Looking ahead: what role for oil in a changing global economy?
October 2023

The theme of volatility and change has been central to much of my commentary over the past year. Indeed, the ongoing global situation has provided fertile ground for all of us to think about the future, because the forces reshaping the way that tanker shipping operates today (such as the war in Ukraine) are also accelerating us towards an uncertain and unpredictable future.

In other words, it is fitting that we think about what lies ahead, because that future is approaching faster and faster every day. One area that we consider a great deal as a tanker shipping company is the role that oil will play in the future.

Decarbonising the world economy and combatting climate change is undoubtedly the most important challenge facing humanity. We must pursue new forms of energy and we must make sure that our existing industries can transition to a decarbonised future in a truly sustainable way; sustainable for the environment, and sustainable for those businesses too.

This is why the team at Stena Bulk is leaving no stone unturned in our pursuit of more sustainable options for our global fleet. I’ve written at length before about some of our strategies here, including our joint venture with Proman to scale methanol as a marine fuel.

But commentary about alternative energy is often constrained to miss out on the detail of what will happen to the fossil-based products on which we currently rely. The reality is that while efforts to decarbonise and combat climate change are nothing short of the most important fight of our lifetimes, we will still all be reliant on oil for various end uses – both energy and non-energy.

According to the Economic Times, “roughly 40 per cent” of oil consumption is already “non-transport”, including “consumption for petrochemicals, power, heating and other industries such as construction, lubricants, agriculture etc.” This includes the production of a huge number of products that we all use daily, including soaps, detergents, plastics, fertilisers and paints amongst others. There is no doubt that synthetics will replace some of this oil use, but even the most bearish forecasts still predict a large number of these products will remain based on fossil products for some years to come. The IEA tends to agree, with various scenarios for oil use in the future all showing that there will still be product that needs to be transported on time and in the right manner.

I strongly believe that oil will continue to have a continuous impact on all of our lives. The simple arithmetic of the cost of fully replacing fossil fuels with green energy makes this clear. We might instead be heading for a future where oil, gas, and maybe even coal are still used at scale, but we will have found ways to clean that energy such as through perfected carbon capture, storage and utilisation.

I’m reasonably confident in this because of the share of fossil fuels as a percentage of GDP – around 5%, or $5tn. This gives stakeholders a huge incentive to try and clean fossil fuel, and in my view increases the likelihood that the future will indeed see us deploy a mix of fossil and green energy sources.

McKinsey is one organisation leading research into how the future energy mix may unfold. As this article says, “fossil fuels such as oil and natural gas will continue to make up a significant share of the energy mix by 2050, partly because of how they combine affordability and security of supply… nonetheless, oil and gas companies are well positioned to play a meaningful role in the energy transition. Reasons for this include their global scale, the risk appetite of their investors, their large balance sheets and cash positions, and their long-standing relationships with energy customers and stakeholders.”

I believe that we should use this discussion as an opportunity to underscore the paramount importance of transporting oil economically, safely and sustainably. After all, any erosion of the high standards for which tanker shipping has become known becomes even more stark in a decarbonised future than it already is today.

In short, this transition is going to happen, but we have to make sure it happens in the right way. Our vision has always been that oil should travel first class. It is deeply engrained into how  all of us at Stena Bulk operates and thinks.

In practise, this means that safety and sustainability is prioritised, but these have to be combined with the basic realities of tanker shipping: economical and rapid transport solutions that can be trusted. And for us this begins and ends at the asset level, so we have built a modern fleet of efficient and flexible tankers that can respond to market demand.

It is also why we are proud of the work we are doing with Proman, OGCI and other leaders across the maritime ecosystem to ensure that the ships of the future can conduct transport work with a minimal impact on the environment. Our duty is to our customers, and we want to ensure that we can transport their products – whatever those products are – in the right way. We owe it to ourselves to be both realistic and optimistic about the future: realistic in that oil will still be used and have to be transported, but optimistic in that we are on the cusp of some truly exciting innovations that will considerably improve safety, sustainability and efficiency for tanker shipping. This is a trend that we very much intend to continue to advance, in partnership with our peers across the tanker segment.

By Erik Hånell, President & CEO of Stena Bulk
October 2023