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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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A Successful Energy Transition Will Need Oil Demand Destruction

  • The global energy transition away from fossil fuels and towards low-emission energy sources appears to be a primary target for a majority of nations
  • Unfortunately, these nations are reluctant to acknowledge that a successful energy transition will require a significant reduction in demand 
  • Reducing energy demand without sparking major riots or reducing the standard of living of their citizens continues to be a problem for governments

There’s a dark secret about the energy transition that politicians and energy regulators all too frequently shy away from. Unfortunately, unless this issue is dealt with the energy transition may never take place.

The world consumes ever-growing amounts of energy as its total population increases, led by emerging markets that, in addition to strong population growth, are seeing an increase in the average wealth of their citizens. Any increase in wealth leads to more consumption of everything, energy included. And if countries are distracted by climate change discussions and rush into emission targets and renewable capacity, a shortage of energy supply follows.

This is what we are currently witnessing in Europe and Asia. Stringent carbon dioxide emission regulations and a campaign to discourage investment in fossil fuel development in Europe have increased the continent’s heavy dependence on imported energy despite ambitions to increase self-sufficiency in energy by building massive wind and solar power capacity.

Meanwhile, in Asia, economies were getting back on their feet after pandemic-prompted lockdowns and energy consumption surged. Suddenly, there was too much demand and too little gas, coal, and even oil. And while oil supply could be boosted relatively quickly because OPEC+ has been holding back supply, gas and coal have turned out to be trickier because of things like underinvestment and plant closures.

Related: WTI Crude Oil Price Hits 7-Year High

Despite the underinvestment, the cold shoulder of asset managers, the environmentalist protests, and the denunciation of natural gas as a bridge fuel between the fossil fuel era and the post-fossil fuel era, demand for these - demand for energy of any kind as long as it’s reliable - has been on the rise. And this is what needs to change if the Paris Agreement agenda is to be met.

A group of UK researchers put it bluntly last year. In a report calling for not net-zero but absolute zero, they suggested that “We need to switch to using electricity as our only form of energy and if we continue today’s impressive rates of growth in non-emitting generation, we’ll only have to cut our use of energy to 60% of today’s levels.”

An energy consumption cut of “only” 40 percent would be quite a feat. The authors of the above report proposed things like switching to heat pumps and smaller cars among the things people can do to affect this particular change, along with using public transport more and buying more efficient equipment.

Let’s forget for a moment the concept of planned obsolescence, which makes some of the proposals impossible to put into practice, and focus on the whole idea of reducing energy consumption. There is a reason this idea is not among the most popular energy transition topics among those in charge of decision-making. No politician has ever won elections by telling voters to consume less of anything. The reason no politician has done this is that telling people they should consume less of anything causes anxiety and fear, and ultimately loses elections.

Yet as the current situation with energy availability in Europe and Asia shows, unless we somehow kill demand for energy the chances of the energy transition succeeding are slim. Human history is a clear example that, without state intervention, the trend is always towards growing consumption - except during recessions, when we tighten our belts, only to loosen them again as soon as the economy starts looking up.

Related: Gas Prices In Europe Are Now The Equivalent Of $205 Oil

What’s more, there are already hundreds of millions of people without access to electricity. A lot of transition talk has been focused on getting clean, affordable power to these hundreds of millions of people, and yet little has been done because it is simply unprofitable. And more millions are coming.

There has been a concerted effort on the part of politicians and institutions to present the energy transition as a straightforward no-brainer. We simply replace dirty oil, coal, and gas power plants with solar and wind farms, and voila, we get clean and affordable power. As Britain’s PM Boris Johnson put it, it’s easy to be green. Only it’s not.

Being truly green would require, in addition to massive investments in utility-scale renewable installations and storage, a substantial reduction in energy demand. Whether this would mean giving up cars and dryers in favor of bicycles and natural drying in the sun and wind - and whether this would be enough - is yet unclear.

