Global oil prices have reached levels not seen for a decade at over $115 a barrel as disruption to crude and fuel exports from Russia has left the world short of supply. Gas prices have also reached record highs, delivering a combined rise in energy costs that is slowing economic growth.
“We’re meeting not only at a time of political turbulence but also turbulence in the energy markets – extreme turbulence of a kind that’s rarely been seen,” said Daniel Yergin, author and vice chairman of S&P Global, which presents the conference.
The United States and allies have imposed heavy sanctions on Russia. While those efforts have specifically not targeted Russian oil and gas, Russian oil companies are having trouble selling barrels as buyers effectively “self-sanction” to avoid unwittingly falling foul of existing or future sanctions.
“The idea was not to sanction oil and gas because of their essential nature but oil is getting sanctioned by private actors not wanting to pick it up or ports not wanting to receive it and the longer this goes on the more supply chains are going to buckle,” said Yergin.
That has exacerbated already short supplies, adding pressure on oil producers to increase output as global demand surpasses pre-pandemic levels. After cutting spending and production during the depths of COVID outbreak, however, the industry has been in no shape to match the growth in consumption.
OPEC+ producers, meanwhile, are routinely falling short of their targeted supply increases, and the number of operating U.S. oil rigs, while rising, is still 24% below where it was prior to the pandemic.
Executives are weighing the need for more oil in the short term with the pressure they face to pump less in the long term as the economy transitions away from fossil fuels.
This year’s CERAWeek is expected to attract more than 45,000 attendees and features numerous presentations on the energy transition – including a Monday kickoff discussion with U.S. climate czar John Kerry.
CERAWeek was canceled in 2020 as the coronavirus pandemic exploded, and last year’s event was held virtually at a time when oil-and-gas demand was beginning to rebound in earnest from the lockdowns and travel bans that dominated 2020. Back then, top executives, including the CEOs of Shell and BP, suggested that the peak in oil demand could have been reached.
Instead, consumption has surged. Energy security will be back on the agenda at CERAWeek.
“The world will continue to demand more energy, not less. And the question is whether that energy comes from the United States or hostile regimes like Russia,” said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at industry group the American Petroleum Institute.
The United States and European partners are exploring banning Russian oil imports, U.S. Secretary of State Antony Blinken said on Sunday, but stressed the importance of maintaining steady oil supplies globally.
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.
High oil and gas prices should encourage fuel demand destruction and make renewable energy and battery cars more competitive – although $100 oil is not necessarily good for the transition.
The average price of a gallon of gasoline in the United States hit $4.009 on Sunday, according to AAA, an automobile association, which is the highest since July 2008. Consumers are paying 40 cents more than a week ago, and 57 cents more than a month ago.
“These prices will affect how people operate,” said Yergin. “It may make people more interested in electric cars.”