OWOE Staff: The energy world has been rocked by a number of crucial events during the past two months. In the transition to renewable energy and more particularly in the removal of fossil fuels form the energy mix, there are possibly three history-making game changers: Don’t get me wrong – I have nothing against environmental activists who are trying to save our planet. In principle, I support most of the stated goals of these individuals and organizations, and of all the people I greatly admire, Greta Thunberg could well be at the top of my list. But the recent focus of these activists on shutting down big oil, closing nuclear power plants, blocking new pipelines, banning plastic straws, etc., is misguided. Yes, all of these are contributors to global warming and other forms of pollution, and yes, the world would be better off without all of them. However, the problem is that these things represent the supply side of the economic marketplace. They are there because people want them, either directly – we want gas to drive our cars, or indirectly – we want to buy lots and lots of stuff that takes energy to manufacture and transport. Cutting supply does not solve the problem if the demand remains: cleverer or less scrupulous players will gladly jump in to fill the void. And, at the end of the day, all of us will likely be worse off.

We are seeing many examples of how supply side restriction in the world of energy lead to very negative unintended consequences (See OWOE Blog: The Cobra Effect). US oil production fell during the pandemic as shale oil producers cut back operations or went bankrupt. Now that the economy is roaring back, there isn’t enough supply, and prices are rising. The result: President Biden has asked OPEC to supply more oil. So, instead of paying US companies to produce the oil that people want and still need, we are sending our money to Saudi Arabia.

Germany had been proceeding with its plans to shut down all nuclear plants, but without a well-thought-out path on how to replace all that green power. Further, Germany supported Russia’s plans to build the Nordstream pipeline to bring gas to Europe. With energy demand rising and lack of domestic supply, the result is that Germany and Europe are now held hostage by Russia.

Recently, a report has been released that ranks Canada as one of the worst emitters on the planet on a per capita basis. How can that be for a country that get about 30% of its energy needs from hydropower? The answer is that Canada’s carbon footprint is not driven by internal energy needs, but by emissions associated with the extraction and refining of fossil fuels for export. I would advocate that a country shouldn’t be penalized for what it provides to other countries. If Canada shuts down, the importing countries will just get what they want from somewhere else, the planet is no better off, and wealth has left Canada for OPEC or Russia (as predicted in the OWOE blog: Time for a New Energy Policy).

We can look at non-energy for guidance in how not to solve a public health problem. In the 1920’s the US experimented with prohibition to eliminate alcohol use. It prohibited manufacture, transport and sales of alcohol, but people were intent on drinking and found ways to get around the law. Result: it was a failure and prohibition ended in 1933. In 1971 President Nixon started the War on Drugs, and it is estimated that over the course of 50 years the US has spent over $1 trillion on the effort with no fundamental impact except the incarceration of tens of millions of American. By all measures: another major failure. In contrast, we can turn to cigarette smoking as an example of an effective campaign to address a public health issue. In the 1960s medical health professionals realized that smoking was a serious issue and began a broad public health campaign to eliminate smoking. It focused on changing people’s perception of the habit and behavior (i.e., the demand side of the equation) along with a focused and aggressive regulatory regime that dramatically raised the cost of smoking (also demand focused). Figure 1 shows the impact over a similar 50-year period to the War on Drugs.

Why can’t the same tactics be used successfully to reduce greenhouse gas emissions? Let’s make a major push on the demand side of the equation: implement a significant carbon tax and other taxes that reward the right behavior, focus on energy efficiency, invest in renewable energy, rein in the utilities so that their financial objectives align with world needs, regulate the oil and gas industry to eliminate fugitive methane emissions, stop the political bickering that is driven by individuals and organizations that choose to ignore the science of climate change for personal benefit, and create a public service campaign that helps all Americans understand the benefits of such plans.

And then let the suppliers battle on an even playing ground for the remaining, and ever shrinking, market.

Guest blog by S. A. Shelley: Earlier this year, the Colonial Pipeline, carrying gasoline and jet fuel from Houston to the southeast US was hacked.  The perpetrators got away with 75 bitcoins, at the time worth just under $5 million US.  Nobody really hurt, so no harm, right?

