Addiction to crude puts America’s future at risk
The trick to making the world safe for democracy is not to drill for more oil and natural gas but to rely less on them.
When oil company CEOs say they could supply more energy if only the public, investors and governments stopped talking about the climate crisis, they are “talking their book.” Of course, they want to drill more; that’s what they and dictators empowered by oil and gas do.
They are like a drug dealer standing over an addict jonesing for a fix. “I’ve got what you need,” they say. “But you’ll have to do what I want.”
The U.S. oil and gas industry is using Russia’s invasion of Ukraine to wrap itself in the American flag. Its leaders promise the United States could be “energy independent” if only President Joe Biden would get out of the way.
As in all good marketing, there is an element of truth. But mostly, it’s spin thrown by a shrinking industry worried about its future. We should resist making long-term decisions based on short-range price forecasts and think about our future selves.
People around the globe are upset about higher gasoline and diesel prices, and rightfully so. Higher fuel prices raise the cost of everything. While the price hike so far is primarily from fuel traders worrying about the future, some real supply problems are beginning to emerge, and they are not going away even if the war ends.
“We are seeing Russian cargoes ostracized,” said Shikha Chaturvedi, head of global natural gas strategy at investment bank J.P. Morgan. “The self-sanctioning now is about 3 million barrels a day, and we see 2 million barrels in
April and about 1 million long term.”
$185 a barrel?
She spoke at a briefing organized by the Center for Energy Studies at Rice University’s Baker Institute to look at global energy markets. If more Russian barrels disappear either from boycotts or sanctions, prices could rise to $185 a barrel or more, triggering a global recession, Chaturvedi added.
Kristine Petrosyan, an oil analyst at the International Energy Agency, warned that her agency already expects the global economy to grow 1 percent less in 2022 than previously expected. Replacing lost Russian oil will not be easy.
“Any additional efforts will result in cost escalation, and additional pricing will be required,” she said.
Complicating matters further, Russia is one of the world’s largest diesel refiners and a significant exporter to Europe. Even if more oil is produced outside Russia, there is not enough spare refining capacity to make up for any losses of Russian diesel, Petrosyan added.
Throw in the shutdown at Ukrainian seaports, severe damage at a Black Sea terminal that exports most of Kazakhstan’s oil, and drone attacks on Saudi Arabian oil infrastructure by Yemeni rebels, and the world is facing energy market chaos.
Jim Krane, an energy expert at the Baker Institute, said U.S. allies in the Middle East have been surprisingly unhelpful.
“The U.S. is in open dispute with two of its friends,” he said. “Saudi Arabia and the UAE are actually favoring Russia.”
High prices and the political heat they generate at home allow the oil and gas industry to pressure regulators to suspend environmental rules or forsake proposals to slow climate change. Voters get less expensive gasoline now, but their grandchildren get searing hot temperatures.
Dunk a despot
“Countries could become so consumed by the immediate fossil fuel supply gap that they neglect or kneecap policies to cut fossil fuel use,” said Nigel Green, CEO of DeVere Group, one of the world’s largest independent asset management firms in London. “This is madness. Addiction to fossil fuels is mutually assured destruction.”
During the 1970s energy crisis, when gasoline prices hit an astronomical
$1.50 a gallon, Texas oilmen handed out bumper stickers that read “Drive 95 — Freeze a Yankee.”
Now we should “Give up Gas — Dunk a Despot.”
Most of the world’s known oil and gas reserves are controlled by repressive regimes in Russia, Saudi Arabia, Venezuela, Qatar, Iran, Kuwait and the United Arab Emirates. Dictators — or monarchs, as their apologists would say — dominate the global market for fossil fuels, and our addiction finances their oppression forces.
Drilling more of our own oil and gas won’t help much; these are global commodities. Besides, there’s not that much left.
“There’s only about a 10-year inventory of shale drilling locations left, maybe 15,” John Hess, CEO of Houston-based Hess Corp., told CERAWeek by S&P Global, the annual energy conference.
Our reliance on oil for transportation is not only bad for the climate; it’s bad for national security, a lesson we should have learned in the 1970s.
Weaning our society from oil and natural gas will take time, and no one claims it will be easy. But this energy crisis could be our last if we finally accept that energy independence requires us to get off oil once and for all.