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Total CEO Says — Coal Is The ‘king’ As Gas Prices Soar

Rising natural gas prices have led to a jump in coal use, with plants in Europe and Asia firing back up as temperatures reduce and the world tussles with worsening gas shortages.

TotalEnergies CEO Patrick Pouyanne on Wednesday emphasized the need to achieve price stability, contending that lower gas prices will reduce the need to rely on the higher-polluting coal, but that the transition to cleaner energy has also created an imbalance in the market.

High pricing is not good news — of course immediately for my company results are better, but for customers” is it not, Pouyanne told CNBC’s Hadley Gamble during a Russia Energy Week panel in Moscow.

Replacing coal with gas “is good for climate change, but to do that, we need to have a lower price,” the CEO said. “Because coal today is a king, because coal is cheaper than all the other sources of energy.”

Coal-produced electricity has shot up in Europe, and European coal futures have more than doubled since the start of the year. And the irony is clear, as this is happening just as Europe is trying to reduce its use of the polluting fuel. Gas prices in Europe, meanwhile, have nearly quadrupled since the start of the year. 

So for us today prices are too high. We have to find stability, going back to something more normal,” Pouyanne said. 

He added that this is not merely a European gas crisis, but a global one, stemming from both a “huge hike in demand for gas from China and Asia,” as well as “more demand for gas because of energy transition, going from coal to gas, which is good for climate change.”

“So that is I think a lesson,” Pouyanne said. “Another is that the more we put renewables in our electric system, we put in intermittent sources which depend on the weather.”

Pouyanne, like many other oil and gas company executives, has noted the risk of renewables that rely on weather. Brazil, which has increased its reliance on hydropower, saw less rain this year, while other parts of the world that have invested heavily in solar and wind power saw less sun and wind.  

BP CEO Bernard Looney, speaking on the same panel, echoed Pouyanne’s concern.

“I think that this crisis in Europe has reminded us that energy is part of the lifeblood of society and that energy use is only going in one direction — and that is upwards,” Looney said. “We all understand that the sun doesn’t shine at night and the wind doesn’t always blow so we have that question of renewables’ intermittency to deal with.” 

This has been brought on by supply shortfalls and the transition to cleaner energy, which has spurred higher demand for gas, considered a cleaner fuel. Demand is also rebounding from its Covid-induced slowdown as economies reopen and travel resumes around the world.

Other energy commodities including oil have also soared in recent weeks, with international benchmark Brent crude trading at $83.37 at 12:00 p.m. ET, its highest level since 2018 and up 64% since the start of this year.

U.S. benchmark West Texas Intermediate hit a seven-year high this week, and was trading at $80.63 at noon ET.

The spike in energy prices comes amid supply chain disruptions and a shortage of shipping containers, both of which have contributed to rapidly rising inflation.

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