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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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Conspiracy Or Incompetence? Why Fossil Fuels Are Flying

  • Despite the fact that the current administration in Washington and the most powerful figures within the EU are attempting to switch away from fossil fuels, oil, natural gas, and coal use are soaring.
  • The European Commission claims that it will not turn away from its energy transition priorities and will continue to invest heavily in cleaner energy sources.
  • The success of fossil fuels in 2021 is not due to an elaborate conspiracy, instead, it is due to poor planning and the unassailable fact that alternative energy source are not yet efficient enough or cheap enough to take over.

U.S. coal use is on track to jump 23 percent this year, for the first time since 2013. European utilities are switching from gas to coal because of the former’s soaring prices. And Brent crude just passed $84 per barrel. 

At the helm in Washington is Joe Biden, a president who came into office with a pledge to reduce American energy dependence on fossil fuels. At the helm in the EU are people equally dedicated to phasing out oil, gas, and coal, and replace them with low-carbon alternatives. Yet, it seems fossil fuels have been the only winners from their energy transition efforts.

In a world where conspiracy theories are becoming increasingly popular, someone somewhere must have already started suspecting Big Oil’s influence. After all, a couple of years ago, a U.S. House committee accused Russia of inciting the protests against the Dakota Access pipeline “to suppress the research and development of fossil fuels and stymie efforts to expand the use of natural gas,” per a Fortune report.

Last week, Bloomberg’s Will Wade reported that during Trump’s term in office, coal consumption by utilities in the U.S. had fallen by 36 percent despite all of Trump’s efforts to boost the sector. Now, under the fossil fuel opposing Biden, the decline has reversed to a 23-percent jump in consumption. And that’s in the United States which, until recently, was the biggest producer of gas in the world.

It’s true that U.S. natural gas exports have been growing at breakneck speed this year. Yet the country’s export capacity is still limited, so most of the gas produced locally remains to be used locally. The EIA said this week that gas exports have been rising faster than gas production, so prices were likely to remain high this winter, but, again, there is only so much LNG you can export with existing capacity.

Meanwhile, in Europe, the situation with gas prices has gotten so bad that utilities are finding it more affordable to switch to coal and pay for the higher emissions than stay with gas, which emits less. In other words, the frontrunner in the energy transition race, the EU, is on track to emit more this year amid its emission-reduction efforts because it is finding itself still addicted to fossil fuels.

This is not to say that the energy transition camp will veer off course, and this, in a world where conspiracy theories were true, would have been suspicious. The European Commission this week released what it calls a toolbox to tackle the “exceptional situation” with energy prices.

Among the measures envisaged in the toolbox, the EC has included aid to energy-poor households, tax cuts, and help for industrial users. The focus, however, is on sticking to the transition priorities or, as the EC puts it, “Our long-term transition and investments in cleaner energy sources should not be disrupted.”

“The clean energy transition is the best insurance against price shocks in the future, and needs to be accelerated,” the document goes on to say. “The EU will continue to develop an efficient energy system with high share of renewable energy.”

All this comes after lower wind speeds for much of the year dramatically reduced the actual share of wind power in parts of Europe, contributing to the energy shortage amid growing demand. Solar doesn’t do particularly well in the autumn and winter by definition, too, which increases reliance on fossil fuels. And yet, the EC proposes acceleration rather than a reconsideration of the energy transition in its current form and increased reliance on both wind and solar.

If this was a movie, it would end with the clever protagonist uncovering an elaborate plot devised by Big Oil to boost its profits by first building our reliance on unreliable energy sources and then cunningly reducing the availability of the reliable ones - fossil fuels - to push prices higher.

However, this is not a movie, and Big Oil has been forced to rethink its own priorities with a view to staying relevant in a low-carbon world. The supermajors are spending billions on renewable energy projects, although to many, it is still too little, too late. Yet the industry will still reap the benefits of the energy crisis that has gone from regional to global in less than a month.

One could argue that this is an energy version of a dead cat bounce and the long-term outlook for fossil fuels remains bearish. However, with the EC and Washington still unable to influence wind speeds and the Earth’s spin around the Sun, chances are even the long-term outlook for fossil fuels is brighter than many might expect. Unless, of course, we manage to slash global energy demand by a sizeable chunk in short order. But that’s another conspiracy theory entirely.

By Irina Slav for Oilprice.com

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Leave a comment
  • George Doolittle on October 18 2021 said:
    Well...just go ask El Salvador how much they love ahem *their Bitcoin instead of US Dollars* and you will find your answer.
  • Lee James on October 19 2021 said:
    "Conspiracy" is for sure a watchword for our times, given very extreme views of the day.

    So, what's really happening? Europe has known all along that it is walking the razor's edge by closing nuclear and coal plants and building out clean energy. How, I ask, could this have been seen as easy, without ups and downs?

    In the U.S., we are also building clean energy capability while dabbling in the so-called shale oil production miracle, using advanced technology. The question here is how well can technology keep up with the increasing scarcity of thinly dispersed oil, deep underground and underwater, that is very resource-intensive to bring in?

    Energy production cost is going up, and it it is not only because we are investing in expensive clean energy. Declining fossil resource intensity combined with heated, volatile geopolitics and undisciplined speculation in energy markets will ensure that the cost of a barrel of oil will remain high.

    There are many causes for the energy challenges we face. Reduced reliance on burning fossil fuel is now a given. The question is, what ALL are we going to do about our energy future? Conspiracy theories are the lazy way to think about it.
  • Mamdouh Salameh on October 19 2021 said:
    Fossil fuels are flying high because the global economy runs on them and also because of the inept policies used by major economies particularly the European Union (EU) to accelerate energy transition at the expense of fossil fuels.

    The global demand for fossil fuels is soaring because renewables are proving inadequate to satisfy electricity and other energy needs of the global economy.

    This means that the global demand for oil and gas will continue to rise well into the future fuelled by rising world population and growing global economy. This equally means that net-zero emissions will never be achieved by 2050 or 2100 or ever.

    The story of energy transition through the ages has been a constant move toward fuels that are more energy-dense and convenient to use than the fuels they replaced.

    That is why the world had moved away from whale oil as a source of energy to wood and then to coal and oil and natural gas in that progression. Until more energy-dense and more efficient and convenient energy alternatives are developed, the global economy will continue to run on oil and gas well into the future.

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

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