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1. Sanctions and the Economic Consequences of Higher Oil Prices

Author:
Christof Ruhl
Publication Date:
04-2022
Content Type:
Commentary and Analysis
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
Sanctions against the Russian Federation are developing so fast that it is hard to keep track of them and even harder to see a consistent narrative as events unfold. But there is one. Russia is the world’s largest exporter of energy and commodities. A persistent balance of payment surplus is the source of its financial strength, in terms of both current income and the financial assets previously accumulated by “fortress Russia.” Oil, gas, and coal exports constitute the most valuable revenue streams and are therefore prime targets of sanctions policy.[1] The problem is that energy sanctions will backfire badly if they lead to price increases large enough to derail the economic performance of sanctioning countries.
Topic:
Economics, Energy Policy, Oil, Natural Resources, and Sanctions
Political Geography:
Global Focus

2. Oil Intensity: The Curiously Steady Decline of Oil in GDP

Author:
Christof Ruhl and Titus Erker
Publication Date:
09-2021
Content Type:
Special Report
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
Oil is the largest primary fuel, and the trajectory of oil consumption is of great concern and consequence for economic, political, and, not least, for climate change reasons. Anticipating oil prices and production from year to year is not easy; identifying even basic ingredients of aggregate demand and supply schedules, such as price or income elasticities, is notoriously difficult. It’s an additional challenge to model the structure of a market that sometimes appears to be highly cartelized, and at other times populated by a large flock of peaceful price takers. But a remarkably steady metric—and possible tool for projecting consumption into the future—has been identified in this paper: oil intensity. Oil intensity is the volume of oil consumed per unit of gross domestic product (GDP). Measured simply in barrels per dollar, it is often viewed as a broad measure of oil efficiency; it certainly demonstrates the importance of oil in a society. The efficiency of oil use has improved, in other words oil intensity has declined, over the years and decades. In 1973, for example, when oil intensity was at its zenith, the world used a little less than one barrel of oil to produce $1,000 worth of GDP (2015 prices). By 2019 (the last data set before Covid) global oil intensity was 0.43 barrel per $1,000 of global GDP—a 56% decline. Oil has become a lot less important and humanity has become more efficient in making use of it. What is worth a closer look, and is the focus of this paper reporting on oil and gas related research at Columbia University’s Center on Global Energy Policy, is the pattern by which this progress has been achieved. Since 1984, oil intensity has fallen every year in an almost perfectly linear fashion: the amount of oil used per dollar of global GDP has dropped by roughly the same amount each year. Wars and revolutions, booms and busts, OPEC successes and failures, and every other monumental event in the last 35 years left their imprint on oil markets but didn’t alter oil intensity’s steady, downward crawl. This kind of regularity is very rare in any long-time trend, in economics or in energy. Although oil intensity isn’t a new topic, an attempt to explain its curiously consistent downward progress—or even any discussion about it—is hard to find in the literature. For this paper, the authors explain the trend and cross-validate its predictive potential before delving into possible reasons behind the linear decline in oil intensity. It finally extrapolates what such a continuing trend might mean for oil consumption and policies around it going forward.
Topic:
Economics, Energy Policy, Oil, Natural Resources, and GDP
Political Geography:
Global Focus

3. The Impact of ESG on National Oil Companies

Author:
Luisa Palacios
Publication Date:
11-2021
Content Type:
Commentary and Analysis
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
The rise of ESG investing—investment focused on environmental stewardship, social responsibility, and corporate governance—in the 21st century has created significant pressures on oil companies. Some shareholders of international oil companies (IOCs) have pressed them to pay closer attention to ESG goals and diversify their business models away from hydrocarbons and into other sources of energy amid efforts to address greenhouse gas emissions.[1] National oil companies (NOCs)—which currently control about 50 percent of the world’s oil production—have different corporate mandates than their IOC peers that might imply a more complicated relationship with ESG goals. NOCs are mainly owned by governments in the developing world, and thus face vastly different demands than IOCs answering to private sector shareholders.[2] But different does not mean NOCs do not or will not feel pressure to address ESG issues. Given NOCs’ significant share of global oil production—and the fact that this share may increase as IOCs diversify—the pressures they face and changes they make could have a significant impact on the future of the oil and gas industry as well as countries’ abilities to meet climate goals. During the November 2021 COP 26 meetings in Glasgow, Saudi Arabia and India became the latest countries with strong NOCs to pledge to reach net-zero greenhouse gas emissions in the next decades.[3] This commentary examines how the ESG agenda is impacting NOCs through the ecosystem of organizations and principles that have emerged from the UN’s Sustainable Development Goals and the Paris Agreement as well as from investors and regulators in global financial markets. The piece then describes the three components of the ESG framework in relation to NOCs and the challenges of accurately measuring adherence to them due to insufficient standardization of metrics and the variety of reporting frameworks. Also, because environmental, social, and governance competence are not strictly related to one another, companies may be strong in some areas and weak in others, making it difficult to evaluate their ESG performance as a whole.[4] Finally, while ESG pressures are coming alongside discussions about the energy transition and climate change, ESG assessments do not evaluate companies’ energy transition plans, even if some aspects of ESG scores might provide insights about them. The commentary pays special attention to the importance of corporate governance for national oil companies in achieving overall ESG goals, given the key differences between their ownership structure and that of private sector companies working in the oil industry.
Topic:
Climate Change, Energy Policy, Oil, Natural Resources, and Green Technology
Political Geography:
Global Focus

