About the author: Carolyn Kissane is the associate dean of the NYU-School of Professional Studies Center for Global Affairs, and the founding director of the SPS Energy, Climate Justice and Sustainability Lab.
Step into the energy arena, where 2024 is unfolding against escalating global risks and persistent uncertainty.
The past year was an epoch of records, disruptions, and pivotal moments in the energy world. A paradox unfolded as the globe witnessed unprecedented strides in solar and wind deployment, with investments in clean energy outpacing the traditional hydrocarbons sector. Yet the relentless demand for energy catapulted coal, gas, and oil consumption to record-breaking heights. We are in a 102 million-barrels-a-day world, and demand will continue to push that number higher. That matters not just for fossil fuels but also for the ascent of clean energy deployment and solutions. 2023 set temperature records, and 2024 may unfurl an even more scorching narrative.
What’s happening? Investment in renewables and support for decarbonization reached a turning point, and far from being on the fringes today, it’s fair to say year on year, decarbonization strategies will receive investment capital, but as the last year illustrates, not without hiccups and some backsliding. Additionally, the cost of building out greater climate resilience and rebuilding after climate-related events will continue to increase, indicating that the road forward is expensive. Still, the world is not getting off it.
In the U.S., production of oil and gas also saw highs. The United States is producing 13.2 million barrels a day. It is expected to be the world’s largest exporter of liquefied natural gas this year, an idea that would have been almost unimaginable a decade ago. Exxon-Mobil is purchasing Pioneer, and Chevron is acquiring Hess, making two already large U.S. companies even larger. The U.S. government auctioned off leases in the Gulf of Mexico, the largest auction since 2015.
Strong production has added to affordability and the security of supply. As a result, the oil price has remained incredibly stable even in the face of war in Gaza, ongoing war in Ukraine, and threats to maritime trade in the Red Sea. If supply were constrained, current events would stoke higher prices, but strong production in non-OPEC countries, including Canada, Brazil, and Norway, contributed to more resilient supply security.
OPEC has been on the defensive. It’s pushing production cuts to achieve a higher price, but to little avail. OPEC lost one member, Gabon, suggesting other OPEC producers may find it frustrating to produce only within Saudi Arabia’s parameters. Demand softening will help prevent the price from spiking in the short term. But if the conflict in the Middle East spreads to include Iran, or if there’s an attack against oil, expect a swift price uptick.
Last year came to a close with the much-anticipated COP28 climate summit ending with what some heralded as a breakthrough, historic, and landmark nonbinding agreement to transition away from fossil fuels. But is it a false dawn for the beginning of the end for fossil fuels? The evidence on energy consumption across sectors is clear: 2023 was a record year for many different energy sources, including fossil fuels and renewables. If anything, there’s a pragmatism and a new energy security reality. This is about co-existence rather than an all-or-nothing. The needle will move, but 80% of the world’s primary energy consumption still comes from fossil fuels.
The intention at some point may be to phase down fossil-fuel use, but it’s yet to happen and may not for a long time. While some countries are moving toward the path of phasing down, none are phasing out. Other countries, especially emerging economies, are phasing up. Their upward development trajectory requires more energy consumption. The premise of transitioning away from fossil fuels is false, as the world is still in the fossil fuel phase while simultaneously adding more forms of energy. The world isn’t experiencing one energy transition but multiple transitions with different starting points and timelines.
What is hopeful about carbon emissions from oil and natural gas is that the companies that produce them, both private and state-owned, recognize that reducing emissions from production is necessary for their businesses to continue to operate. A major win for COP was the agreement to reduce and eventually eliminate methane emissions from production. This is a critical greenhouse gas to reduce, which is relatively easy. This is about commerce as much as doing good. Producers know they need to act to sustain their social license to operate, and they recognize the growing regulatory momentum to regulate and price greenhouse gas emissions, including carbon.
Tensions between the U.S. and China have not dissipated, and supply chain vulnerabilities remain. BYD, China’s electric-vehicle manufacturing darling, overtook Tesla for EV sales late last year. China already dominates solar manufacturing, batteries, and many other renewable energy technologies, and its companies can produce the goods countries want to decarbonize. It is hard to remember, but Japan and Germany were the largest manufacturers of solar panels as recently as 2007.
When it comes to energy production, China is a case of Dr. Jekyll and Mr. Hyde. It is the largest producer of solar panels, batteries, EVs, onshore and offshore wind turbines, and more while simultaneously being the largest emitter of carbon emissions and continuing to build out and fiscally support new coal-fired power plants. It surpassed the U.S. as the largest oil importer and is a big importer of liquefied natural gas. Coal helps power the manufacturing of the world’s lower-priced renewable technologies for the energy transition. Investment incentives and support from the Chinese government make green manufacturing a critical pillar of China’s economy, along with AI and quantum computing. The world needs China for decarbonization, and China needs the world.
China benefits as the No. 1 producer of a host of technologies required for increased renewable energy deployment. The Inflation Reduction Act is helping the U.S. gain ground, but if this is a race, China is a decade ahead. And as competition for critical minerals heats up, so do the headwinds of supply chain disruptions.
China also stays committed to being Russia’s best friend. Russia continues its war against Ukraine with a degree of impunity. The $60 price cap the U.S. and its allies tried to impose on Russian oil means little. China, Turkey, and India are willing buyers of Russia’s discounted oil; production stays above 10 million barrels a day. Sanctions may impact revenues somewhat, but production remains at levels predating the February 2022 invasion.
Natural gas is another story. Russia has lost its key market, Europe. It would have been unimaginable two years ago, but Europe’s piped gas imports fell 56% in 2023, bringing it to 28.3 billion cubic meters. To understand the extent of that decrease, in 2018-19, gas flows into Europe hit 180 billion cubic meters.
Russia’s 2024 budget sustains its war effort. A terrible longer-term outcome would be Russian President Vladimir Putin going the way of Syrian President Bashar al-Assad. Back in 2014, it seemed unfathomable that Assad could stay in power after the brutal, inhumane civil war he presided over in Syria. But now, 10 years later, he’s still around and back in the international fold.
The final issue for 2024 will be elections. They matter big time this year. More than 60 countries and almost four billion people will vote in everything from presidential to local elections. Votes will be held in India, Indonesia, South Africa, and a host of other countries, large and small, including the U.S. Energy policy and security will be on the ballot, if not officially, at least in people’s minds and for candidates.
In the U.S., Joe Biden would offer continuity on energy policy. If Donald Trump is the Republican candidate, he is likely to lead pushback against Biden’s climate agenda and call for repeal of the Inflation Reduction Act. But whatever he says about the energy transition, Trump can’t upend it. Across the board, Red states have benefitted from the investment incentives generated through the IRA. Still, that likely won’t stop him from weaponizing the issue.
Can one approach the outlook for energy in 2024 with a sense of cautious optimism? The answer is a nuanced yes and no, meaning it’s going to be a wild ride.
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