Why is oil important for energy security? What is the role of oil in clean energy transition?

Why Oil is Important for Energy Security

Oil remains central to global energy security due to its pervasive use across critical sectors and its entrenched position in the global economy. Its importance stems from several factors:

• Indispensable for Transportation: Oil-derived fuels like petrol, diesel, and aviation fuel power the vast majority of global transportation – road, air, and marine. This ensures the uninterrupted movement of goods, people, and services, which is vital for trade, commerce, and daily life.
• Industrial Backbone: Many industries rely heavily on oil as a primary energy source for manufacturing processes and as a feedstock for petrochemicals, plastics, fertilizers, and pharmaceuticals. Disruptions in oil supply can cripple industrial output.
• Geopolitical Leverage and Strategic Autonomy: Countries with significant oil reserves or diversified import sources possess greater geopolitical influence and resilience against external shocks. Nations without domestic production, like India, face vulnerabilities due to geopolitical conflicts, sanctions, and price volatility, which directly threaten national security and economic stability.
• Energy Density and Storage: Oil's high energy density makes it an efficient fuel for storage and transport, especially crucial for strategic petroleum reserves maintained by many countries to hedge against supply disruptions.
• Established Infrastructure: A vast, century-old global infrastructure of pipelines, refineries, shipping routes, and distribution networks is in place to handle oil, making it readily available and accessible worldwide.
• Military and Defense: Oil is crucial for military operations, powering armed forces, logistics, and strategic assets, making its secure supply a fundamental aspect of national defense.
• Economic Contribution: For many oil-producing nations, oil revenues are a significant source of government income, contributing to employment and economic growth.

Role of Oil in Clean Energy Transition

The role of oil in the clean energy transition is complex and often paradoxical. While its combustion contributes significantly to greenhouse gas emissions, the oil and gas industry is simultaneously playing a transitional and, in some cases, an active role in facilitating the shift towards a low-carbon economy.

1. Bridge Fuel and Economic Enabler

• Sustaining Current Energy Systems: Oil acts as a bridge fuel, providing reliable energy to meet current global demand while renewable technologies mature and are scaled up. This ensures energy access and prevents economic shocks during the transition period.
• Financing Green Initiatives: Revenues generated from oil and gas operations are increasingly being diverted by national and international oil companies (IOCs and NOCs) to fund research, development, and deployment of renewable energy projects (solar, wind, hydrogen) and other decarbonization technologies. For instance, some oil and gas companies are now significant investors in renewables.
• Economic Stability for Investment: Stable oil revenues can provide the financial muscle for economies to invest in capital-intensive clean energy infrastructure and technologies without compromising immediate developmental goals.

2. Technological and Infrastructural Contributions

• Carbon Capture, Utilization, and Storage (CCUS): The oil and gas industry is at the forefront of developing and deploying CCUS technologies. This involves capturing CO2 emissions from industrial processes and power generation, utilizing it (e.g., for enhanced oil recovery – EOR), or storing it permanently in geological formations. Around 90% of current CCUS operations involve the oil and gas industry.
• Hydrogen Production: The oil and gas sector possesses the expertise, infrastructure, and skills to scale up the production of low-carbon hydrogen (blue hydrogen, using natural gas with CCUS), which is a key enabler for decarbonizing hard-to-abate sectors like heavy industry and heavy-duty transport.
• Biofuels Development: Oil companies are investing in and developing advanced biofuels, which can directly substitute fossil fuels in existing infrastructure, reducing emissions without requiring a complete overhaul of transport systems.
• Geothermal Energy: The geological and drilling expertise of the oil and gas industry is directly transferable to developing geothermal energy projects.
• Offshore Wind Development: The experience in complex offshore installations and project management from the oil and gas sector is valuable for expanding offshore wind energy.

3. Efficiency and Emission Reduction within the Industry

• Operational Decarbonization: Oil and gas companies are working to reduce their own operational greenhouse gas emissions through energy efficiency measures, methane leak detection and repair, and reduced flaring.
• Leveraging Data Analytics: Enhanced use of data analytics is improving operational efficiency, reducing waste, and minimizing the ecological footprint of oil and gas extraction and processing.
• Water Management: The industry is exploring more effective ways of recycling and reusing water in its operations to decrease freshwater usage.

4. Lessons for the Clean Energy Economy

• Market Mechanisms: The global oil market’s sophisticated trading systems, strategic reserves, and supply chain security frameworks offer valuable lessons for building resilient renewable energy markets and managing the supply of critical minerals (e.g., lithium, cobalt) essential for clean energy technologies.
• Policy Development: The experience of managing a global commodity like oil can inform the development of policies and regulatory frameworks for new energy carriers and technologies.