More Countries Consider Returning to Fossil Fuels to Maintain Energy Security

More Countries Consider Returning to Fossil Fuels to Maintain Energy Security
A miner holds chunks of coal. (Parilov/Adobe Stock)
Andrew Moran
Many countries worldwide have been faced with a dilemma over the last year: turn to fossil fuels to maintain energy security or turn to renewables for their political climate agendas.
In the aftermath of the pandemic, a growing number of nations have endured power outages, shrinking inventories, and higher oil and gas prices. Despite investing billions into green technology, such as solar and wind, it has been challenging since output failed to satisfy immense energy demand across developed and developing markets. 
The other issue, particularly in Europe, is an enormous dependence on Russia’s crude and natural gas exports. The eurozone had imported vast amounts of energy from Moscow—40 percent of its natural gas and 30 percent of its oil. Because of the brutal winter that gripped the region and led to falling stockpiles, the European Union recently announced it would be gradually reducing its reliance on energy imports from Russia by up to two-thirds by the end of the year.  
In recent years, plenty of advanced and developing economies have pledged to kick the addiction to fossil fuels and invest more in green energy, be it solar panels or windmills, to curb emissions.  
However, with data showing that alternatives have been unable to keep up with substantial consumption, more countries are returning to crude oil, coal, and natural gas for the time being.  
Speaking to a local newspaper, German Finance Minister Christian Lindner suggested that the nation should reconsider its ban on new oil and gas drilling in the North Sea as it decreases its purchases of Russian energy.  
Oil pumpjacks in the Inglewood Oil Field in Los Angeles, Calif., on Jan. 28, 2022. (Mario Tama/Getty Images)
Oil pumpjacks in the Inglewood Oil Field in Los Angeles, Calif., on Jan. 28, 2022. (Mario Tama/Getty Images)
Germany will not approve any new permits for drilling oil and gas in the area as part of a coalition deal between Chancellor Olaf Scholz’s Social Democrats, the Greens, and Lindner’s Free Democrats (FDP). But Lindner believes that this should be postponed due to recent geopolitical and market developments and the country’s need for more fossil fuels.  
“We have to question the decision in the coalition agreement. Due to global market prices developments, this looks more economical,” he told the Tagesspiegel newspaper.   
“Against the changed geopolitical background, I think it is advisable to examine the entire energy strategy of our country without any prohibitions on thinking.”  
Over the last year, Germany has seen coal become the country’s main electricity source again, topping wind. This comes after the government planned to shut down all 84 of its coal-fired power plants, importing 45 percent of its needs from Russia.  
Estimates suggest that Germany will see an increase of hard coal imports by 7.7 percent this year.  

“Coal burn in Europe has remained at high levels since last year due to high gas prices, and it is likely to continue the trend this year, too, with gas prices surging further,” said Yan Qin, an analyst at Refinitiv, in a note.

In recent weeks, there had been some speculation that the German government would delay its plan to close its remaining nuclear power plants. But Berlin rejected this proposal.
“We have again examined very carefully whether a longer operation of the nuclear power plants would help us in this foreign policy situation,” German Vice-Chancellor Robert Habeck said in a statement last week. “The answer is negative—it would not help us.”
Today, gas and nuclear power continue to represent a significant portion of Europe’s power grid, ING analysts say.
“The future role of gas and nuclear power highly depends on political choices about Europe’s future power system,” wrote ING senior sector economist Gerben Hieminga and head of its Financials Sector Strategy, Maureen Schuller, in a report.  

Will China, India Go Green or Stick to Fossil Fuels?  

In September 2020, speaking before the U.N. General Assembly, Chinese leader Xi Jinping vowed to achieve carbon neutrality by 2060.   
Beijing has built more wind power than the rest of the world combined, and it could see more robust capacity growth over the next five years.  
Late last year, India also pledged to accomplish net-zero emissions by 2070, including meeting half of its energy needs by renewables by 2030.  
But it could prove challenging for these two nations to be successful in this broader green-related pursuit as they buy and mine more conventional forms of energy.
The world’s second-largest economy had experienced rolling power outages throughout the country last year. This prompted Beijing to revive coal consumption, approve mining expansions, and start construction on coal-powered generators. While it still buys more than 30 million tons of coal per month, China aims to cut down on imports and improve domestic production.  
The National Development and Reform Commission (NRDC), the nation’s top economic planner, wants to increase domestic output by roughly 300 million tons while also erecting a 620-million-ton stockpile for the fuel source.  
A coal-fired power plant in Hanchuan, Hubei Province, China, on Nov. 11, 2021. (Getty Images)
A coal-fired power plant in Hanchuan, Hubei Province, China, on Nov. 11, 2021. (Getty Images)
Vice Premier Han Zheng called coal China’s “last barrier” to energy security.  
Last month, the Indian government confirmed that coal production rose 6.13 percent year-over-year to 79.6 million tons in January.  
India also projects to enhance coal production by 75 percent to 1.2 billion metric tons by 2023 or 2024.  
While officials say they want to diminish their dependence on imports, the South Asian economy witnessed its coal inventories plummet to critically-low levels in October. This sparked rolling blackouts throughout the country.
Reportedly, India is also considering acquiring more Russian crude and other commodities at a discount.  

What About the US?  

Even in the U.S., where the administration is expanding a green energy agenda, coal imports have remained strong and production has climbed sharply from previous years.  
U.S. coal production rose more than 6 percent in the last week, according to estimates from the Energy Information Administration (EIA). It is also a net exporter of coal, although the country still imports more than five million short tons.   
Meanwhile, with prices as high as they are, some industry observers believe the U.S. oil and gas sector could begin to ramp up production.  
Experts note that companies have been apprehensive about drilling full speed ahead, whether it is because of trying to reduce their carbon footprint or regulatory uncertainty at the federal level. But this could incrementally change.
IHS Markit statistics highlight that private firms have been steadily increasing output, contrary to the White House’s suggestion.

“Over the longer term, inventory exhaustion is likely to emerge as a mounting concern. Although drilling inventory within lower-tier acreage remains abundant, exhaustion of core acreage is likely to emerge within smaller, mature unconventional plays over the next several years,” IHS stated.

Crude oil rigs in the United States advanced to 527 in the week ending March 11, up from 519 in the previous week, according to Baker Hughes. This is the highest number since April 2020.  
“The technologies to supply America with the energy it needs doesn’t exist in the green energy world yet. Well sure you can have instrumental incremental increases in solar and wind battery technology breakthroughs but right now they’re not there,” wrote Phill Flynn, a senior energy analyst at The Price Futures Group and the author of The Energy Report.  
In October 2021, the EIA forecast in its International Energy Outlook that oil and gas would still be the top sources of global energy by 2050, with renewables making up approximately one-quarter of the international energy mix.  
“We do see a lot of impact from the growth in renewables and such in reducing carbon intensity, Chris Namovicz, EIA’s electricity, coal and renewables modeling team lead, said during a presentation on the outlook. ”That being said, demand is still growing and there are still portions of demand that are most economically satisfied through burning of fossil fuels.”  
Overall, the skyrocketing price of fossil fuels reflects the substantial demand for these products, strategists note.  
Coal prices are expected to top $500 per ton this year, according to Rystad Energy. A barrel of West Texas Intermediate and Brent crude oil is above $100. Natural gas is trading at around $4.50 per million British thermal units (Btu).  
Until renewables can do their part and remain reliable during all types of conditions, from market to weather, strategists purport that fossil fuels will continue to remain present in the global economy, even by 2050. 
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