Europe’s plan to double down on renewable fuels in response to rising fuel costs could have the unintended short-term effect of increasing prices and slow down the energy transition, Chevron Corp Chief Executive Michael Wirth said on Tuesday.
“That can erode the public support that will be necessary for the energy transition”,” Wirth said. “There is a bit of a paradox that I observe.”
Fuel prices have been soaring around the world amid declining investments in fossil fuel projects. Prices have accelerated since sanctions were imposed this year against energy exporter Russia following its invasion of Ukraine.
Gasoline and diesel prices are a top electoral topic in different countries of the world, including U.S. Congressional elections and a Brazil presidential run, both later this year.
A persistent period of U.S. diesel at $6 per gallon and natural gas prices nearing $10 per million British thermal unit could have political implications for policy makers, Wirth said.
“One of the things I worry the most about is a period of high prices that voters begin to identify with energy transition ambitions,” Wirth said.
The CEO called for policy that would incentivize carbon emission reductions instead of restricting oil and gas supply before renewable fuels such as solar and wind power have scale to replace traditional fossil fuels. Wirth defended the need of a pricing mechanism for carbon in the United States similar to the one set in Europe.
“A price on carbon is a simple way to create a price signal that would create a business model that would mobilize capital,” Wirth said. “We need to find some sort of a commercial framework. And it needs to be enabled by policy.”