Goldman Sachs Predicts $100 Oil As Renewable Transition Falters

Related stories

Tinubu Names IBB’s Son, Top Experts to Lead Key Nigerian Agencies

By Abiola Olawale President Bola Ahmed Tinubu has appointed Muhammad...

2027: Labour Party Appoints Nenadi Usman as Interim National Chairperson 

By Abiola Olawale  Ahead of the 2027 general elections, the...
  • Energy transition efforts, including decreased investment in hydrocarbon production, have contributed to rising oil prices and increased reliance on fossil fuels in backup scenarios.
  • Offshore wind projects are being canceled, EV sales in the U.S. are slowing down, and the solar industry faces competition from cheap Chinese panels, highlighting challenges in the renewable sector.
  • Despite clear setbacks, governments remain committed to their energy transition goals, potentially leading to even higher energy costs in both Europe and the U.S.

By Irina Slav

This week, Goldman Sachs raised its oil price target to $100 again. The bank cited lower OPEC output combined with higher demand, which taken together, “more than offset significantly higher U.S. supply.”

The average gas price in the U.S. on September 20 was $3.875, slightly lower than a day earlier but $0.20 higher than a year ago.
Even with higher gas prices, EV purchases have slowed down instead of rising.

In Europe, the deindustrialization of Germany is no longer news, the car industry is bracing for a Chinese EV rush, and Brussels is trying to build an energy transition supply chain from scratch.

Iraq Discusses Natural Gas Investments With U.S. Firms
Meanwhile, offshore wind developers are canceling projects in both Europe and the U.S., solar developers in the EU are complaining about cheap Chinese panels.

Also meanwhile, oil and gas companies keep reporting meaty profits and investors are rediscovering their love of hydrocarbons.

The energy transition is backfiring.

At the recent World Petroleum Congress in Calgary, oil executives and government officials both warned against the continued push to discourage investment in new hydrocarbon production.

“There seems to be wishful thinking that we’re going to flip a switch from where we’re at today to where it will be tomorrow,” Exxon’s chief executive said during the event.

“No matter where demand gets to, if we don’t maintain some level of investment industry, you end up running shorter supply which leads to higher prices,” Darren Woods also said.

This is exactly what we are currently witnessing in Europe and the United States. Because of the transition push, oil producers are being extra cautious with production growth. Also, they are prioritizing shareholder returns to keep shareholders on, so it pays for them to be cautious.
In Europe, the supermajors are being squeezed by windfall profit taxes, activist pressure, and increasingly restrictive legislation, so they are turning elsewhere. Shell is tapping billions of potential barrels in Namibia, and Total is considering a $9-billion commitment to oil exploration in Suriname.

Meanwhile, drivers across Europe are struggling with higher fuel costs and higher electricity bills as the EU becomes increasingly dependent on intermittent wind and solar that need backup from hydrocarbon-fueled power plants. These plants are taxed heavily for their carbon emissions, which has pushed the cost of their output—and electricity bills—higher.

All of this is only going to get worse before it gets better. Because despite a growing number of signs that the transition is not going according to plan, those in the driver’s seat are doubling down on every single commitment.

The offshore wind energy industry is essentially on its deathbed, yet there has been no change of attitude from governments. The most likely thing they would do about its problems will probably be even more subsidies instead of a reconsideration of the role offshore wind would play in the transition.

In EVs, dealers are struggling with rising inventories in the U.S., and Ford said recently it was going to book a $4.5 billion loss on its EV business. In Europe, sales are up strongly, but carmakers are fretting about Chinese EVs, which are just as good as theirs but cheaper.

Solar energy is doing great in the U.S., set for record growth of 32 GW this year, “helped by investment incentives under the Inflation Reduction Act,” Reuters reported recently. It appears nobody really cares what happens when the sun goes down over all those gigawatts. Battery storage is far behind solar in terms of capacity.

Solar is doing great in the EU, too, also thanks to heavy subsidies, only there is a shortage of qualified installers, and local panel producers are grumbling against Chinese imports that are, according to the industry, killing them.

So the EU recently essentially declared a selective trade war on China through the mouth of EC president Ursula von der Leyen. China warned there would be consequences—at a time when the country has become a major exporter of fuels to Europe thanks to the Russian fuel embargo.

The price of energy is going to continue higher in both Europe and the U.S. All because of an ill-conceived transition away from hydrocarbons.

NB: Irina Slav wrote this article for Oilprice.com

The New Diplomat
The New Diplomathttps://newdiplomatng.com/
At The New Diplomat, we stand for ethical journalism, press freedom, accountable Republic, and gender equity. That is why at The New Diplomat, we are committed to speaking truth to power, fostering a robust community of responsible journalism, and using high-quality polls, data, and surveys to engage the public with compelling narratives about political, business, socio-economic, environmental, and situational dynamics in Nigeria, Africa, and globally.

Subscribe

- Never miss a story with notifications

- Gain full access to our premium content

- Browse free from up to 5 devices at once

Latest stories

NDN
Latest News
Drama as Okpebholo Tells Peter Obi: Notify me Before Visiting Edo or Else I Can't Guarantee Your SecurityTrump Vows to Sue Rupert Murdoch as Epstein Report Opens New Rift in Their RelationshipTinubu Names IBB’s Son, Top Experts to Lead Key Nigerian Agencies2027: Labour Party Appoints Nenadi Usman as Interim National Chairperson Alleged $9.6 Billion P&ID Fraud: Fleeing Briton’s Surety Arrested, Produced In CourtWhy Oil Prices Could See a Significant Upside ShiftPresidency Announces Gov Umo Eno as APC Leader in Akwa Ibom, Sparks ReactionsBreakdown of Buhari’s Family EntitlementsThaksin touts golden visa, higher travel fees to boost ThailandDangote Refinery Halts Fuel Discount Program Over Alleged Marketers Fraud2027: Intrigues as PDP Confirms Move to Bring Peter Obi Back After Atiku’s DepartureAre You Pregnant? By Johnson Babalola2027: Buhari’s exit Cripples APC in entire North as CPC Loyalists Defect in Large NumbersDrama as 16, 17-year-olds Now Allowed to Vote In UK ElectionsSenate passes $9 billion in spending cuts to public broadcasting, foreign aid requested by Trump
X whatsapp