For now, the idea is to switch to electric cars rather than shun personal transportation as a whole. And there is already opposition to the mandatory phasing out of ICE vehicles in parts of Europe. Remember the yellow vest protests in France? They were ignited by a proposal to increase fuel taxes for environmental purposes. That was perhaps supposed to sap demand for fuel but instead led to quite violent protests.

Energy demand destruction is the only way the energy transition would work. And yet, it is the one thing no one wants to do, not directly, at least, because it could be dangerous. 

By Irina Slav for Oilprice.com

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Leave a comment
  • Jason on October 11 2021 said:
    Energy demand destruction is a dead letter. I can’t believe you went there. Only totalitarians want that and the rest of us hate them.
  • DoRight Deikins on October 12 2021 said:
    You're getting close, Irina. Sounds like we're heading for government control of our lives, for our best interest, of course. Now it can be far better than the old slogan, For the Good of the People. Yep, now it's For the Good of the World. Don't know if you have done much reading of Solzhenitsyn, Pasternak, or Orwell, but they would find much that would be familiar in the way we are heading. Nikita Khrushchev would be interested in how the shelves of the world are going to look like the shelves of Eastern Europe in the 70s and 80s.

    I think that people forget that the idea of socialist governments is not to serve the people, no matter what they say. It is to stay in power and to continue to garner more power and control, because they know what's better for all of us than we do.

    But wait, hasn't China successfully melded state-control to give their people a better living. Hmm, I would argue that the only reason they have been reasonably successful is because they are able to live off of the surfeit of riches of America and perhaps Europe to support their manufacturing juggernaut. If America and the rest of the world stopped buying because their standard of living has dropped 40, 50, 90%, I believe China would quickly revert to the socialist endgame, that is nothing for all (except for the Party).

    One final thought, I think that most people don't mind others giving up their standard of living as long as they can keep their own.
  • Walter Haugen on October 12 2021 said:
    I have been advocating for economic contraction for over 50 years and of course it is futile. I also gave up having children in 1970 for environmental reasons and it has been a losing battle trying to convince people to limit family size. So here we are. Currently economic contraction has morphed into "degrowth," which I regard as a ridiculous term, but there is some momentum building. The best efforts for contraction are actually the lockdowns imposed by world leaders as a response to Covid. Of course Johnson, Macron, Merkel, Ardern and the rest don't realize what they are doing but the die is cast. Learn how to get by with half of your current energy consumption and you will be ahead of the game
  • One Second on October 12 2021 said:
    The author is conflating different things. There will be a huge primary energy demand destruction simply because of the switch to much more efficient technologies like electric cars, heat pumps. LEDs, new refrigeration and cooling technologies without any detrimental effect on the living standard, in fact the living standard will only improve with these new technologies.
    There will be huge increase in electricity demand however, but this can and will be met easily with renewables and storage. Green growth is a thing and there is no need for belt tightening whatsoever. The amount of energy that the sun sends toward the earth every day is astounding and many, many times more than the world could ever need for simply the consumption of today's luxury goods and services for all people on earth.
  • Mamdouh Salameh on October 12 2021 said:
    Europe’s energy crisis which has spread to the Asia-Pacific region and the world at large is a foretaste of what could happen when global energy transition is pushed forward at the expense of fossil fuels. This is what I call the dilemma facing proponents of energy transition.

    Unfortunately, they live in a realm of fantasy. This isn’t going to happen. The notions of energy transition to replace fossil fuels and net-zero emissions are myths. Furthermore, renewables on their own aren’t capable of satisfying the global demand for energy and electricity.

    While a level of transition will continue to take place, fossil fuels are here to stay well into the future until they are replaced by more efficient and practicable alternatives. This isn’t going to happen in the next 100 years.

    Environmental activists and divestment campaigners would rather see a collapse of the global economy and civilization as we know and cherish for the sake of achieving their dogmatic views on energy transition and climate change. They live in a world of fantasy and self-delusion.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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