4. ESG Investing and the Oil and Gas Industry: Moving Toward a Holistic Approach to Risk, Governance; Performance Measurement, Disclosure, and Results

Author:
Hon Xing Wong, Marianne Kah, and Erin Blanton
Publication Date:
11-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
On September 17, 2020, Columbia University’s Center on Global Energy Policy (CGEP) held a virtual workshop about environmental performance in the oil and gas industry. Investors, senior oil and gas industry executives, NGOs, and other stakeholders participated in this candid discussion about how environmental risks should be measured, disclosed, and incorporated into investment decisions.
Topic:
Energy Policy, Oil, Natural Resources, Gas, and NGOs
Political Geography:
Global Focus

5. Electric Vehicle Penetration and Its Impact On Global Oil Demand: A Survey of 2019 Forecast Trends

Author:
Marianne Kah
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
Columbia University’s Center for Global Energy Policy is undertaking a multiyear study on the prospects for and timing of peak oil demand. An essential piece of the puzzle is understanding what happens to global oil demand in the passenger vehicle sector, since it is the sector with the largest oil demand use today. Policy makers in a growing number of countries are supporting passenger vehicle electrification or a phaseout of fossil fuel passenger vehicles to reduce greenhouse gas emissions and improve urban air quality. To understand the trajectory of oil demand in this sector, it is important to comprehend the magnitude and timing of electric vehicle (EV) penetration. The pace of demand growth matters. If the world doesn’t move off oil at a rapid rate, it is important that policy makers recognize the need for investment in new oil supplies to prevent supply shortages and accompanying oil price spikes. Numerous studies analyzing the impact of EVs on oil demand have been published. It is difficult to compare these studies because they do not define the passenger vehicle sector the same way or provide underlying assumptions on a comparable basis. Last year, the author conducted a survey of all available global electric passenger vehicle penetration forecasts to compare underlying assumptions and the impact on oil demand. The author conducted a similar survey in 2019 to understand how views on EV penetration are changing. This report describes the results from the 2019 survey and indicates how views have changed since last year. Rationale for Studying the Passenger Vehicle Sector As shown in figure 1, the passenger vehicle sector is the largest sector of oil use, representing about one-quarter of the oil demand barrel. The passenger vehicle sector is a target for policy makers because full penetration of EVs could ultimately take nearly 25 million barrels per day of oil use out of the market. However, it is important to understand the other 75 percent of the oil demand barrel before assessing the prospects of peak oil demand. It should be noted that the passenger vehicle sector gets a disproportionate amount of attention from policy makers and the media because of the current focus on electrification and the greater ease of electrifying passenger cars versus other modes of transportation. For example, it is easier to electrify a passenger car than a heavy-duty truck, where the large and costly batteries required will reduce cargo carrying capacity due to weight limits on roads. It is also more challenging to electrify airplanes than passenger cars.
Topic:
Energy Policy, Oil, Science and Technology, Infrastructure, and Green Technology
Political Geography:
Global Focus

6. New Realities, New Risks: Rethinking the Strategic Petroleum Reserve

Author:
Jason Bordoff, Antoine Halff, and Akos Losz
Publication Date:
07-2018
Content Type:
Special Report
Institution:
Center on Global Energy Policy (CGEP), Columbia University
Abstract:
The last few years have offered a reminder, if any was needed, that oil markets are no stranger to volatility. From OPEC’s reported demise to OPEC’s resurgence, the rapid fall and rise again of US shale, and the ebb and flow of geopolitical risk, oil has been on a rocky ride. After industry leaders and experts declared that the days of cheap oil were over—“$100 per barrel is becoming the new $20,” explained one top oil CEO in 2014[1]—consensus shifted to a view that oil prices would remain “lower for longer”[2] before sharply rising again in the last few months. Each day brings yet another reminder of risks to oil prices, with oil markets tight, OPEC nations signaling they intend to continue supporting prices beyond $80 per barrel, President Trump canceling the Iran nuclear deal, Venezuelan production in freefall, and geopolitical risks rife from Syria to Libya and beyond.
Topic:
Energy Policy, Oil, and International Affairs
Political Geography:
Global Focus