Home Economy Big Oil's political influence wanes as governments embrace green energy

Big Oil’s political influence wanes as governments embrace green energy

The handshake between then-UK prime minister Tony Blair and Muammer Gaddafi in the desert in 2007 was not just a time when the Libyan leader forged ties with an old enemy. It is also a clear symbol of the role “Big Oil” plays in foreign policy.

BP signed a key exploration agreement on the same trip, which limits efforts to push the UK government to re-establish ties with the late North African dictator while opening up access Huge hydrocarbon resources on the doorstep of Europe.

The struggle for fossil fuels has influenced geopolitics for decades, from creating conflict and shaping relations between the West and the Middle East to today’s controversy over the Nordstream 2 pipeline. from Russia to Western Europe.

But now, the relationship between Western oil companies and their governments is undergoing a dramatic change as governments pledge to switch to green fuels and fossil fuels are no longer allowed. favored – a move that gained speed in April when US president Joe Biden convened an international climate summit to put pressure on countries to cut emissions.

“There has always been a view that great geopolitical power is tied to access to oil,” said Greg Priddy, a former US government energy analyst. “Even as the Obama administration was in the US at its end, there was a feeling that major foreign manufacturers were strategically important. But all of that is changing.”

Then-British Prime Minister Tony Blair left with Libyan leader Muammer Gaddafi in 2007. The meeting is symbolic of the role ‘Big Oil’ plays in foreign policy © LEON NEAL / AFP via Getty

This change happened last month tháng International Energy Agency released a report arguing that if the world were to cut greenhouse gas emissions to net zero by 2050 – a prerequisite for meeting the Paris climate accord’s goal of limiting warming 1.5 degrees Celsius above pre-industrial levels – exploration for new oil fields must immediately stop.

Even before the report, oil companies were cutting back on investments in risky frontier exploration activities, due to concerns that oil consumption could peak in the next decade.

But in countries where oil executives may have once acted as quasi-ambassadors in managing relationships with foreign leaders, their influence is dwindling. Critics have complained of a “revolving door” between governments and oil corporations, with officials holding positions in the industry after retiring from public life. Governments no longer want to be seen backing fossil fuel companies abroad while pushing a domestic agenda based on renewable energy, analysts say.

In the US – the world’s largest oil producer and consumer – the Biden administration rejoined the Paris agreement, scrapped the Keystone XL pipeline and proposed unprecedented investment in clean energy. Internationally, the White House has pressed other countries to stop funding coal projects abroad last month G7 countries commit to do so later this year – as well as lead the climate summit.

“With the change in administration in Washington, I think we might have seen a love relationship,” said Helima Croft, a former CIA analyst who runs commodities research at RBC Capital Markets. of the US government with budding oil companies.

“Protecting access to resources used to be seen as an important issue in Washington, but now it is less focused on the energy transition and climate change.”

However, attempting a global transition to renewable energy is a complicated calculation, observers warn.

The major oil companies say that although they are supported, they are never dependent on their governments to help them access secure resources and that they are still welcome in many countries.

But industry figures suggest that politicians risk losing their global influence by weakening their links with domestic oil companies and driving developing countries away from the fuel. fossil. The United States, for example, should use its vast hydrocarbon resources to support potential allies that can rely on supplies from countries like Russia, they said.

A former senior US national security adviser who now works for a major US oil company said: “There is now a geopolitical competition with China for economic influence over many countries. places in the world. “The US has an advantage with LNG supplies but seems less willing to use them.”

Workers at a Chinese-built railway line in Kenya.  Oil giants say Western countries are failing to use their energy assets in competition with Beijing for economic influence

Workers at a railway line built by China in Kenya. Oil corporations say Western countries are failing to use their energy assets in competition with Beijing for economic influence © Luis Tato/Bloomberg

Jason Bordoff, a former special assistant to Barack Obama and director of the Center for Global Energy Policy at Columbia University, notes that global oil demand remains meager.

“The IEA road map is pretty impressive in highlighting what needs to change, but it’s also striking in saying that nothing has changed – oil demand is still picking up,” Bordoff said.

The role of natural resources in foreign policy, he said, will evolve with the energy transition. Minerals important for batteries or access to alternative fuels like hydrogen mean that the relationship between major raw material producers and governments will change, not disappear.

“Even if all the problems of energy geopolitics were solved by decarbonisation, the energy transition will inevitably create new problems,” he said.

Ultimately, high-level political backing cannot protect oil companies from events. Blair may have paved the way for BP but their investment in Libya has not paid off, with the 2011 civil war and ensuing conflict disrupting their plans. In 2018, the company sold half of its stake in the exploration rights to Italy’s Eni.

“There has always been an interesting relationship between the government and the big oil companies but I was never quite sure how the influence played out,” said Professor Paul Stevens, Distinguished Fellow at Chatham House said.

“But with oil on its way out. . . companies are resisting a backing action and the government cannot do much for them. ”

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