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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Clean Power Push Set To Upend The Geopolitics Of Energy

The global push for clean power generation and increased electrification in transportation is creating a new world order in energy where new winners and losers may emerge.

If the world moves toward predominantly renewable energy sources, the influence of a small number of oil-producing petrostates concentrated in a conflict-prone region is set to wane. At the same time, new power players will emerge, analysts say. These will be the countries holding reserves of the key energy transition minerals or hosting sites for the production of batteries, solar panels, and such with interconnectors for export and import of electricity.

In a world described by the International Energy Agency’s bombshell report from last week—in which it was explained that no new investment in oil and gas is needed, ever, if we are to achieve net-zero emissions in 2050—the energy warfare and the war for resources could shift from large-scale conflicts about oil to potential conflicts about electricity supply, including via cyber warfare. 

Cyberattacks On Electricity Grids Could Intensify

America just got a glimpse of what a cyberattack could do to its energy supply. Although no electricity grids were targeted in the ransomware attack on Colonial Pipeline, the cyberattack on computer systems cut off supply of the main fossil-fuel product used in the United States as it stopped gasoline shipments to the Eastern Seaboard.

As the share of electricity in the global energy mix is set to grow exponentially in the coming decades, along with digitalization of operations and asset monitoring, the new threat to energy supply may not be a skirmish or a full-blown conflict near the Strait of Hormuz in the Middle East. It could be state-sponsored cyberattacks on electricity grids, Amy Myers Jaffe, a research professor at Tufts University’s Fletcher School, argues in an article in The Wall Street Journal.

The higher the digitalization and the adoption of the Internet of Things and Industrial Internet of Things in electricity grids and supply, the more chances hackers—including such backed by governments—could get to target parts of the networks, Myers Jaffe says.

To protect themselves against such threats, countries and companies may not only need to boost investment and defenses against cyber threats, but they may also need to show they are ready to retaliate if need be, Myers Jaffe notes.

Will The Energy Transition Lead To A More Peaceful World?

Some analysts argue that increased electrification and the rising share of renewable sources will lead to a more even distribution of energy resources as many countries either have wind or solar resources. This would compare to the current influential energy players—several oil producers in the Middle East, as well as Russia and Venezuela, which even today are managing global oil supply via the OPEC+ alliance to “ensure market stability.”

Researchers at the Norwegian Institute of International Affairs (NUPI) published last year a review of the existing research on the geopolitical consequences of the energy transition.  

“We can distinguish between two camps: the “renewed conflict” camp and the “reduced conflict” camp. The first holds that renewables will not change the extent and frequency of energy conflicts and that they will just come in new forms. By contrast, people in the second camp think that renewable energy will increase energy independence and thereby reduce the level of conflict in the world,” Senior Research Fellow Roman Vakulchuk says. Related: Secret Meeting Between Saudi Arabia And Iran May Trigger Major Policy Change

Increased renewable energy use is likely to lead to increased ‘democratization’ of countries and could make the geopolitics of energy “less conflictual,” Vakulchuk and NUPI Research Professor Indra Øverland argue.

At any rate, the geopolitics of renewable energy will be much different from the geopolitics of oil and gas, where the key weapon is the importing countries’ “fear of resource scarcity”, they say.

Most analyses reviewed by NUPI conclude that big oil exporters will be especially hard hit in a new energy world order, and the oil reserves of Saudi Arabia, Russia, Venezuela, Brazil, and Nigeria could become “stranded geopolitical assets.”  

“Countries that have historically enjoyed geopolitical influence because they supply fossil fuels are likely to see a decline in their global reach and influence unless they can reinvent their economy for a new energy era,” a 2019 report from The Global Commission on the Geopolitics of Energy Transformation, an independent initiative launched by the International Renewable Energy Agency (IRENA), concluded.

The Gulf countries such as Saudi Arabia, Kuwait, the UAE, and Qatar are highly exposed to changes in global energy influence, but they are also highly resilient with financial resources “to reinvent themselves and adapt to the energy transition,” the report said.

The question is, will those Middle Eastern oil and gas producers will move to “reinvent themselves” as fast as to willingly lose the still large geopolitical clout that comes from being the world’s major oil-exporting region.   

Renewables Transition To Create New Energy Powerhouses

According to IRENA’s report, “No country has put itself in a better position to become the world’s renewable energy superpower than China.”

China, the world’s single largest oil importer, has made early moves into solar panels production, extraction of the key metals of the energy transition, and battery-grade minerals production, also with a view to reduce its reliance on oil and gas imports.

China, as well as countries like the Democratic Republic of Congo, which holds cobalt and copper resources, are set to increase their relevance in the supply chains. This fact is not sitting well with the United States as both the previous Trump Administration and the Biden Administration were and are working to reduce the risks in the supply chain for critical minerals.

The energy transition would shift the fear of resource scarcity away from the Strait of Hormuz and onto the resource holders of lithium, cobalt, copper, and nickel, as well as the security of electricity grids and interconnectors.  

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on May 26 2021 said:
    This is a simplistic view of the geopolitics of energy based on the following flawed assumptions.

    1- The push for clean power generation will create a new world order without oil and gas.
    2- Equating the geopolitical influence of oil and gas resources to key energy transition minerals or hosting sites for the production of batteries, solar panels, and such with interconnectors for export and import of electricity.
    3- Global oil and gas assets will be stranded.
    4- Renewable energy will reduce the level of conflict in the world.

    There will never be a new world energy order without oil and gas. Environmentalists who call for an abrupt end to fossil fuels and a sudden adoption of renewable energy fail to recognize the obvious lack of logic in this.

    On their own, renewables aren’t capable of satisfying global energy demand because of their intermittent nature. Moreover, global energy transition won’t succeed without major contributions from both natural gas and nuclear energy.

    The global economy runs on oil and gas and will continue to do exactly that well into the future. It follows that there could neither be a post-oil era nor a peak oil demand either throughout the 21st century and probably far beyond.

    Fossil fuels are finite resources. It has taken millions of years for fossil fuels to be formed. Some countries have them but the majority don’t. Solar and wind powers are infinite and available for anybody with the technology and resources to generate energy from them. That is why we can’t equate the geopolitical influence of oil and gas resources to batteries and solar panels.

    Since there would neither be a post-oil era nor a peak oil demand, then no oil and gas assets will be stranded.

    While renewable energy will increase energy independence, it will never reduce the level of conflict in the world. It will only change the manner of warfare from tanks, planes, missiles and ships to Cyber warfare. Electricity plants and grids could be disabled by hackers leading to a similar retaliation or conventional wars.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Lee James on May 27 2021 said:
    Of course, an earnest transition only makes sense if you believe that we are in for a climate emergency that is significantly induced by how we humans live. Governments are increasingly coming along side scientists to say that we need to act on climate. That is the current reality as seen by the recently published IEA report.

    Governments and courts will act on the IEA report. Today, a Dutch District Court ruled against Shell Oil's modest plan for decarbonizing. The case is unique because it is the first time a judge has ordered a large polluting corporation to comply with the Paris climate agreement.

    We can't go cold turkey on oil and gas, but what if? What if courts intervene, carbon pollution is taxed, we decide the cost of oil-propelled city traffic jams is more than we want to pay in highway infrastructure, oil production costs go way up, and petroleum industry subsidies are axed?

    I'm not sure we can fully anticipate what the future holds for oil, but I think I see a growing willingness to embrace alternatives. I sense a lot of change in oil industry coming up, even as we rev-up, post COVID shutdown.

Leave a comment




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