For the first time in decades, Europe is facing a new reality: Europeans have become poorer, said Igor Sechin, Chief Executive Officer of the Rosneft oil company, in his keynote speech at the Energy Panel at the 27th St. Petersburg International Economic Forum.
According to Igor Sechin, despite government subsidies, the household gas prices in Europe almost doubled between 2021 and 2023, which is forcing European households to reduce gas consumption by unprecedented volumes.
“As a result of the price shock, the gas demand in household and commercial sectors of Europe dropped by more than 20% in the past two years and continues its fall this year. As a result, for the first time in decades, Europe is facing a new reality: Europeans have become poorer,” the Rosneft CEO said.
Increased gas spendings are eating up the margin of such energy intensive industries as steel making, fertilizers, chemicals, ceramics and glass. As a result, the manufacturing activity in the Eurozone has been on the decline since the middle of 2022, Igor Sechin said.
In effect, Europe is meeting its emissions reduction targets by directly cutting energy consumption and slowing down the economic growth. “The continuation of such policy may eventually destroy the European industry. As we all know, the lowest energy consumption is in the graveyard,” he added.
According to Igor Sechin, the energy transition should be well-balanced and focused on addressing the interests of the majority that will ensure the growth of energy consumption in the coming years, i.e. developing countries. It is the developed countries, representing a minority of the world's population today, that have contributed most to the climate crisis. He noted that developed countries account for 65% of the cumulative emissions produced over the last 200 years; the world's 10% wealthiest population is responsible for half of all CO2 emissions; the world's 1% wealthiest population accounts for twice as much carbon dioxide emissions as the poorest 50% of the world's population; and the entire continent of Africa produces less than 4% of the world's emissions.
During his speech at the Energy Panel, the Rosneft CEO also said that introduction of new technologies in the context of energy transition requires huge investments.
In particular, the cost of transition to electric vehicles in large megacities is estimated in tens of billions of dollars. “For example, we estimate that electrification of transportation in such cities as Sao Paulo, Mumbai, New York, London, Johannesburg and Shanghai could cost more than half a trillion dollars,” Igor Sechin said.
He underlined that on the way to achieving carbon neutrality by 2030 it will be necessary to increase production of copper by almost 1.5 times, nickel and cobalt by two times and lithium by more than 4 times. This could further increase pressure on land, water and resources in developing countries, where most of the mineral deposits critical to the ‘green’ transition are located.
Igor Sechin specifically mentioned copper, whose consumption, excluding the ‘green agenda’, will exceed 900 million tonnes by 2050. “Furthermore, another 500 million tons will be needed to electrify the global vehicle fleet (apart from other energy transition targets). Thus, cumulative copper consumption by 2050 could double the amount of copper produced in all of human history. It is also 60% more than all recoverable reserves available today,” he said.
The Rosneft CEO believes that at the first stage the emissions issue can and should be addressed by improving efficiency of energy production, rather than displacing traditional energy sources with alternative ones.
It is evident that demand for electricity will grow driven by developing countries that have yet to overcome energy poverty, he said, adding that as of today, more than two out of eight billion of the world's population still use open fire for daily living needs, and more than 700 million people live without any access to electricity.
Igor Sechin noted that it is in the developing countries of Asia and Africa that we are witnessing the greatest population growth and, as a consequence, a rapid increase in the need for energy resources. Obviously, in this situation, a reduction in global consumption of fossil resources would automatically mean that the problem of hunger and energy poverty would not only persist, but also worsen.
Overcoming energy inequality is impossible without reliable supplies of oil and gas, the Rosneft CEO concluded.