Energy conference returns in person in Houston amid market turmoil

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The world’s biggest gathering of energy industry leaders returns to Houston this week as Russia’s invasion of Ukraine delivers an oil price shock to the global economy and embattled executives face growing criticism for the industry’s role in climate change.

Global oil prices have reached levels not seen for a decade at over $110 a barrel as disruption to crude and fuel exports from Russia has left the world short of supply. Gas prices have also reached record highs, delivering a combined rise in energy costs that is slowing economic growth.

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“We’re meeting not only at a time of political turbulence but also turbulence in the energy markets – extreme turbulence of a kind that’s rarely been seen,” said Daniel Yergin, author and vice chairman of S&P Global, which presents the conference.

The United States and allies have imposed heavy sanctions on Russia. While those efforts have specifically not targeted Russian oil and gas, Russian oil companies are having trouble selling barrels as buyers effectively “self-sanction” to avoid unwittingly falling foul of existing or future sanctions.

That has exacerbated already short supplies, adding pressure on oil producers to increase output as global demand surpasses pre-pandemic levels. After cutting spending and production during the depths of COVID outbreak, however, the industry has been in no shape to match the growth in consumption. OPEC+ producers are routinely falling short of their targeted supply increases, and the number of operating U.S. oil rigs, while rising, is still 24% below where it was prior to the pandemic.

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Executives are weighing the need for more oil in the short term with the pressure they face to pump less in the long term as the economy transitions away from fossil fuels.

This year’s CERAWeek is expected to attract more than 45,000 attendees and features numerous presentations on the energy transition – including a Monday kickoff discussion with U.S. climate czar John Kerry.

CERAWeek was canceled in 2020 as the coronavirus pandemic exploded, and last year’s event was held virtually at a time when oil-and-gas demand was beginning to rebound in earnest from the lockdowns and travel bans that dominated 2020. Back then, top executives, including the CEOs of Shell and BP, suggested that the peak in oil demand could have been reached.

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Instead, consumption has surged. Energy security will be back on the agenda at CERAWeek.

“The world will continue to demand more energy, not less. And the question is whether that energy comes from the United States or hostile regimes like Russia,” said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at industry group the American Petroleum Institute.

A growing number of U.S. lawmakers are calling for bans on Russian oil imports, including Senators Dan Sullivan and Lisa Murkowski, Republicans from Alaska, and Joe Manchin, Democrat from West Virginia, which are fossil-fuel producing states. They are sponsors of a bill to end imports of Russian oil – and all three will appear at the conference.

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The Biden Administration has so far resisted calls for an outright ban, saying that would only boost fuel costs. “We do not have a strategic interest in reducing the global supply of energy,” a senior Department of Energy official said Friday.

Advocates of greater use of renewables say that additional fossil-fuel investment now will only increase the world’s dependence on oil and gas at a time when the climate continues to warm – and Russia’s actions makes transitioning to cleaner fuels more desirable.

High oil and gas prices should encourage fuel demand destruction and make renewable energy and battery cars more competitive – although $100 oil isn’t necessarily good for the transition.

“These prices will affect how people operate,” said Yergin. “It may make people more interested in electric cars.”

(Reporting By David Gaffen; additional reporting by Stephanie Kelly and Ernest Scheyder, Editing by Franklin Paul)