- The reasons for the spike in gas prices are varied but its effect is already being felt on the ground.
- In the U.K., for example, it has caused a number of small energy suppliers to go bust.
The CEO of energy technology firm Baker Hughes has outlined what he feels are key points related to the energy transition amid deepening concern about rising gas prices and the knock-on effects this could have in the months ahead.
In an interview with CNBC's Dan Murphy at the Gastech conference in Dubai, United Arab Emirates earlier this week, Lorenzo Simonelli was asked whether soaring gas prices were likely to be transitory or if he expected wider implications for consumers, markets and the broader economy.
"I think a lot of people are seeing what's happening in Europe and it's bringing to light the important discussion around the energy transition, and the importance that we have around gas as well," he said.
It was still early to see if prices would remain high or if this rise was transitory, he said.
Benchmark European gas prices have jumped over 250% since the start of the year, Reuters reported this week.
The reasons for the spike are varied. The influential, yet typically conservative, International Energy Agency said on Tuesday that surging European gas prices had "been driven by a combination of a strong recovery in demand and tighter-than-expected supply, as well as several weather-related factors."
"These include a particularly cold and long heating season in Europe last winter, and lower-than-usual availability of wind energy in recent weeks," it said.
IEA Executive Director Fatih Birol said given that the reasons behind the price rise were multifaceted, it would be "inaccurate and misleading to lay the responsibility at the door of the clean energy transition."
Birol's statement would appear to contrast views expressed by figures such as OPEC Secretary General Mohammed Barkindo. Barkindo told CNBC on Tuesday that soaring gas prices were the cost of the attempted shift to renewable energy sources.
"I have talked about a new premium that is emerging in the energy markets that I term the transition premium," Barkindo said.
The effect of the gas price rise is already being felt on the ground. In the U.K., for example, it has caused a number of small energy suppliers to go bust.
"We need energy security," Baker Hughes' Simonelli said. "And look, there's plenty of gas around the world, there's plenty of energy available," he added. "It's a question of bringing it to the market."
On the energy transition — a term referring to a move from fossil-fuel based sources to ones such as solar and wind — Simonelli sought to highlight a number of issues he felt were important.
"We think there's three hard truths," he said. "Firstly, we've got to work together, accelerate the move towards decarbonization and also eliminating emissions."
"Secondly, hydrocarbons are here to stay … and natural gas, in fact, is a key element. And thirdly, we've got to do it together, collaborate and actually adopt the new technologies that are available."
Burning fossil fuels, such as oil and gas, is the chief driver of the climate emergency. And despite policymakers and business leaders repeatedly touting their commitment to net zero strategies, the world's fossil fuel dependency is expected to get even worse in the coming decades.
None of the world's major economies are currently on track to contain global heating to the Paris Agreement target of 1.5 degrees Celsius, according to a study published by Carbon Action Tracker earlier this month, while separate research shows the vast majority of the world's known fossil fuel reserves must be kept in the ground to have some hope of preventing the worst effects of climate change.
The role of natural gas
The current crisis surrounding the price of gas has reinforced its continuing significance, even as major economies such as the U.K., European Union and U.S. outline plans to move away from fossil fuels in the years ahead.
Indeed, in its statement issued Tuesday, the IEA said gas remained "an important tool for balancing electricity markets in many regions today."
"As clean energy transitions advance on a path towards net zero emissions, global gas demand will start to decline, but it will remain an important component of electricity security," the Paris-based organization added.
In his interview with CNBC, Simonelli was asked about the role gas would play in the race to net zero. "You just have to look at Europe and look at the United States with regards to the way they've been successful in the last decades to actually reduce their CO2 emissions," he said.
"You've seen a shift from coal to natural gas and that's going to continue as you look at it from an emissions profile," he said. "So, you can reduce the footprint of natural gas from an emissions standpoint. It is already one of the most efficient fuels and we think it's here to stay."
— CNBC's Natasha Turak contributed to this report