HOUSTON, March 8 (Reuters) – Enormous challenges remain across global energy markets in the wake of the war in Ukraine, U.S. Energy Secretary Jennifer Granholm said on Wednesday, citing continued risks for energy security and the need to mitigate climate change.
Russia’s invasion of Ukraine more than a year ago led to an energy crisis in Europe as Russian gas stopped flowing into the continent and Western sanctions disrupted Russian oil supplies.
“We have not yet vanquished the volatility that characterized so much of the last 12 months,” Granholm told the CERAWeek energy conference in Houston, the largest annual gathering of top executives. “The risks to energy security, the vulnerabilities, and the need for national and economic security have not disappeared,” she said.
A year ago in the early weeks of the war, Granholm had called on executives at the conference to pump more oil and gas as the world faced the possibility of disruption to the 10% of global oil supplies that Russia produces.
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On Wednesday, Granholm said the industry had responded with increased output and cited projections that both U.S. oil and gas production were set to hit records next year.
“I’m grateful that we have seen an increase in production,” she said. “Obviously that has helped our allies and it’s helped at home.”
She said industry and governments must figure out ways of meeting rising demand while cutting emissions of greenhouse gases driving climate change.
Both oil and gas prices have fallen from their peaks in the months after the war thanks in part to mild weather limiting Northern Hemisphere demand for heating fuels.
Executives warned this week that the industry remains vulnerable to shocks as it deals with potential new disruptions to supplies and increased demand from China.
Granholm assured oil and gas executives at the conference that the administration’s commitment to fighting climate change did not mean it intended to discourage fossil fuel production.
“We know that oil and gas is going to remain a part of our energy mix for years to come,” she told the crowded plenary hall. “This transition is not about closing doors. Its about opening new windows of opportunity.”
She said the global energy industry needed to figure out ways to reduce emissions linked to fossil fuels while adding new climate-friendly energy resources like solar, wind, and geothermal.
Granholm said the U.S. Inflation Reduction Act, a landmark climate-focused law signed last year that offers roughly $370 billion in clean energy incentives, would help energy companies pursue those goals.
“We need both traditional and new energy as this transition progresses,” she said.
Her comments underscored a shift in policy since the early days of the Biden administration, which had attempted to deliver on a campaign promise to end new oil and gas drilling on public lands before getting blocked by the courts and pressured by the political fallout from soaring pump prices.
Granholm said Washington made no apology for the IRA legislation’s local content stipulations, which had caused trade tensions with the European Union.
“We don’t want to stoke trade wars or anything like that,” said Granholm. “We keep saying ‘have at it- you should do the same thing’ – a little friendly competition is all.”
“But we are serious about bringing supply chains back into this country,” she said.
Clean energy companies have announced tens of billions of dollars worth of investments in the United States since the IRA was passed.
Granholm added that the U.S. would release on Wednesday a $6 billion funding opportunity for industrial decarbonization projects to help reduce emissions from industries ranging from cement to steel.
Reporting by Richard Valdmanis; Writing by Simon Webb; Editing by Gary McWilliams and David Gregorio
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