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Events in the last few years have demonstrated that the energy transition depends on energy security to proceed at a steady pace and at scale. The biggest emphasis on the need for reliable and affordable energy is in the developing world, where 80% of the world’s population lives.

The use of natural gas provides a major path to decarbonization in two ways.


Climate policy is a priority around the world. But current experience also demonstrates what has been learned and relearned again and again — that energy security is also a priority. And that requires continuing investment to assure reliable and affordable energy. To downplay energy security or dismiss its importance is to risk fueling backlash, derailing climate objectives and generating crises.

To downplay energy security or dismiss its importance is to risk fueling backlash, derailing climate objectives and generating crises.

Energy security is a fundamental imperative for countries as energy undergirds economies and is essential for the well-being of populations. Although muted during the COVID-19 pandemic, its salience has reemerged with a new urgency. Today, energy security — assuring the availability of reliable and affordable supplies — encompasses both conventional oil and gas and renewables as well as electric grid reliability. But, in terms of sources of supply, the main focus of energy security remains assuring needed supplies of oil and gas, which provide 55% of world energy, compared with 7% for renewables. Coal supplies 27%, while nuclear and hydro provide much of the rest of commercial energy. The engine of energy security is investment in supplies and infrastructure needed to meet increasing demand. Moreover, given a natural decline of about 3%-4% per year in existing oil production, substantial investment is needed merely to maintain current levels of supply.

Events in the last few years have demonstrated that energy transition can only proceed steadily and at scale if energy security is assured. Otherwise, backlash develops against climate policies, as is evident in some parts of Europe today. Further risks not only include disruption and conflict but also future political upheavals. Case in point: Africa’s population is expected to double in the next quarter century. Without energy security to underpin economic growth and job creation, migration to Europe will eventuate on a far greater scale than today. In turn, this is likely to magnify the political reaction now seen in Europe.

Attention to energy security certainly slipped away during the COVID-19 pandemic. Owing to the partial shutdown of economies, consumption plummeted and energy prices collapsed. Yet projections were generalized from those very specific conditions to what would be the very different conditions of the post-pandemic world. High-profile scenarios were proposed that laid out a linear transition to net-zero by 2050. Predictions were made that oil consumption had reached its peak in 2019, just before the pandemic, and would thereafter decline. That has turned out to be incorrect. World oil demand by the end of this year will likely be about 3 million b/d higher than in 2019.

World oil demand by the end of this year will likely be about 3 million b/d higher than in 2019.

‘Wake-up call’

This “pandemic thinking” persisted even as the world began to recover from the shock of the pandemic. Yet, by fall 2021, as markets tightened and prices increased, energy security was returning to the table. In November 2021, US President Joe Biden authorized the release of oil from the US Strategic Petroleum Reserve, established as a backstop for energy security, to compensate for a shortfall in petroleum supply, and he called on oil companies to increase production. This was before Russia’s invasion of Ukraine.

Then came the Russian invasion in February 2022, setting off a global energy shock and a far-reaching disruption of the global supply system. As Tatsuya Terazawa, chairman of Japan’s Institute of Energy Economics and former vice minister of Japan’s Ministry of Economy, Trade and Industry, observed, the crisis was “a wake-up call and reminder for the world to look not only through the lens of climate but also seriously look at the importance of energy security and the stability of energy markets.” Reflecting the viewpoint of the Japanese government, he further added, “Discouraging investment in the upstream oil and gas is inconsistent with the need to reduce dependence on Russian energy.”

Indeed, energy security suddenly returned as an urgent priority for governments worldwide. They scrambled to secure and encourage more supplies — with varying degrees of success — to keep their economies running and avoid heaping pain on consumers. Russian President Vladimir Putin sought to break the EU coalition supporting Ukraine and bring Europe to its knees by wielding the “gas weapon” — cutting off most of Russian natural gas supplies to Europe. But the weapon failed, although the economic costs of repelling the attack were high.

