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2021 As A Rebound Year For Fossil Fuels - Barış Sanlı

This week we will see oil companies’ quarterly results. Just like the record losses during 2020, we may see a jump in profits and free cash flows. Then there will be comparison charts between oil companies and new energy technology companies. In summary, we may see Covid19 as a reinforcer of fossil fuel dominance.

Change does not happen overnight. The effects of the 1970s energy crises have been felt in the short term and the long term. It changed investment decisions, paved the way for Feed-in tariffs, natural gas liberalization in the US, the strengthening of trading companies. Hybrid cars, lithium batteries are all products of that era. From the 1970s to the 2000s, it took 30 years to have mature technologies. AI and numerical methods may accelerate this time to 10-20 years.

But the short term is not that rosy. IEA’s latest report on global energy trends shows a rebound of fossil fuels. The only big hiccup is India for now. Emissions are expected to increase 5%, coal demand to rebound by 4.5%, natural gas to bounce by 3%. These are gains from 2020. If we compare these numbers to pre-covid 2019 levels, the increases are limited. It might be much bigger if covid was sorted out.

Electricity demand is estimated to grow by 4.5%, where renewables will rise by 8%. The only missing piece is the aviation sector. Qatar Airways is not optimistic about a rebound in aviation demand. But domestic flights in the US and UK may return to normal. Just like the security procedures after 9/11 became a norm for airport travel, the covid procedures are expected to stick for a long time.

The growth of fossil fuels is mostly from emerging countries. Coal is a beast that is harder to manage in developing economies. It is interconnected with regional economies, power balances, and industries. It took more than 40 years for the UK to get rid of coal and its power alliances. In developing countries, it may take longer due to the weakness of institutions.

Electric cars are increasing Europe at an unprecedented rate. The trend is expected to persist. Norway is the leader in EV sales, and the share of EV sales has surpassed 50%. But there is a hitch. Norway’s officials claim that EVs are the most popular second car in the country. That is to say that if households have two or more cars, the primary vehicle is still gasoline. The one on the bench is electric. According to Statistics Norway, total oil product sales dropped 7.2% from 2019 to 2020. Gasoline is decreased by 5.6%, and auto diesel is down 5.2%. But EV sales are 50% of all sales. It worthy of thinking once more.

The Chinese coal market is the future warzone for coal demand and emissions. The Chinese leadership is showing a desire to limit coal growth but after 2025. The 14th five-year plan was not that hopeful, but we heard promises of more aggressive targets for the 15th five-year plan.

We hear that “it is our last chance to reverse the course on climate change” with attached urgent timelines. Climate policies have shifted the whole urgency to crisis status. In Covid19, we are experiencing people being bored and getting angry with crisis chorus from politicians to doctors. Climate will be no different. The low-hanging fruit can easily be reached with more solar, wind, and electric cars. The rest will take some time.

The rebound in emissions, fossil fuels, and oil companies in 2021 should teach us a key lesson in a major crisis. You are either a marathon runner or a sprinter. For a big crisis, you should better be a marathon runner. Because as the challenge grows, so does the number of obstacles and their endurance.

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