The article in the url below is an interesting discussion about the consequences of a high oil price for fossil fuel consumption and the switch to renewables:
"With oil costing more than $100 a barrel, and Russia's war in Ukraine underscoring the risk of relying on fossil fuel, it would seem like a great time to speed up the transition away from the polluting fuel. The reality isn't so simple. Public support for climate action is higher than ever in most countries, but that doesn't ease the economic pain when everything from food to transport gets more costly. … That reliance makes any imbalance between supply and demand a source of price volatility, including the current spike."
Like everything else, the pandemic threw a wrench into pricing in the oil industry:
"In 2020, oil giants drastically pulled back on investments to increase production on the assumption that Covid-19 lockdowns would depress demand for their product. But the quick rollout of vaccines in developed nations led to a faster-than-expected recovery and a shortfall in supply. Now Russia's invasion of Ukraine has added risk to oil supply, with economic sanctions growing. Analysts say the longer the war goes on, the greater the chance the price of oil remains above the $100 mark."
The result is that 'change' to the industry is coming a lot slower than required. Partly that is due to the necessary shift in mindset, partly due to the lifecycle of infrastructure (hard to justify replacing infrastructure before it wears out), and partly resistance from those who do not agree with the case for change and the urgency to act sooner rather than later. For example, take the sale of EVs, which have been doing particularly well in Norway:
"Yet clean energy has merely slowed down the growth of fossil fuel demand, and hasn't yet led to substantial decrease in oil consumption in most countries. … Consider what's happening in Norway, where 65% of all vehicles sold in 2021 were electric and yet oil demand has fallen less than 10% since 2013. Plus, there's rising demand from developing countries that need more energy to fuel growing economies."
In illustrating the point, this chart caught my attention. It demonstrates the fungible nature of oil but, to me, it signifies a more serious problem. In essence, the chart suggests that, in spite of the rapid increase in EV sales, oil consumption remains relatively stable:
If these data are correct, and play out across all nations, then we are in bigger trouble than I thought. I have long thought there are three categories of actions we are taking in response to climate change:
- Complete deception
- Well-intentioned, but ineffective
- Making a difference
I had been filing the rise of EVs under the 'making a difference' heading (which was the smallest bucket of the three). If it turns out that EVs should really be housed under category 2, then the number 3 bucket becomes even lighter. And none of that, of course, includes all the rare earths and other materials that are going into making the batteries that make EVs much more environmentally intensive straight off the lot (see Strategic CSR – EVs).
Take care
David
David Chandler
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Why $100 a Barrel Oil Could Be Bad for the Energy Transition
By Akshat Rathi and Will Mathis
March 2, 2022
Bloomberg
