Are you still struggling with that New Year’s hangover? Ears still ringing from standing too close to the fireworks display? One too many of those seemingly harmless end-of-year cocktails? Or regretting that extra glass of mulled wine? And then perhaps you had a few more drinks on New Year’s Day to shake off last night’s hangover because 2021 was perhaps best quickly forgotten?

My head hurts too. However, it’s not due to whisky, vodka, maotai or tequila, red wine or jet-lag. Here are 3 things giving me a hangover:

The coal era is coming to an end… except power generation is using more coal than ever before! I keep thinking that coal is fading away (‘phasing out’ or ‘phasing down’ both mean lower use to me) and I thought it was all a done deal and that’s what I heard at COP26 – “We are on the way to consigning coal to history”. Wrong! I thought this meant that coal is on its way out, but it is nothing of the sort right now. Like many New Year resolutions we are not talking commitment, just good intentions. The world is using more coal for power generation than ever before!

We are on track for 2022 to be an all-time high in coal demand for power. India is set to grow coal-fired electricity generation by 12% and China by up to 9% reaching all-time highs in both countries. Global demand for coal for cement and steel manufacture is also underpinning demand. Europe is back to burning coal too. Here the light winds and grey skies have thwarted renewable power, plus nuclear maintenance that has taken electricity production units offline, have drastically reducing power options. In Germany, with little natural gas flowing from Russia, and light winds, it leaves coal (and lignite, yes, remember lignite even dirtier than normal coal) as the major source of power generation which, along with nuclear, is supposed to be aggressively phased out.

In the US, the future of their whole economic Build Back Better Act, a US$ 2 trillion tax-and-spend package built around a renewable energy and climate agenda is currently stalled by a single senator from coal-rich West Virginia. And this as the USA enters a key year of mid-term elections with soaring inflation.

Without immediate actions to tackle coal emissions there can be little chance, if any, of keeping global warming to 1.5C. Coal of course is the single largest source of carbon emissions. What all this shows is how far away we are from where we need to be to reach Net Zero.

Natural gas is not green energy… never-mind, we can pretend it is! Is natural gas a form of green energy, or a form of transitional energy, or not? The European Union has been struggling with this concept for years, and still cannot make its mind up. If natural gas is green then it enables investors to press ahead with wave after wave of new gas development projects. This would mean a secure future for fossil fuels.

European natural gas supply is fraught with energy security problems, not just whether natural gas is green. There is an awkward convergence of competition with Asia for LNG cargoes, the uncertainty about the relationship with Russia, together with insufficient gas storage, increases in carbon pricing and declining North Sea reserves. These have pushed up prices that cause a major cost of living and economic challenge.

Less than a decade ago, Europe (including the UK) was looking towards a fracking-led unconventional domestic gas powered future. It failed to get support. Nowadays it’s considered OK for Europe to import natural gas by pipeline from Algeria and Russia, also LNG from Qatar, Trinidad, and the US (much of which is produced by fracking). Now Europe pays triple or on some days 10 times more than the price of US natural gas.

Meanwhile the natural gas forecast in the US, is that by end 2022, demand will be met by domestic production and be at an all-time high of almost 98 billion cubic feet per day. Around 80% of this will be shale gas and tight gas accessed by horizontal drilling and multi-stage fracking.

Please increase oil production… oh! please stop producing oil! Leaders of the world’s giant economies have been issuing pleas for producers to produce more oil, ensure plentiful supply and with that help reduce oil prices. At the same time, many of those same economies are formulating legislation to make it harder and harder for oil companies to produce, seeking to block their activities at home, restricting new exploration and developments.

It has become politically incorrect to publicly acknowledge that oil & gas will be needed long into the future. Activists are delighted when they manage to stop or limit an oilfield development. But activism is not what will bring the era of oil to an end. Recognising one’s addiction, or over-indulgence, is just the first step on the path to a healthy recovery. The oil era will come to an end when we have developed plentiful, efficient, price-competitive affordable low carbon power, transport fuels and products which are available globally. It requires science, technology and innovation.

For the moment, the oil industry is adding many thousands of jobs each month as it rebuilds from the pandemic-induced lows. Banks are feeling political pressure and see added risk when lending to oil producers. Demand still grows though, and many oil companies are simply relocating activity to where they are more welcome.

A new dimension to oil has recently appeared with Russia placing massive investments into new northern oil projects seeking to bring low sulphur/high quality, easy-to-refine, light crudes into core European markets. With short transport routes these can displace both Middle East and West African cargoes, as well as high quality barrels from declining North Sea fields. This new Russian production is set to be larger than the entire current North Sea production. And this during a time that European markets are supposed to be weaning themselves off their addiction to oil. Russia clearly believes demand will persist, and they can add to its attraction by lowering the carbon consumed both during production and transport to market.

Right now the world is set to consume more oil in 2022 than ever before. Much will depend on how pandemic restrictions, lockdowns and international travel bans are reduced. Demand could grow by over 3 million barrels per day – and equal the 2019 pre-pandemic record.

For me, the hydrocarbons sector starts 2022 deeply conflicted, parts of it seem to be utterly confusing, almost beyond explanation. We have the means and the technology to unravel the climate challenge and put it right. My hope is that in 2022 we can get back on track and make real progress implementing better energy solutions than the ones used so far. This can cure my hangover!