Guest blog by S. A. Shelley: September 2021 has been an interesting month as energy supply crunches of all forms appeared all over the world. China is suffering from rolling power outages that are affecting residents and industry and the authoritarian government there has ordered traders and industry to secure as many energy supplies as quickly as possible. In Europe prices for electrical power and natural gas are climbing to record highs and in the UK petrol stations are running out of petrol to sell to consumers. Pressure on energy prices is starting to manifest itself in the United States as well, with California already experiencing an increasing number of rolling brownouts, sorry “flex alerts“.  Traders are starting to buy options on future contracts for oil at $200 / bbl. They are not far off, with natural gas prices in Europe in terms of energy equivalent at $140 / bbl (see note 1).

Guest blog by S. A. Shelley: At OWOE we try to be objective in our analysis and evaluations of energy matters. But we can’t always be emotionless, or in my case, I can’t always refrain from smacking my forehead when politicians do questionable things: I’ve been near comatose for the last few weeks on account of the politicians.

Guest blog by S. A. Shelley: I know that this is supposed to be an energy blog, but for quite some time energy has become entangled with the environment, and rightly so because energy extraction and energy use affect the environment.

Guest blog by S. A. Shelley: Most readers have probably heard of the Law of Unintended Consequences, the more good that one intends then the more harm results (see also the Cobra Effect). Politicians have an intrinsic ability to apply this without fail. Then to make everything worse, there is Pournelle’s Law of Iron Bureaucracy, ensuring that even the slightest of good intentions are inevitably smashed by the insufferable protocols of bureaucracy. Such is the realm of politicians. But in the information age, the woke minority and sometimes business tycoons also suffer from these laws. Business tycoons can correct for such things, otherwise they go bust. Woke progs will often ignore reason and facts, those remnants of patriarchal suppression, in order to validate horrific outcomes. Eventually, though, the smoldering landscape or the increasing number of coal plants being built in Asia should overwhelm Woke feelings.  Unfortunately, politicians and governments are with us for as long as their privilege and pensions last and they rarely admit mistakes let alone mitigate or fix them.

OWOE Staff:The energy world has been rocked by a number of crucial events during the past two months. In the transition to renewable energy and more particularly in the removal of fossil fuels form the energy mix, there are possibly three history-making game changers:

1. The International Energy Agency (IEA) came out with its report on the state of the climate, and it was brutal toward fossil fuels. It laid out the reality of the current climate crisis and pointed to one clear action required to prevent catastrophic global warming: “The world has a choice – stop developing new oil, gas and coal fields today or face a dangerous rise in global temperatures.” It is important to point out that the report didn’t call for the immediate elimination of fossil fuels as energy sources. The IEA understands the need for some transition period to a fossil-free future. But the transition needs to be speedy, and the IEA feels that the best way to do this is to stop all new developments, live off the current reserves, and use that time to develop the technologies, change behavior and make the transition.
2. President Joe Biden issued his sweeping climate goal to cut US emissions in half by 2030 ahead of convening an historic summit with 40 world leaders to demonstrate American leadership in the quest to elimination of fossil fuels by 2050.
3. ExxonMobil, Royal Dutch Shell, and Chevron were rebuked by shareholders and the courts for not aligning their strategies with the threat of climate change. 

Guest blog by S. A. Shelley: For several years, Bitcoins and similar digital currencies have been the rage, heralded as a true medium of exchange and value that is independent of government manipulation, as is seen with all fiat currencies. However, Bitcoins in particular have also generated rage amongst environmentalists because the energy consumption and carbon emissions required to support Bitcoins approach the total annual consumption of states like New York or exceed the total energy consumption of nation states like the Netherlands or Argentina.

Guest Blog by S. A. Shelley: Pipeline politics have come to dominate energy discussions domestically and internationally. Probably the most well-known of these are the Nordstream 2 Pipeline in the Baltic to bring Russian Gas to Germany and of course the Keystone XL Pipeline which would have brought more Canadian Heavy Oil to American Refineries. Believe it or not, pipelines can bring benefits. For Nordstream 2 it will bring Russia a new vassal state. Keystone XL, had billions in money set aside to utilize renewable power and hire unionized workers; It would have been the world’s first “net-zero” pipeline and probably the world’s first equity built pipeline. Unfortunately, for both pipelines the tactical thinking won out over the strategic benefit.

Guest blog by Mr. R. U. Cirius: Here are some interesting and somewhat offbeat energy stories that haven’t gotten much media attention that OWOE readers might have missed.