Political divisions undermine global energy transition solutions

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Global energy transition solutions

Global energy transition solutions

Global energy transition solutions – Steve Puckett, OBE, and co-founding director of the Asian Lubricants Industry Association (ALIA) delivered the keynote address at the ALIA Annual Meeting at the Four Seasons Hotel in Kuala Lumpur, Malaysia on June 12, 2023. During his speech, the consultancy’s chairman TRI-ZEN International, based in Singapore, outlined unprecedented threats facing the Asian lubricants industry. While the scale of these challenges is growing, political divisions continue to undermine global solutions, says Puckett.

In his speech, navigating unprecedented changes in the industry, Puckett reiterated the impact of geopolitical tensions on business performance. The great powers are going their separate ways in trade and technology for security reasons. Puckett noted the impact of Russia’s war in Ukraine and the continued deterioration in US-China relations — with diplomats on both sides simply trying to stem that decline. We are entering a deepening crisis where national politics undermines global leadership, says Puckett.

This geopolitical unrest is highlighted in the continued disruption of global supply chains. Companies are struggling to control the end-to-end product supply chain, putting pressure on core businesses. Puckett highlighted a likely increase in turmoil in the future and the need to urgently restructure the business to optimize resilience.

Disrupted supply chains are affecting inflation. Puckett lamented an acceleration in inflationary pressures not seen in the past 40 years. He emphasized the need for lubricants companies to identify and mitigate business risks and take steps to limit external cost increases and improve capital structuring.

Puckett also highlighted the increasing occurrence of increasingly sophisticated cyber threats, along with digital transformation and the current global turmoil. Asia-Pacific is most at risk, experiencing more than 30% of cyberattacks. Organizations need to urgently analyze the potential impact on their business and implement precautions.

Climate change remains the biggest risk, and there is a pressing need for change, says Puckett. However, he noted the difficulties in balancing the need for energy security and the energy transition. No government will allow its energy security to be compromised. Creating affordable, reliable and sustainable energy is a “notable challenge”, he says.

The high growth of renewable energy did not provide a factually complete picture, says Puckett. All forms of energy are increasing, and coal and oil continue to outnumber all other energy sources combined. Oil demand is expected to rise to 102 million barrels per day (bpd) by the end of the year before starting to stabilize and eventually decline. Puckett highlighted an ongoing need for oil and gas, which requires significant infrastructure. The question is: can we produce the required quantity without additional investment?

Puckett noted that most banks are no longer lending to oil and gas projects, with the capital flow shifting towards the energy transition. However, the developing world needs affordable electricity, and coal currently provides it. Asia’s coal accounts for 13% of all global emissions, says Puckett.

When it comes to electric vehicles, China has taken the lead and is buying access to resources. Currently, China controls more than 50% of the critical materials for manufacturing electric vehicles (EVs). However, Puckett emphasized that there is extreme price volatility in EV materials and believes that material costs will continue to be a significant challenge for these new energy vehicles well into the future.