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Sustainability is on the cusp of an evolutionary leap. Companies all over the world are beginning to explore more sustainable ways of doing business, primarily due to the global climate emergency. They consider their long-term impact on the local environment, society, and the economy and ask whether their business makes a positive contribution. Becoming more sustainable may not be easy at first, but business sustainability is more an opportunity than a threat. The challenge is well worth the reward since there is no long-term trade-off between sustainability and financial value creation. Sustainable companies will be more resilient and create an enduring impact.
This article looks at the value of sustainability to business. First, it discusses the benefits as well as key strategies and challenges to increasing sustainability in business. Second, the link between energy efficiency and sustainability is examined. The business plan of the world's most sustainable energy companies is analysed, focusing on the lessons energy businesses can learn to become more sustainable.
On the 1st of November 2021, the 26th United Nations Climate Change Conference, also known as COP26 which stands for ‘Conference of the Parties’, is scheduled to be held in the City of Glasgow from 1-12 November under the presidency of the United Kingdom.
For nearly three decades the UN has been bringing together almost every country on earth for global climate summits. In that time climate change has gone from being a fringe issue to a global priority.
During COP21 which took place in Paris in 2015 the Paris Climate Change Agreement was born. For the first time ever, something momentous happened: every country agreed to work together to limit global warming to well below 2 degrees and aim for 1.5 degrees to adapt to the impacts of a changing climate and to make money available to deliver on these aims.
The Suez Canal hit the news on Tuesday 23 March 2021 when a mammoth container ship, the 224,000-ton ‘Ever Given’ ran aground in the canal after 40-knot winds and a sandstorm may have caused low visibility and poor navigation. The ship has lodged itself across the waterway (see Photo 1).
2020 will enter history books as the year of the COVID-19 pandemic which has inflicted the biggest damage on both the global economy and the global oil market since the Great Depression of 1929.
It will change the way we live in more ways than one. If anything, the pandemic has proven irrevocably how inseparable oil and the global economy are by demonstrating that destroying one automatically destroys the other and vice versa. 1
In the family apartment in my hometown les Ulis (south suburb 20 miles away from Paris, France), I vividly remember spending the first few weeks of the month of May 2003 preparing from my master's oral exam for the ESCP Business School ....
Lest We Forget
The Suez crisis of 1956 was such a momentous event for Great Britain that it reduced a great and proud country from a major player on the international stage to a second rate power, caused its economy to shrink and devalued its currency.
The great rivalry between the United States and China will shape the 21st century. It is a truth universally acknowledged that a great power will never voluntarily surrender pride of place to a challenger. The United States is the pre-eminent great power. China is now its challenger.
The escalating trade war has been casting dark clouds over the global economy creating uncertainty and depressing the global demand for oil and therefore oil prices.
Despite efforts by John Bolton the hawkish neo-conservative National Security Adviser to President Trump and Israel’s Prime Minister Benjamin Natanyahu to push the United States to go to war with Iran, war is neither an option for Iran nor for the United States.
Iran is not seeking a war with the United States but it will retaliate if its crude oil exports were prevented from passing through the Strait of Hormuz. And while it will be virtually impossible to block the Strait completely, Iran can nevertheless mine it and wait for an oil tanker loaded with oil to hit a mine. That alone could deter oil tanker owners and insurance companies from sending their tankers across the Strait. Alternatively, Iran could threaten to sink an oil tanker. That could have the same effect like mining the Strait.
Last month Saudi Aramco hit the news when it was named as the world’s most profitable company with revenue of $224 bn, a net income of $111 bn and a free cash flow of $86 bn against a total debt of $27 bn in 2018.
There was a lot of fanfare about Saudi Aramco created by investment banks which benefited hugely from Saudi Aramco’s launch of a major bond issuance to help finance its acquisition of 70% stake in Saudi petrochemical Basic Industries Corporation (SABIC).
The global oil market and its leaders
2018 had seen oil prices buffeted by bullish and bearish influences with oil prices seesawing from $66.87 a barrel on the first day of the year, to a high of $87 in early November then slumping before Christmas to a disappointing $54.10.
Who gets what?
But there were other forces at play that significantly influenced the price of oil in 2018. These forces were personalities whose decisions, utterances and in some cases farsightedness impacted directly on oil prices and the global oil market and may equally do so in 2019 as well.
Sustainability is the practice of maintaining processes of productivity indefinitely—natural or human made—by replacing resources used with resources of equal or greater value without degrading or endangering natural biotic systems. Sustainable development binds together concern for the natural systems with the social, political, and economic challenges faced by humanity.
The three pillars of sustainable development are the economy, energy and the environment. Interaction between these three pillars sustains a growing global economy which provides employment for millions of people and a decent standard of living in a healthy environment and the energy means that help enhance the quality of our life and mobility. The global economy has to be in a continuous state of healthy growth if it is to be able to feed 7.5 billion of people.
