Global Oil Companies Say "The Future Lies in Renewable Energy"... 'Complete Transformation'

Environmental Changes Including Oil Price Drop
Growing Need for Climate Change Response
BP, Royal Dutch Shell, Total Aim for Carbon Emission Zero
IEA: "Renewable Energy Transition is the Way to Save Global Environment and Economy"

[Asia Economy Reporter Naju-seok] Global energy companies have begun rapidly transforming into renewable energy companies amid the COVID-19 pandemic. They aim to develop renewable energy sectors as their core industries amid environmental changes such as the sharp decline in oil prices caused by a drastic drop in demand.

Energy-related companies such as British Petroleum (BP) in the UK, Royal Dutch Shell in the Netherlands, and Total in France have successively declared their transformation into carbon-neutral companies by 2050. These companies, whose main business is oil production, have set policies to reduce the proportion of oil extraction and expand the share of renewable energy.

Recently, BP announced plans to write down assets worth between $13 billion and $17.5 billion (approximately 21.23 trillion KRW) in the second quarter of this year. They intend to lower the value of assets such as oil fields among their holdings to increase investment in eco-friendly energy. BP also lowered its long-term oil price forecast for 2050 from $70 to $55 per barrel.

The moves by some of the world's top oil companies suggest that the future value of the oil industry has declined. Bernard Looney, CEO of BP, mentioned in an interview with a media outlet, "Demand for oil may decrease rather than increase," and added, "Oil demand may have already peaked." This indicates that humanity's demand for oil may have reached its peak and could decline going forward.

Last year, Shell announced plans to become the world's largest power producer by 2030. The company aims to generate electricity based on natural gas or renewable energy instead of oil. Last year, Shell entered large-scale wind and solar power production projects with the Massachusetts state government in the U.S., and earlier this year, it decided to build a solar power plant in Queensland, Australia.

France's Total is expanding its business areas by investing in renewable energy and acquiring electric vehicle battery companies.

COVID-19 has been a decisive turning point for energy companies' transformation. The sharp price volatility of oil and other commodities has made the oil-related industry a risk factor for energy companies. With global economic activities and even mobility reduced due to COVID-19, energy companies faced unprecedented new crises. On April 20, at the New York Mercantile Exchange (NYMEX), May delivery West Texas Intermediate (WTI) crude oil prices fell to -$40.32 per barrel, marking an unprecedented blow to international oil prices. Although oil prices have recovered amid expectations for economic activity resumption, they remain stuck around $40 per barrel.

In addition to reduced investments, large-scale restructuring is inevitable. Among the 40 million workers in the global energy industry, 3 million face the risk of restructuring.

The renewable energy sector is the only area expected to continue growing. The International Energy Agency (IEA) recently reported that while oil demand may only recover to last year's level by 2022, renewable energy is predicted to be the only sector to increase production scale this year.

Renewable energy is gaining attention because carbon taxes and other measures are being imposed to address climate change, weakening the competitiveness of fossil fuels like oil. Alongside this, sustainability issues have become prominent in investment decisions, increasing pressure from investors. Earlier this year, Larry Fink, CEO of BlackRock, the world's largest asset management company, announced that environmental sustainability would be a key factor in investment decisions. For example, BlackRock plans to withdraw investments from coal mining. Moreover, financial companies like BlackRock face pressure from investors to stop investing in fossil fuels. In an interview, CEO Fink stated, "More and more investment clients are demanding sustainable asset portfolio allocations."

Policy intentions from energy-related international organizations and various countries also support these changes. Germany, France, and others have announced plans to increase investments in eco-friendly industries to respond to the economic downturn caused by COVID-19. They also expressed intentions to restructure the industrial framework itself, as future growth lies in eco-friendly industries. Government policy funds are being prioritized for renewable energy and related sectors.

The IEA even forecasted that the transition to sustainable energy could serve as a savior for the global economy. By shifting from fossil fuels like oil to renewable energy, the economy can grow, jobs can be created, and a clean energy system can be established. To achieve this, the IEA projected that investing $1 trillion annually over the next three years could increase the world's gross domestic product (GDP) by 1.1%, create 9 million jobs, and reduce carbon dioxide emissions to 4.5 billion tons by 2023.

This content was produced with the assistance of AI translation services.