Rising natural gas prices have led to an increase in coal use, and plants in Europe and Asia have come back on as temperatures drop and the world faces a worsening gas shortage.
Total Energies Chief Executive Officer Patrick Pouyanne on Wednesday emphasized the need for price stability, stating that lower gas prices will reduce the need to rely on more polluting coal, but that the transition to cleaner energy has also created a imbalance in the market.
“High prices are not good news; of course the immediate results for my company are better, but for the clients, “Pouyanne told CNBC’s Hadley Gamble during a panel at Russia Energy Week in Moscow.
Replacing coal with gas “is good for climate change, but to do that, we need to have a lower price,” said the CEO. “Because coal is king today, because coal is cheaper than all other sources of energy.”
Electricity produced from coal has exploded in Europe and European coal futures have more than doubled since the beginning of the year. And the irony is clear, as this is happening just as Europe is trying to reduce its use of polluting fuel. Meanwhile, gas prices in Europe have almost quadrupled since the beginning of the year.
“So for us today the prices are too high. We have to find stability, go back to something more normal, “said Pouyanne.
He added that this is not simply a European gas crisis, but a global one, stemming both from a “large increase in gas demand from China and Asia” and from “increased demand for gas due to the energy transition, shifting from coal. “. to gas, which is good for climate change. “
“So I think it’s a lesson,” Pouyanne said. “Another is that the more we put renewable energy into our electrical system, we put intermittent sources that depend on the weather.”
Pouyanne, like many other oil and gas company executives, has noted the risk of climate-dependent renewables. Brazil, which has increased its dependence on hydroelectric power, saw less rain this year, while other parts of the world that have invested heavily in solar and wind power saw less sun and wind.
BP CEO Bernard Looney, speaking on the same panel, echoed Pouyanne’s concern.
“I think this crisis in Europe has reminded us that energy is a vital part of society and that energy use only goes one way, and that’s up,” Looney said. “We all understand that the sun doesn’t shine at night and the wind doesn’t always blow, so we have to deal with the issue of intermittency of renewables.”
‘A more volatile system’
Speaking of governments’ efforts to reduce the production and use of fossil fuels, Looney said: “At the end of the day, if the supply disappears and the demand does not change, that only has one consequence, and that is an escalation in the increases. of prices. So I’m not suggesting that the responsibility should fall on customers or society, but this is a system, and both the supply and demand sides must work together. “
“Simply correcting a problem on the supply side without affecting demand will not result in a more stable system, it will result in a more volatile system,” added Looney.
Increased gas use due to colder weather earlier in the year “has reduced all gas inventories, so today we see an exceptional circumstance,” Pouyanne said. “I think after winter we should be able to go back to lower prices, which would be good for everyone.”
Gas prices are rising to record levels in Europe. Energy shortages are also affecting homes and businesses across Asia, forcing factories to close.
This has been caused by supply shortages and the transition to cleaner energy, which has stimulated higher demand for gas, considered a cleaner fuel. Demand is also recovering from its Covid-induced slowdown as economies reopen and travel around the world resumes.
Other energy raw materials, including oil, have also skyrocketed in recent weeks, with international reference Raw brent trading at $ 83.37 at 12:00 p.m. ET, its highest level since 2018 and up 64% since the beginning of this year.
US reference West Texas Intermediate It hit a seven-year high this week, trading at $ 80.63 at noon ET.
the Rising energy prices come amid supply chain disruptions. and a shortage of shipping containers, which have contributed to a rapid rise in inflation.