Silly Season With A Looming Winter Of Energy Discontent - TD

Link: https://www.forbes.com/sites/tilakdoshi/2021/10/11/tis-the-silly-season-with-alooming-winter-of-energydiscontent/?sh=242e2584399c&mc_cid=946252612e&mc_eid=a2d5539c63 Please see link above for source text, embedded hotlinks and comments.

October 11, 2021

‘Tis The Silly Season With A Looming Winter Of (Energy) Discontent Tilak Doshi Contributor Energy I analyze energy economics and related public policy issues.

No, this article is not about a socially-distanced, house-bound suburban family in lockdown zero-covid mode engaged in a game of charades with face masks on. Nor is it about the prospect of a Christmas that promises broken supply chains and bare shelves around the world for all the cheap goods made in China which is suffering from coal shortages and power blackouts.

This article is about the mounting absurdities of the climate change crusade that is now the religion not just of highway-blocking Insulate Britain and Extinction Rebellion zombies but also of Prime Ministers and Presidents of the world’s leading democracies.

Silliness in energy policy is nothing new of course. President Carter delivered his “moral equivalent of war” speech in 1977 and gave the following litany of dark predictions: “The oil and natural gas we rely on for 75 percent of our energy are running out.”

“Unless profound changes are made to lower oil consumption, we now believe that early in the 1980s the world will be demanding more oil than it can produce.”

“World oil production can probably keep going up for another six or eight years. But some time in the 1980s it can’t go up much more.”

“We can’t substantially increase our domestic production…”

“Within ten years we would not be able to import enough oil—from any country, at any acceptable price.”

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He was wrong on precisely all these prognostications in his famous MEOW speech, and is most remembered for America’s gas lines, inflation and the country’s loss of belief in itself as the world’s exceptional nation, at least until President Reagan declared “it’s morning again in America” in 1984. To be sure, President Carter was no fool, and there were plenty of smart people proclaiming similar Malthusian gloom and doom forecasts of the world running out of fossil fuels. The pointy-head intellectuals of the Club of Rome running one of the earliest main-frame computer models of the global future got it just as wrong, issuing in 1972 the mother of all apocalyptic ‘end is nigh’ forecasts which, we were told, would strike well before the turn of the century.

In the first two decades of the new millennium, in the real world, the US emerged as a powerhouse of new oil and gas production with its remarkable fracking revolution and quickly achieved its status as the world’s leading oil and gas producer outranking both Saudi Arabia and Russia. No, the world did not run out of resources, and yes, despite the widely proclaimed “climate emergency”, the global population is doing very well.

Average global life expectancy at birth in 1950 was just over 45 years — and in 2019, it was almost 73 years. In 1970, 48 percent of the global population lived in absolute poverty. By 2015, this had dropped to less than10 percent despite a two-fold increase in world population.

But let us register the tally of energy silliness that has beset us this past few months, shall we? Let’s start with the new “not Trump” US President on his first day of office just over 8 months ago. On attaining office, President Biden immediately unleashed a series of executive orders to reverse his predecessor’s strategy of “energy independence”. At a stroke of his pen, he revoked permits for the Keystone XL pipeline, suspended oil leasing in Alaska, halted oil and gas leases on federal land, and even invoked the Endangered Species Act to block energy resource development on private lands in the West.

Having demonized US oil and gas and doing everything to block its further development, the Biden White House did not take long to criticize the big oil producers in OPEC+ including Saudi Arabia and Russia for “insufficient crude (oil) production levels”. The White House put a global statesmanship gloss on this request for OPEC+ to increase oil production – US national security adviser Jake Sullivan opined “At a critical moment in the global recovery, this is simply not enough.” But there is no doubt that the summer surge in US gasoline prices and tumbling popularity polls had much to do with President Biden’s request.

While many of us jaded observers of the energy scene are inured to the silly antics of our government leaders, its still quite something to see the Biden administration implore foreign producers to ramp up oil exports while doing its best to stymie America’s own oil and gas industry. Scott Angelle, a former Republican lieutenant governor of Louisiana and secretary of natural resources, said bluntly: “The White House doubles down on favoring OPEC production while giving the middle finger to American energy jobs, American energy consumers [and] climate-advantaged American production.”

