The world’s biggest gathering of energy industry leaders kicks off in Houston Monday, as Russia’s invasion of Ukraine delivers an oil price shock to the global economy and embattled executives face growing criticism for the industry’s role in climate change.
Global oil prices have reached levels not seen since the 2008 financial crisis as disruption to crude and fuel exports from Russia has left the world short of supply, boosting energy costs that is slowing economic growth.
Tensions continued to rise over the weekend, with the United States and the European Union considering an outright ban on buying energy from Russia. In overnight action Brent crude briefly touched $139 a barrel – not too far off its all-time high of $147.50.
Until this point, the U.S. and EU had not specifically targeted those sales, which amount to 4-5 million barrels per day (bpd) of crude, more than any other nation besides Saudi Arabia.
European countries account for roughly half of those purchases, according to the U.S. Energy Information Administration.
“The conference is certainly going to have a different tone than it would have a week or two weeks ago,” said Daniel Yergin, vice-chairman of S&P Global, which presents the conference.
This year’s CERAWeek is expected to attract more than 4,500 attendees and a program drawn up long before Moscow’s invasion of Ukraine – Russia calls its actions a “special operation” – features numerous presentations on the energy transition, including a Monday kick-off discussion with U.S. climate czar John Kerry.
But the global turmoil has upended the agenda, where some slated speakers, including Saudi Energy Minister Abdulaziz bin Salman, have canceled plans to speak.
“Given how tense this growing crisis on oil that’s unfolding, it might just not be possible for him to take four days to be out of the country,” S&P Global’s Yergin said.
Saudi Arabia is part of a grouping known as OPEC+ – members of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – that has maintained its current program of boosting supply by 400,000 bpd every month to restore output cuts dating back to 2020.
The United States and others have called for OPEC+ to boost output – but producers are consistently falling short of targeted increases, and nations with spare capacity, such as Saudi Arabia, have been wary of using it.
“We do believe that the Kingdom could potentially be willing to resume its central banker role and attempt to avert a calamitous global economic crisis,” analysts at RBC Capital Markets wrote late Sunday.
That has tightened supplies that are already short, adding pressure on oil companies to increase output. But after cutting spending and production during the depths of the COVID pandemic, the industry has been in no shape to match the growth in consumption: The United States is still producing more than a million barrels below its 2019 peak of 13 million bpd.
“I think that years of economic downturn and regulatory punishment has taken a toll and it’s going to be a lot harder than people think,” said Josh Young, chief investment officer at Bison Interests.
Advocates of greater use of renewables say that additional fossil-fuel investment now will only increase the world’s dependence on oil and gas at a time when the climate continues to warm – and Russia’s actions makes transitioning to cleaner fuels more desirable.
(Reporting By David Gaffen; Additional reporting by Liz Hampton; Editing by Kenneth Maxwell and Toby Chopra)
