This is actually a very easy article to understand, a-political and non-partisan by any honest measure.
Unfortunately, it’s becoming increasingly obvious that there’s a whole bunch of people in our energy-climate discussion that just won’t accept what can only be described as very obvious and undeniable facts.
Let’s start with the basics: fossil fuels supply 80% of the world’s energy and about 80% of the energy consumed in the U.S.
Energy is the driving force of modern life, so fossil fuels are thus the inherent inputs to just about everything that we do, make, and consume.
As I see it, coal, oil, and natural gas are so essential that investing in them is the epitome of “sustainability” because these fuels “sustain” our privileged way of life and our $25 trillion economy.
Oil, for instance, provides 95-97% of our energy for transportation; coal and gas generate 60% of U.S. electricity.
For electric cars and everything else, fossil fuels are used to transport a lot of parts and materials, and to power the machines and factories.
I mean really, is there anything that’s not made using electricity and then transported?
Coal, oil, and gas are thereby ingrained in our lives and will continue to build the world around us.
And that world is constantly growing and demanding more energy: we will add some two billion humans and about double global GDP to $200 trillion by 2050.
Modern civilization will remain fundamentally dependent on fossil fuels for a very long time.
Commonsense then would dictate that coal, oil, and gas are also foundational to the manufacturing and transport of wind, solar, and electric car technologies, or what I call the “triad climate panacea” for those demanding that we somehow stop producing and using fossil fuels.
While so impossible to accept for some, the reality is that these “energy transition” technologies that we keep hearing so much about actually need fossil fuels to survive.
And, again as the input fuels, higher prices for coal, oil, and gas thus mean higher prices for wind, solar, and electric cars.
None of this is controversial or difficult to understand: you increase the cost of the input, you increase the cost of the product.
One could therefore not think of a more inflation encouraging policy than an anti-fossil fuel policy because it increases the cost of our input fuels, especially those policies blocking development of the oil and gas that constitute 65% of America’s energy supply.
Higher fossil fuel costs, largely coming by not investing enough in producing and then transporting them, create an unstable economy, which is the very last thing we want for our “energy transition.”
Inherent in the manufacturing and chemical industries, you increase the cost of oil gas and you increase the cost of over 6,000 everyday products.
Sorry, but more electric cars will do nothing to change that since they have nothing do with manufacturing.
But again even in the transportation sector, the anti-oil promoters have a very big problem: a higher cost for crude oil increases the cost of just about everything because just about everything gets transported at some point along its life-cycle.
Not to mention that those electric cars will not be running on unicorns (again, coal and gas are 60% of U.S. power).
In fact, the anti-fossil fuel business is becoming far too unrealistic for all of our own good.
Last year, contrary to perpetually declining like we keep hearing, wind and solar costs were up 35%, namely since their input prices were way up (i.e., fossil fuels) and inflation thus soared.
To show the devastation, BP and Equinor are now seeking a crazy 54% hike in the electricity prices they will receive for the power generated at their offshore wind projects, an industry that is showing signs of imploding because of surging input costs.
High inflation rates from being anti-fossil fuels mean higher interest rates: the economic struggles of offshore wind leader Ørsted are also very telling of this.
Fact check: renewables in particular are much more vulnerable to higher interest rates than oil and gas because they rely heavily on debt markets.
And now, Reuters reports that investors are thus turning more toward AI and infrastructure.
Anti-fossil fuel policies thereby clearly block progress on climate change.
Instead of rehashing what others have said on the naïveté and downright energy stupidity of the “hey, let’s block fossil fuels and only produce wind, solar, and electric cars” crowd, let me just link to two legendary energy thinkers explaining the Energy Realism problem for those who oppose the development of fossil fuels:
“The ‘Energy Transition’ Delusion: A Reality Reset,” Mark P. Mills, Manhattan Institute, August 2022
“The Modern World Can’t Exist Without These Four Ingredients. They All Require Fossil Fuels,” Vaclav Smil, Time, May 2022
To demonstrate the absurdity, one could argue that a coal miner has a “green job” (whatever one of those is) – certainly more than the environmental lawyers and administrative assistants that typically get counted in those infamous “green job” tallies.
Follow me here.
About 70% of the world’s steel production has coal (met/coking) is dependent on coal as a core ingredient (i.e., purified coal, “coke”).
ArcelorMittal reports: “To build one wind turbine (inland), around 225 to 285 tonnes (248 to 314 tons) of steel is required.”
A coal miner mines the coal…that makes the steel…that makes the windmill.
Without coal, or more likely with coal but at a higher cost if the anti-fossil fuelers have their way, there’s no windmill or the windmill is preventatively too expensive.
But the ripple effect of being anti-fossil fuel gets even worse.
Since natural gas is the primary feedstock for ammonia, the building block for all nitrogen fertilizers, higher cost gas, which is the inevitable end result of not investing in its development, leads to…higher cost food.
Earth to the anti-fossil fuel business: could your position get any more catastrophic than working to install higher cost food?
Blocking fossil fuel development, and thus increasing the cost for renewables themselves, makes it much harder for these already intermittent energy resources like wind and solar to penetrate the energy complex.
Even with Herculean gains for wind, solar, and electric cars, the world’s demand for fossil fuels is at record levels and rising.
Dictated by physics and cost and profit considerations, Energy Realism doesn’t care about your feelings.
So, the idea often promoted by ESG and green groups to “not invest in upstream (E&P) for fossil fuels” ups the costs of fossil fuels because it restricts their capital investments and supply, which then means higher prices for renewables and electric cars, which then makes those technologies less commercially viable.
While the International Energy Agency (IEA) has come back around again and softened a bit (again, Putin’s war woke up a lot of the Western energy dreamers), its newfound position articulated out of the blue in 2021 to immediately halt new fossil fuel development to meet net-zero by 2050 was not just unimaginably reckless but contrary to meeting its own climate change goals.
It will increase the cost of just about everything, lead to economic dislocation, price spikes and volatility, and block any progress on the energy transition.
Curiously, for literally decades prior, IEA was telling us that required annual upstream investments in oil alone needed to be $500 or even $600 billion for many years to come to meet rising demand.
Back in 2018, for instance, IEA correctly realized that more electric cars did very little to erode our oil requirement: “the analysis shows oil consumption growing in coming decades, due to rising petrochemicals, trucking and aviation demand.”
And remember, we have to invest heavily in E&P just to stand still in output since natural decline rates for wells are 6-9%, with all-important shale much higher than that.
In the IEA vs. OPEC war about all this, OPEC is surely right: “At least $12 trillion in oil industry investments are needed to prevent a spike in energy prices, OPEC chief says.”
As Europe is painfully finding out, ensuring energy supply stability and affordability are integral to climate policy, or the public “greenlash” will make meeting climate goals politically untenable.
Not to mention that ensuring energy security is now being seen as just as vital, if not even greater in importance, as pursuing climate goals.
The world’s two greenest governments, California (highest electricity prices in the U.S. save Hawaii) and Germany (highest electricity prices in the world) show what happens when the climate fixation trumps all other considerations.
Contrary to what some keep telling you, California and Germany are examples of WHAT NOT TO DO on energy-climate policy.
Indeed, as it ultimately turns out, the greatest Public Relations firm for coal, oil, and gas is…human activity itself…and, apparently, even the goal to install an energy transition.
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