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It was also par for the course for the Biden administration to shut down the $7 billion Keystone XL pipeline capable of moving 830,000 barrels per day of Canadian heavy crude oil to the US Gulf Coast refineries while standing down Trump’s sanctions on the company building the Nord Stream 2 pipeline delivering Russian natural gas to Germany. It gifted the Kremlin a major geopolitical prize which President Putin is now using as a bargaining chip to hold Europe to ransom amidst record high natural gas prices. Aleksandr Novak, Russia's energy minister, explicitly linked easing Europe’s gas crisis - caused when demand outstripped supply as economies reopened post-Covid with the opening of the Nord Stream 2 pipeline.

Energy policy silliness, however, is not a Biden administration monopoly. In a speech to the UN in New York in September, UK Prime Minister Boris Johnson pressed countries “to deliver on their commitments” to reduce carbon emissions, reminding world leaders that the upcoming UN climate conference in Glasgow in November would be the “turning point of humanity”. Meanwhile, as the Prime Minister lectured from his UN podium that “it’s time for humanity to grow up”, his own party backbenchers in parliament back home warned that the country’s on-going energy crisis showed why the government had to scrap green levies and subsidies for the renewables industry.

Indeed, Johnson may have been competing with Biden for the energy silliness prize when he pledged to make the UK the “Saudi Arabia of wind power”. As it turns out, owners of UK’s last remaining coal power stations were paid huge sums to keep the lights on after an extended Europe-wide wind drought caused wind power to fail and natural gas prices climbed to record highs.

While natural gas and power prices surged in the UK, a raft of small energy companies went belly up and two fertiliser plants in northern England closed down, which forced most of Britain’s commercial carbon dioxide production to shut down. This in turn is threatening shortages in the food and beverage sector which depend on the gas for a host of applications. To top it off, UK business secretary Kwasi Kwarteng, after holding emergency talks with energy chief executives to help companies weather the unprecedented spike in gas and electricity prices, doubled down on Britain’s shift to renewable energy. He has been busy explaining that surging natural gas and power prices, energy companies going bankrupt, and petrochemical producers shutting down operations really meant that the UK needed to develop renewable energy capacity even more rapidly.

To add to the compendium of silly energy policies, in the midst of a gas supply crisis, the UK government’s environment regulator just denied Royal Dutch Shell permission to further develop a site in the North Sea which could have supplied up to 10% of Britain’s annual natural gas consumption. The UK government had already banned fracking in 2019, following Europe in the decision to keep fossil fuels “in the ground” consistent with their climate change predilections. And, in its wisdom, the UK government saw it fit to reduce Britain’s gas storage capacity to just 2 per cent of annual gas demand, compared with 25 per cent to 37 per cent in Europe’s four largest storage holders.

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But it gets better – energy policy silliness is not just the province of the politicians. Socalled energy experts and international bureaucrats are serious competitors in this arena. In mid-May of this year, the International Energy Agency published its “Net Zero By 2050” study. Described widely as a “bombshell report”, among its high points it proposed an end to all new investments in fossil fuels (coal, oil and natural gas) from 2021.

After essentially calling for the most fundamental transformation of the global energy system since the advent of the Industrial Revolution over two centuries ago — to be completed within the next three decades — the IEA opined just weeks later that "OPEC+ needs to open the taps to keep the world oil markets adequately supplied". And, on cue, as Europe’s gas and power prices surged to record levels, the IEA called on Russia to be a “reliable supplier” and send more gas to Europe.

Perhaps it’s not so much silliness as a perfectly reasonable hypocrisy of the St. Augustine variety who in his confessions prayed “Lord, make me chaste – but not yet!”

Lets hope that the onslaught of energy policy silliness (or hypocrisy) of the past several months does not cause a winter of discontent and that the gods of weather be merciful to us.

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Tilak Doshi I have worked in the oil and gas sector as an economist in both private industry and in think tanks, in Asia, the Middle East and the US over the past 25 years. I focus on global energy developments from the perspective of Asian countries that remain large markets for oil, gas and coal. I have written extensively on the areas of economic development, environment and energy economics. My publications include “Singapore in a Post-Kyoto World: Energy, Environment and the Economy” published by the Institute of Southeast Asian Studies (2015). I won the 1984 Robert S. McNamara Research Fellow award of the World Bank and received my Ph.D. in Economics in 1992.

Irises at a private residence in the wilderness of the Cascade Mountains in Washington State. Life is wonderful and the climate terrific.

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