The political weight of Big Oil is declining as governments embrace green energy

The handshake between British Prime Minister Tony Blair and Muammer Gaddafi in the desert in 2007 is not the only time the Libyan leader has cemented ties with an old enemy. It was also a strict symbol of the role “Big Oil” played in foreign policy.

BP sealed a significant exploration agreement on the same trip, which limited its efforts to push the UK government to re-establish ties with the late North African dictator while opening access to huge hydrocarbon resources at the gateway. Europe.

The struggle for fossil fuel resources has influenced geopolitics for decades, from the generation of conflicts and the formation of 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 commit to turning green and fossil fuels fall out of favor – a move that picked up pace in April when the president of the states United Joe Biden summoned one climate summit to put pressure on countries to reduce emissions.

“There has always been the notion that great written geopolitical power was tied to access to oil,” said Greg Priddy, a former energy analyst for the U.S. government. “Even until the Obama administration in the United States, there was a sense that major overseas producers were strategically important. But that all changed.”

British Prime Minister Tony Blair then left, with Libyan leader Muammer Gaddafi in 2007. The meeting was a symbol of the role of “Big Oil” in foreign policy © LEON NEAL / AFP via Getty

The change was hammered out at home last month when the International Energy Agency has published a report arguing that if the world were to reduce its greenhouse gas emissions to zero by 2050 – a prerequisite for meeting the Paris climate agreement’s goal of limiting global warming to 1 , 5C above pre-industrial levels – exploration of new oil fields must stop immediately.

Even before the report, oil companies had reduced investment in risky exploration of borders, fearing that oil consumption could peak in the next decade.

But in countries where oil leaders have once been able to play a role almost as ambassadors in managing relations with foreign leaders, their influence is waning. Critics have once complained of a “revolving door” between governments and oil groups, with officials taking positions in the industry after leaving public life. But governments no longer want to be seen supporting fossil fuel companies overseas while pushing a national agenda based on renewable energy, analysts say.

In the United States – the world’s largest oil producer and consumer – the Biden administration reunited the Paris agreement, scrapped the Keystone XL pipeline and proposed unprecedented investment in clean energy. Internationally, the White House has pressured other countries to stop funding overseas coal projects last month The G7 nations are committed to do it at the end of this year – and also to lead the climate summit.

“With the change of administration in Washington, I think we’ve probably seen the twilight of the U.S. government’s love affair with oil companies,” said Helima Croft, a former CIA analyst who directs merchandise research at RBC Capital Markets.

“Saving access to the resources used to be seen as an important issue in Washington, however, is less so now with an emphasis on the energy transition and climate change.”

However, testing a global transition to renewable energy is a complex calculation, observers warn.

Large oil companies say that while they have appreciated the support, they have never relied on their governments to help them secure access to resources, and they remain welcome in many countries.

But industry figures argue that politicians risk losing global weight by weakening their ties with national oil and gas companies and alienating developing countries from fossil fuels. The United States, for example, must use its own vast hydrocarbon resources to support potential allies that might otherwise rely on supplies from countries like Russia, they say.

“There is geopolitical competition with China now for economic influence in many parts of the world,” said a former U.S. national security adviser who now works for a large U.S. oil company and asked to stay anonymous. “America has advantages with its LNG supplies, but it seems less reluctant to use them.”

Workers on a railway line built in China in Kenya.  Oil groups say Western countries are failing to use their energy assets to compete with Beijing for economic influence.

Workers on a railway line built in China in Kenya. Oil groups say Western countries fail to use energy resources to compete with Beijing for economic influence © Luis Tato / Bloomberg

Jason Bordoff, Barack Obama’s former special assistant and director of the Center for Global Energy Policy at Columbia University, said global oil demand was still poorly allowed.

“The IEA roadmap has been pretty shocking to highlight what needs to change, but it’s also shocking to say that nothing is changing yet – the demand for oil is still growing,” Bordoff said.

The role of natural resources in foreign policy will evolve with the energy transition, he said. Critical minerals for batteries or access to alternative fuels such as hydrogen meant that relations between major commodity producers and governments would change rather than fade.

“Even if all the problems of energy geopolitics have been solved by decarbonising, the energy transition will undoubtedly create new ones,” he said.

In the end high-level political support cannot protect oil companies from the events. Blair may have paved the way for BP but his investment in Libya did not bear fruit, with the 2011 civil war and subsequent struggles disrupting his plans. In 2018 the company sold half of its stake in the discovery rights to Italian Eni.

“There was always an interesting relationship between the government and the big oil companies but I was never quite sure what the influence was going on,” said Professor Paul Stevens, a distinguished colleague at Chatham House.

“But with oil at the exit… Companies are fighting against a backward action and the government can’t do much for them.”

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