Europe’s plan to double down on renewable fuels in response to rising fuel costs could have the unintended short-term effect of increasing prices and slow down the energy transition, Chevron Corp Chief Executive Michael Wirth said on Tuesday.
“That can erode the public support that will be necessary for the energy transition”, Wirth said. “This is a bit of a paradox since, under ordinary conditions, it would increase demand for alternative fuels.”
He added that high costs could also lead to support for increased oil drilling in the U.S. and demands to construct more petroleum pipelines to bring down costs.
Although Wirth’s concern could be seen as supporting the interests of his industry, it is one shared by alternative energy advocates and public policy officials.
Fuel prices have been soaring around the world amid declining investments in fossil fuel projects. Prices have accelerated since sanctions were imposed this year against energy exporter Russia following its invasion of Ukraine and some analysts believe oil prices could reach $150 per barrel levels by the end of the year.
Gasoline and diesel prices are a top electoral topic in different countries of the world, including U.S. Congressional elections and a Brazil presidential run, both later this year.
A persistent period of U.S. diesel at $6 per gallon and natural gas prices nearing $10 per million British thermal unit could have political implications for policy makers, Wirth said.
“One of the things I worry the most about is a period of high prices that voters begin to identify with energy transition ambitions,” Wirth said. “They’ll say, yes, I support renewable energy but I’m not willing to give up my lifestyle for it. They also understand that shortages and high prices are the result of political situations, such as the war in Ukraine.”
The CEO called for policy that would incentivize carbon emission reductions instead of restricting oil and gas supply before renewable fuels such as solar and wind power have scale to replace traditional fossil fuels. Wirth defended the need of a pricing mechanism for carbon in the United States similar to the one set in Europe.
“A price on carbon is a simple way to create a price signal that would create a business model that would mobilize capital,” Wirth said. “We need to find some sort of a commercial framework. And it needs to be enabled by policy.”
Charlotte Mimms, long-time advocate of wind and solar energy, is also worried that public support for non-fossil fuels could take a hit from rising fuel prices. “There’s a limit to how much people are willing to sacrifice to disengage from traditional energy sources. I worry that the war in Ukraine as well as other factors could set back our efforts to transition away from petroleum.”
She added: “We could be facing the perfect storm. If the public demands more and cheaper petroleum products to maintain a way of living they’ve grown accustomed to, the environmental crisis will get rapidly worse.”