n the final months of 2021, when world leaders were gathering in Glasgow pledging reduce or offset the use of planet-heating fossil fuels, an untimely problem was beginning to unfold: prices for coal and gas hit all-time highs.

It happened as economies were re-emerging from the worst of the COVID-19 crisis faster than anyone was ready for, lifting energy demand ahead of the Northern Hemisphere winter when more energy is needed for heating homes. Meanwhile, coal and gas stockpiles were running low, output had been curtailed from key suppliers including Russia, and buyers started scrambling to secure cargoes they could import by sea. Before long, power shortages in China were forcing factories to shut down.

For ASX-listed oil and gas producers Santos and Woodside Petroleum, the rising price of liquefied natural gas (LNG) – Australia’s third-biggest export – has translated to record December quarter sales revenue. One-off spot LNG cargoes in Asia, which were trading at less than $US2 ($2.79) per million British thermal units during the pandemic-led crash of 2020, surged above an unprecedented $US50 in October and remains above $US30 today. The benchmark Brent oil price has risen to $US88 a barrel, its highest in several years.

While the immediate trigger for spiking energy prices may have been multi-pronged, Santos managing director Kevin Gallagher says what it shows is the result of “five years of underinvestment in the supply side of our industry”.

“That’s a consequence of a number of things… two oil price crashes and a global pandemic – and, I’d have to add, activist pressure and government policy,” he says.

I think what you’re seeing now is a bit of a realisation globally: there is nothing out there to replace fossil fuels for a long time.”

The burning of fossil fuels including coal and gas represents the biggest hurdle to achieving “net-zero” emissions targets, under which governments are vowing to eliminate or offset the greenhouse gases they release into the atmosphere to avert catastrophic levels of global warming.

While backers of natural gas describe it as a necessary “transition fuel” in the green power shift, as a less-emitting alternative to coal that can keep energy reliable and affordable in periods when weather conditions for wind and solar are unfavourable, the role of gas is increasingly under question. Scientists and climate advocates insist it remains a heavy source of emissions and its role must be urgently reduced not expanded.

Extracted in full from: ‘They are dreaming’: Why Santos boss Kevin Gallagher still believes in oil and gas (smh.com.au)