BP’s chief US economist Michael Cohen said the oil industry focused too much on cutting greenhouse gases last year, eroding its ability to keep pace with demand.
“2022 taught us that too much focus on the decarbonization agenda led to a mismatch between supply and demand,” said Cohen in an interview with Bloomberg in Mexico City.
He likened the energy complex to a three-legged stool balancing energy security, affordability and a low-carbon future. “If you focus too much on one leg of the stool, you end up throwing the others off,” Cohen said.
Efforts by the US and European Union to reduce dependence on Russian exports to retaliate against the invasion of Ukraine laid bare a seemingly stark choice between burning more fossil fuels to ensure energy supplies or face potential power outages. US President Joe Biden implored producers to pump more oil to bring down surging prices while countries like Germany burned more coal.
BP reported record profits last year after oil prices surged. It has subsequently scaled back plans to reduce oil production to meet its net zero targets. In February, the European producer reduced its goal to slash oil and gas output by 2030 to between 20% and 30%, from between 35% and 40% previously.
BP’s estimates for oil investment requirements are lower than that of OPEC, with the Organization of Petroleum Exporting Countries anticipating a need for $12.1 trillion to 2045. The European oil major anticipates that, at most, the sector will need slightly more than $400 billion a year until 2050.
OPEC, the US International Energy Agency and BP’s estimates “vary widely", Cohen said. “Its not sensible to get bogged down in the details, what’s clear is we need to keep investing as we have been in the past.”
The company is also targeting investment in green hydrogen and biofuels. It is focused on growing these areas in Latin America, said Angelica Ruiz, BP’s senior vice president for Latin America, in the interview. “We are not only doing more, but we have acquired new companies that underpin this new growth engine that we believe is critical.”