To help compensate for the shortfall, Europe turned to liquefied natural gas (LNG), which provided almost 40% of Europe’s total gas supply. Half of that LNG came from the US, which had only become an LNG exporter in 2016. In September 2022, the Netherlands secured two floating terminals for receiving LNG, with the first shipment arriving from the US that same month. Germany received its first-ever full shipment of LNG in January 2023, also from the US. LNG and alternative supplies covered about half the gap left by Russian gas cuts. Norway, now the bedrock of Europe’s pipeline gas, surged supplies in 2022. The other half of the gap was met through deep cuts in European gas consumption, particularly in industries.

Political leaders hastened to secure additional supplies of oil and gas and called for more production. German Chancellor Olaf Scholz flew to Senegal to, he said, “intensively” encourage Senegal to develop its natural gas reserves for shipment to Europe as LNG. In Canada, he said, “We would really like Canada to export more LNG to Europe.” EU officials and ministers from European governments traveled to the Middle East and the US and across Africa in quest of new supplies. US Energy Secretary Jennifer Granholm called on US oil companies to increase investment and production, explaining, “We need oil and gas production to rise to meet current demand.” The Biden administration authorized subsequent releases from the Strategic Petroleum Reserve. China prioritized energy security ahead of climate policy in its new Five-Year Plan. In February 2024, the German government approved plans to finance up to 20 new natural gas-fired electric generating plants to avoid a shortage of electricity (with the proviso that they must be able to convert to hydrogen by 2040).

It was not only the consequences of the Russia-Ukraine war that recharged the focus on energy security. It was also the energy transition itself, which generated a new dimension of energy security. In recent years, a host of governments and international organizations have raised alarms about a potential shortfall of minerals required for renewable energy, including wind turbines, solar panels and electric car batteries. The concern extends beyond mining to processing, refining and manufacturing. Last year saw a new record in renewable deployment, with half of that in China. Yet, at the same time, parts of the renewable industry are being challenged by rising costs, inflation, high interest rates, supply chain constraints and protectionism. Offshore wind projects in the US and Europe have been canceled or postponed because of those problems. Moreover, permitting delays around the world are slowing the execution of new projects. At the current pace of renewables investment and deployment, predictions for near-term peaking of oil and gas demand are likely to prove unrealistic. As Joe Biden said in the 2023 State of the Union address, “We will need oil and gas for a while.”

Energy security in the Global South

The biggest emphasis on the need for reliable and affordable energy is in the developing world, where 80% of the world’s population lives. Summarizing the conclusion of the 2023 G20 Energy Transitions Working Group (the G20 is composed of major developing countries and developed nations), the Indian government reported that “amongst the G20 members, there is a broad consensus that energy security, energy access, market stability and energy affordability need to be advanced.”

Attaining energy security is basic to making progress out of poverty in general and remedying the lack of access to commercial energy and electricity. African leaders argue that renewables at this time can only meet a small portion of what their countries need to promote economic development, reduce poverty and improve health. These countries require increased supplies of oil and gas to fuel growth in their economies, which in turn will require continuing investment in oil and gas both in Africa and globally. The disparities in per capita GDP (purchasing power parity) underline the urgency for the Global South: Germany’s per capita GDP is $63,000, France’s is $55,000, Belgium’s is $65,000 and the Netherlands’ is $71,000. By contrast, Senegal’s is $4,200, and Uganda’s is $2,600. The same disparity shows up in energy. Per capita electricity consumption in sub-Saharan Africa, excluding South Africa, is less than 4% that of Europe. More than 3 billion people in the developing world use less electricity, on an annual per capita basis, than a standard refrigerator does in the US.

Attaining energy security is basic to making progress out of poverty in general and remedying the lack of access to commercial energy and electricity.