Since the withdrawal of the United States from the Nuclear Deal with Iran and its decision to re-introduce sanctions on Iran particularly Iranian oil exports, analysts and experts alike have been competing with each other in their projections about how much Iran will lose from its oil exports as a result of the sanctions. Their projections have ranged from 500,000 barrels a day (b/d) to 1.5 million barrels a day (mbd) out of estimated Iranian oil exports of 2.125 mbd.
Most of these projections were, in my opinion, based on faulty assumptions and lack of understanding of the dynamics of the global oil market and virtually bordering on daydreaming and wishful thinking.
Some experts are projecting a peak oil demand by 2036. Others like Fitch Ratings are saying that greater product awareness and technological changes could fast track the adoption of electric vehicles (EVs) that could plausibly lead to a peak oil demand before 2030.
It is, however, debatable as to whether a peak oil demand could be reached during the 21st century. The one certain thing is that oil is expected to remain the world’s primary energy source throughout the 21st century and probably far beyond. A major underpinning factor is the growing world population.
While everyone has been watching the Strait of Hormuz amid rising tension between the US and Iran, a chokepoint on the other side of the Arabian Peninsula is now at the centre of attention.
The recent attack by the Houthi rebels in Yemen on two Saudi oil tankers each carrying 1 million barrels of oil in the Strait of Bab al-Mandeb and Saudi Arabia’s suspension of oil shipments through the Strait have demonstrated how vulnerable the world’s key oil chokepoints are and how easy it is to disrupt global oil traffic.
US President Trump broke all norms of diplomacy and protocol during the NATO meeting in Brussels on the 11th of July 2018, when he accused Germany of being “a captive of the Russians” because of its dependence on Russian energy supplies. He went on to say that “Germany is totally controlled by Russia because they will be getting 60-70% of their energy from Russia and a new pipeline”.
He was, of course, referring to the jointly European and Russian-financed Nord Stream 2 gas pipeline that would deliver a total of 110 billion cubic metres per year of Russian gas supplies under the Baltic Sea, to Germany and the European Union (EU) thus bypassing the Ukraine. It will be completed by the end of 2019.
Oil prices don’t lie. They reflect the true picture in the global oil market from an economic and geopolitical angles. In the aftermath of the historic summit between US President Trump and North Korean Leader Kim Jong Un, oil prices were flat. What does this tell us?
The fact that the oil markets largely ignored the much-anticipated summit could mean that they viewed the summit as all flash with little substance. And though both sides hailed the summit as a breakthrough, there was nothing to show except a declaration pledging to work towards denuclearization with no details about how this is to be achieved.
The 26th of March 2018 will go in history as the most momentous day for the United States’ economy, China’s economy and the petrodollar and also for China’s status as an economic superpower. In that day China launched its yuan-denominated crude oil futures in Shanghai thus challenging the petrodollar for dominance in the global oil market. And in that very day 15.4 million barrels of crude for delivery in September 2018 changed hands over two and a half hours—the length of the first-day trading session for the contract.
Exactly one week after China launched its crude oil futures, the petro-yuan surpassed Brent trading volume. How long will it take it before overtaking the petrodollar? (see Chart 1).
In February 2018, an international consortium led by France’s Total and also comprising Italy’s Eni and Russia’s Novatek, signed two exploration and production agreements covering Blocks 4 and 9 offshore Lebanon, providing for the drilling of at least one well per block in the first three years. The consortium’s priority will be to drill a first exploration well on Block 4 next year, Total said.
As for Block 9, Total and its partners are fully aware of the Israeli-Lebanese maritime border dispute in the southern part of the block that covers only a very limited area (less than 8% of the block’s surface). Given that the main prospects are located more than 25km from the disputed area, the consortium confirms that the exploration well on Block 9 will have no interference at all with any fields or prospects located south of the border area,” the French company said (see Figure 1).
Russia’s cooperation with OPEC has led to the OPEC/non-OPEC production cut agreement credited with virtually rebalancing the global oil market and pushing oil prices towards almost $70/barrel and also putting a $60 floor under oil prices, up from $50 in 2017.
Russia and Saudi Arabia, the architects of the production cut agreement made it clear that the agreement will go beyond 2018 but in a format that reflects the changing market conditions such as a rebalanced market and rising oil prices. After all, both Russia and OPEC face a major rival: US Shale. It looks as if Russia could become a member of OPEC in all but name.
In an article I wrote for the Research Centre of Energy Management (EMC) at ESCP Business School on the 2nd of March 2017 under the title “Oil Prices Will Be Mostly Bullish in 2017”, I said that the oil price will break through the $60 level in 2017. This the oil price did when it has risen to more than $66.78 a barrel in December 2017.
And despite efforts by vested interests including the International Energy Agency (IEA) and the United States Energy Information Administration (EIA) to dampen oil prices, I am now projecting that the oil price could be heading towards $70/barrel or even higher during 2018 and $100 in 2020.
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