“I’m not going to sugarcoat how hard transitions are,” new United States Energy Secretary Jennifer Granholm stated on Wednesday. Her comment, made during IHS Markit’s annual CERAWeek conference, was in reference to the clean energy transition that serves as one of the cornerstones of President Biden’s platform, but she could just as easily be talking, in grander terms, about the administrative changeover that she is part of. The new presidential administration has hit the ground running on climate change, with a demonstrative focus on bringing the United States up to speed with the rest of the developed world in terms of leaning into the global green energy transition. While this proactive approach has been lauded as essential and far overdue in some circles, it also has its fair share of critics. Biden’s relatively tough stance on the United States’ massive shale oil and gas industry has stirred up a groundswell of anxiety in many parts of the country that depend on fossil fuel to keep their economies running.
This anxiety is well-founded. Shale country has already had a serious taste of peak oil this year and the effects have been devastating. After the West Texas Intermediate crude benchmark hit historic lows in 2020, plunging past its previous rock-bottom and way below zero to end April 20th, 2020 at nearly $40 below zero per barrel, shocks were felt all across the Permian Basin. Entire small towns dried up and blew away like so many tumbleweeds across Texas without the heretofore seemingly infallible momentum of the oil and gas economy to keep them going.
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Now, just when oil prices are stabilizing and the shale industry is adjusting to the new normal, the last thing those dependent on the fossil fuel sector want is more adversity. But for Granholm, this view--that the Biden administration is leaving oil and gas workers behind--is a shortsighted one. Instead, she says that oil and gas companies should be jumping at the chance to grow and innovate to stay relevant in the new, increasingly decarbonized global economy. It’s not the Biden administration that’s leaving oil and gas workers behind, the thinking goes--it’s stubborn oil and gas execs. “The bottom line is this particular growth of clean energy and reduction of carbon provides a huge opportunity and I’m extending a hand of partnership,” Granholm said at the CERAWeek conference on Wednesday.
She has a point. Around the world, global leaders are getting serious about climate change and curbing greenhouse gas emissions. According to data gathered by the world’s premier authority on global warming, The Intergovernmental Panel on Climate Change (IPCC), we have just one decade left to change course and avoid the worst effects of climate change. Right now, we’re on a collision course, but world leaders as well as private sector head honchos are lining up to change that.
In Europe, Big Oil is already well into its transition to becoming Big Energy. Even China is getting serious about cutting its carbon footprint. The environmental, social, and governance (ESG) investment trend has gone mainstream, and some experts say that peak oil is already upon us.
It would be both naive and misguided to suggest that the world no longer runs on fossil fuels--it does, and will continue to do so for years to come. If, for some reason, the world were cut off from fossil fuels overnight, the results would be catastrophic. But the heyday of oil and gas has come and gone, and the future will reward those who have adapted to a decarbonizing economy.
Critics are correct to point out that telling fossil fuel workers to get jobs building solar panels is overly simplistic and deaf to the needs and struggles of this huge and imperiled workforce. But the real point is that those jobs are evaporating like it or not, with or without the Biden administration. Yes, the timeline will likely be shortened by current presidential priorities, and the seriousness of these prospects for oil- and coal-town economies can’t and shouldn’t be overstated, but in the long term, the outcome is the same. It’s time to adapt--or get edged out by another country that had no qualms about setting aside their allegiance to oil.
By Haley Zaremba for Oilprice.com
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