Without sufficient energy, the economic gaps will only grow — and with that will come greater risks. Africa’s expected doubling of population by 2050 will mean that by then, one-quarter of the world’s population will live in Africa. Can growth be achieved and stability maintained if the African continent is energy-starved because of inadequate investment in energy supplies? The relief valve from the resulting lack of economic development and job growth would be mass emigration to Europe, far larger than today’s flow. As noted above, the resulting impact on the stability of European political systems would be very concerning.

The role of natural gas

Natural gas is a particular focus for promoting economic development — and for reducing emissions. “If we are not getting reasonably priced finance to develop gas, we are denying the citizens in our countries the opportunities to attain basic development,” Nigeria’s finance minister said in 2022. As a new report from the Center for Strategic and International Studies put it, “Natural gas is central in delivering both energy justice and climate progress in Africa.” Natural gas’ role is further enhanced by the global drive to capture fugitive methane emissions. The use of natural gas provides a major path to decarbonization in two ways. First, it helps stabilize the grid by providing balance to the variable generation of electricity by wind and solar. Case in point: In the US, California is seen as a leader in promoting renewable power. Today, wind and solar provide about 25% of California’s electricity. But the state depends on natural gas-fired generation — almost 50% of the total — to keep the system balanced.

The second way in which natural gas promotes decarbonization is by replacing coal. The US provides another case study: Its CO2 emissions from electric generation in 2022 had declined by a third since 2010, while the economy in the same period had grown by almost a third. The number one reason for the reduction in CO2 is natural gas replacing coal in electric generation. Southeast Asian countries would like to move in the same direction. For them, increasing both natural gas production and LNG imports is essential to push coal out of electric generation — and thus reduce the emissions from burning coal. In India, a massive campaign was launched in 2016 to use natural gas liquids for home cooking in villages across the country to reduce harmful indoor pollution and carbon emissions that come from cooking with wood and waste.

In February 2024, Prime Minister Narendra Modi announced a $67 billion investment program to expand India’s natural gas supply system. This is meant to help achieve the goal of increasing gas’ share of the national energy mix from 6% to 15% — and do so even as total energy demand doubles by 2045. At the same time, Modi met with 20 leaders from the international oil and gas industry to urge them to invest in oil and gas production in India to avoid a shortfall in the energy supplies necessary to fuel India’s economic growth ambitions.

Europe’s sudden turn to LNG after the Russian gas cutoff, while staving off deep recession in Europe, created an energy security crisis for developing countries in South and Southeast Asia that could not afford to compete in the global marketplace against European buyers. The result was a return to coal for electricity generation and, in many cases, the shuttering of factories that could not get sufficient electricity. Natural gas development in India and Africa is a priority not only for energy security and economic development but also for basic human health. It is estimated that 3.2 million people die prematurely from household air pollution each year from cooking with wood, waste and other such fuels.

Looking forward: Crises to be avoided

While climate was the main focus of the COP28 climate conference at the end of 2023, the importance of “ensuring energy security” was also part of the final UAE Consensus document. That represents recognition that the COP28 goal of “a just, orderly and equitable” energy transition requires a foundation of energy security. The last two years have provided many warnings of what “disorderly” transitions can mean: price shocks, shortages, disruptions, scramble for supplies, backlash, rancor, bitter divisions and conflict — in short, cycles of crises that the world would do well to avoid in the years to come.    

Daniel Yergin, vice chairman of S&P Global and chairman of CERAWeek, is author of The New Map: Energy, Climate, and the Clash of Nations. He received the Pulitzer Prize for his book The Prize: the Epic Quest for Oil, Money, and Power. He is also author of The Quest: Energy, Security, and the Remaking of the Modern World. He was the first recipient of the James Schlesinger Medal for Energy Security from the U.S. Department of Energy and received a Lifetime Achievement Award from the Prime Minister of India.

This article was authored by a cross-section of representatives from S&P Global and in certain circumstances external guest authors. The views expressed are those of the authors and do not necessarily reflect the views or positions of any entities they represent and are not necessarily reflected in the products and services those entities offer. This research is a publication of S&P Global and does not comment on current or future credit ratings or credit rating methodologies.

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