil companies reduced investment in risky frontier exploration, fearing that oil consumption could peak in the next decade.

But at a time when oil executives could have played as different roles as ambassadors when it came to managing relations with foreign leaders, their impact is diminishing. Critics once denounced the “revolving door” between governments and oil groups as officials taking positions in the industry after leaving public life. Analysts say governments do not want to see them backing their fossil fuel companies abroad while pushing for a domestic agenda based on renewables.

In the US – the world’s largest oil producer and consumer – the Biden administration has once again joined the Paris agreement, expelled and proposed the Keystone XL oil pipeline unprecedented investment in clean energy. Internationally, the White House has put pressure on other countries to stop funding coal projects abroad – in the last month The G7 nations were committed to do so by the end of this year – as well as driving the climate summit.

Even if it solves all the problems of energy geopolitics by decarbonizing it, the energy transition will certainly create new ones.

“With the change in administration in Washington, I think we’ve probably seen a blurring of the U.S. government’s love affair with oil companies,” said former CIA analyst Helima Croft, who leads RBC Capital Markets ’commodity research.

“Maintaining access to resources was once a major issue in Washington, but it is now less focused on the energy transition and climate change.”

However, trying to make a global transition to renewable energy is a complex calculation, observers have warned.

Large oil companies say that although they had support, they never relied on their governments to help ensure access to resources, and they continue to be welcome in many countries.

According to industry data, politicians are at risk of losing global strength, weakening ties with domestic oil and gas companies and alienating developing countries from fossil fuels. The U.S., for example, should use extensive hydrocarbon resources to help potential allies that could rely on supplies from countries such as Russia.

“Right now there is geopolitical competition with China for economic impact in many parts of the world,” said the former U.S. national security adviser, who now works for a large U.S. oil company and asked to remain anonymous. “The US has advantages over LNG supply, but it seems willing to use it less.”

Jason Bordoff, a former special aide to Barack Obama and director of the Center for Global Energy Policy at Columbia University, said the global demand for oil has not yet been abandoned.

“The IEA roadmap was quite striking in highlighting what needs to be changed, but it’s striking that nothing has changed yet – the demand for oil is still going up,” Bordoff said.

He said the role of natural resources in foreign policy would evolve with the energy transition. The acquisition of critical minerals or alternative fuels for batteries, such as hydrogen, would change rather than the disappearance of relations between major raw material producers and governments.

“Even if energy is solved by decarbonizing all problems of geopolitics, the energy transition will certainly create new ones,” he said.

In the end, high-level political support cannot protect the oil company from the events. Blair may have paved the way for BP, but his investment in Libya has not borne fruit, as the 2011 civil war and subsequent riots disrupted plans. In 2018, the company sold half of its stake in exploration rights to Italian company Eni.

“There was always an interesting relationship between the government and the big oil companies, but I was never very sure what kind of path it affected,” said Professor Paul Stevens, a great fellow at Chatham House.

“But oil at the start. . . companies are fighting a backward action and the government is not doing much for it. ”

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