Call it the Trump effect or pure strategy shift, but fossil fuel is back in business with major oil and gas players looking to rework their investment plans with focus on exploration and production business.
The latest to do so is bp. On February 26, bp introduced what it called a ‘fundamentally reset strategy’ with clear focus on increasing oil and gas investment, aligning refined products business and disciplined investment in energy transition.
Will this restrategising by oil majors mean slowing down of the energy transition process? What will happen to the climate commitments?
According to President of Transversal Consulting, Ellen R Wald, “The fossil fuel business was never out. It has always played a vital role in the global energy eco-system. Even when the focus was on renewables and the energy transition, oil and gas continued to be profitable.”
“People were under a misguided perception that they wouldn’t be profitable after 2030 because they believed forecasts that were inaccurate. Now that it’s 2025 they are realising that fossil fuels are still necessary and feel comfortable saying it publicly,” she said.
According to Bob McNally, Founder and President of Rapidan Energy Group, “The world has been transitioning from the Paris Agreement era to the Post-Paris Era since the Russian invasion of Ukraine. With the election of President Trump and Republican control of Congress, along with elections in the EU Parliament, Austria, and Germany, this shift is picking up speed.”
“Historians will look back to the 2015-2022 period as a high point for hopes for and investment in a rapid decarbonisation: Interest rates were low so capital was cheap; inflation was a distant memory; there were no major wars; oil prices were low. Other than Donald Trump’s first term, other world governments favoured aggressive climate action. Most importantly, there was little resistance to China’s domination of global renewable and EV supply chains,” he recounted.
But, each one of those factors have reversed, indefinitely, he said adding “Investors and companies are shifting, and countries like India will likely also adjust…We can debate whether it was ever realistic to assume that a rapid decarbonisation was ever a realistic goal at reasonable economic and political cost, but the world is moving on to new concerns and priorities, including how to fuel AI data centre demand.”
Definitely fossil fuel business is back.
“I believe reality is finally setting in for several reasons,” said Tracy Shuchart, Senior Economist, NT-Live/ NinjaTrader Group, LLC. “The Russia-Ukraine war exposed Europe’s over reliance on Russian gas, leading to energy shortages forcing nations globally to re-think energy priorities. This has led to nations prioritising reliable energy sources to avoid supply shocks, with fossil fuels remaining essential for stability — baseload power vs intermittent power from renewables. Many renewable projects are just economically unfeasible and need to be heavily subsidized by governments,” she said.
Growth compulsions
Countries in Asia and Africa are focused on economic growth, increasing demand for oil, gas, and coal. Sectors like steel, cement, and chemicals rely on hydrocarbons, and alternative solutions remain costly or underdeveloped, she said adding, “High energy costs and unreliable supply have led to voter dissatisfaction, influencing policy shifts in Europe, the US, and beyond. This has led to investors recognising the need for a balanced approach, with some ESG funds now including natural gas as a “transition fuel.”
Does this mean climate advocates will get realistic?
“For climates activists this means that they are going to have to shift toward advocating for realistic transition policies, which include things such as nuclear, natural gas, and carbon capture,” she added.
But, more importantly, for countries like India which are being pushed to work on a strategy, energy security is what matters.
“Energy security is paramount for India being the fastest growing emerging market. I think we are already starting to see fatigue of the West trying to push India into the green agenda,” she pointed out.
The move is also seeing softening of oil prices, for now. The question will remain for how long?
“We are already seeing a softening of oil prices. For US shale, too low is going to be a problem as break-evens are currently around $65 on average (some basins are less, some basins more). Oil at $50 such as the Trump administration wants, for too long, and producers will be forced to curtail production, which ultimately lead to higher prices again,” she said.
“For India, with growing consumption lower prices are preferable, but the good news is that the Government is moving to attract more investment in the domestic oil sector loosening regulations, opening previously restricted areas for exploration, offering incentives, and revising the Oilfields Act to protect investor interests,” Shuchart said.
Output ramp-up
“In January of this year, bp has committed to increasing oil production by 44 per cent and gas output by 89 per cent from India’s largest offshore field, Mumbai High, through a decade-long contract with Oil and Natural Gas Corporation (ONGC),” she said.
On March 10, the Ministry of Petroleum and Natural Gas informed Rajya Sabha in a written reply that the government has taken various measures to reduce the dependency on imported crude oil and to promote domestic production of oil and gas. Various steps have also been taken by government and Public Sector Undertaking (PSUs) Oil Marketing Companies (OMCs) to address issues related to fuel pricing, the impact of global crude oil prices and to mitigate the burden on consumers. Besides, oil and gas PSUs have already announced their target dates for net zero status and are ready with their plans.
Overall, the situation currently is to India’s advantage. It is an opportunity for India to stabilise its energy basket, while ensuring that it does not buckle under geopolitical pressures.