Navigating the Energy Trilemma: Oil and Gas Industry Making Strides
Authors: Presley Jennifer 
Published: June 2023

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Energy is vital to human flourishing. Since the dawn of time, humans have sought to find more efficient ways to power and propel their lives forward. With each generation, we’ve made progress in unlocking energy density—moving from burning wood for warmth inside caves thousands of years ago through our current age, where a revolution in modern energy is transpiring.

However, recent global events have certainly tested the upstream oil and gas sector’s “can-do” attitude and spirit of innovation.

In the 3 years since West Texas Intermediate Crude (WTI) futures dipped below zero—dropping more than 300%—to settle at negative $37.63/bbl, there has been a global COVID-19 pandemic and recovery, supply chain and logistical challenges, and a war.

The oil and gas industry is more adept at riding the market volatility wave than in the past. WTI futures climbed out of the negative, reaching as high as $123.70/bbl on 8 March 2022, as the pandemic began to ease, and the lockdown ended in many regions worldwide.

Geopolitical tension with Russia and its full-scale invasion of Ukraine in the first half of 2022 contributed to the crude oil price increases. Also contributing to higher pricing in the first half were concerns over supply levels. The Russian invasion of Ukraine came during eight consecutive quarters of crude oil level decreases, according to the US Energy Information Administration (EIA).

In the year since, the price has dropped but not nearly as profoundly, with recent prices ping-ponging in the mid-$60 to mid-$80/bbl range. The EIA cited as reasons for the lower price concerns over a possible economic recession and China’s severe COVID-19 containment measures as keeping global demand lower.

The Russian invasion of Ukraine turned global markets upside down. The International Energy Agency (IEA) cited it as the trigger of a worldwide energy crisis that “has the potential to hasten the transition to a more sustainable and secure energy system,” in its World Energy Outlook 2022.

“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” said IEA Executive Director Fatih Birol at the time of the outlook’s release. “Even with today’s policy settings, the energy world is shifting dramatically before our eyes.”

Transition and Trilemma

The energy transition changes how the world views and uses oil and gas. While it is not the first energy transition the world has faced, it is proving to be the most significant and complicated.

“It is needed if we are to prevent the 1.5°C increase in temperature,” Kjetil Hove, the executive vice president of development and production in Norway for Equinor, said during his keynote address at the SPE/IADC International Drilling Conference and Exhibition held in Stavanger on 7 March.

“The future carbon intensity of the energy mix needs to be reduced significantly. Last year’s energy crisis and the war in the middle of Europe showed that the energy transition needs to be done wisely and that it addresses the energy trilemma,” he said.