Since the global economy has cratered under the COVID-19 pandemic, demand for oil has plummeted worldwide. From an average daily demand of close to 100 million barrels, consumption has fallen to about 80 million barrels per day at present. The Energy Information Administration doesn’t expect oil demand to return to last year’s level until the end of 2021 — at the earliest.
In response, drilling activity in the U.S. and abroad has dropped dramatically, leading to tens of thousands of layoffs, a rising number of bankruptcies, and fiscal problems for many American states and oil-producing countries. Though these disruptions are causing pain for millions of people, many environmentalists are hailing the energy debacle as a godsend that will accelerate the end of the carbon era and the environmental degradation that they claim has accompanied the use of fossil fuels.
Perhaps surprisingly, pushback against fossil fuels and related infrastructure has continued apace during the pandemic. For example, in the face of lockdowns, anti-pipeline activists in Canada and the U.S. have taken their protests online. Opponents of the Trans Mountain pipeline in western Canada are using phone blitzes and social media to deliver their message while, south of the border, opponents of the Keystone XL pipeline are doing the same. Once social distancing measures are relaxed, groups fighting pipelines, export terminals and other oil and gas-related projects promise to be “back on the streets.”
The Green New Deal also has witnessed a second coming in recent weeks. The 2009 stimulus bill, passed in response to the global financial meltdown, included $90 billion for green energy programs. The $2.2 trillion relief package signed by President TrumpDonald TrumpJan. 6 panel faces double-edged sword with Alex Jones, Roger Stone Trump goes after Woodward, Costa over China Republicans seem set to win the midterms — unless they defeat themselves MORE in March did not specify funding for green energy, but Democrats and some Republicans are pushing for a large chunk of green energy spending in the next stimulus package, likely to be enacted by the end of June. At the same time, presumptive Democratic presidential nominee Joe BidenJoe BidenSouth Africa health minister calls travel bans over new COVID variant 'unjustified' Biden attends tree lighting ceremony after day out in Nantucket Senior US diplomat visiting Southeast Asia to 'reaffirm' relations MORE has appointed Rep. Alexandria Ocasio-CortezAlexandria Ocasio-CortezGreene: McCarthy 'doesn't have the full support to be Speaker' Omar calls out Boebert over anti-Muslim remarks, denies Capitol incident took place Five reasons for Biden, GOP to be thankful this season MORE (D-N.Y.), one of the authors of the Green New Deal, to his energy advisory panel.
One of the goals of the Green New Deal is to largely wean ourselves off fossil fuels within a decade and rely almost exclusively on renewable energy sources such as wind, solar, battery storage and hydropower for electricity generation. To do so would require trillions of dollars in new investment, and we’d still need natural gas-fired plants as backup to ensure reliability when wind and solar are off the grid.
Another Green New Deal objective is to move rapidly toward an electric vehicle fleet. However as long as gasoline remains inexpensive, plug-ins are unlikely to grow significantly, regardless of government subsidies. A recent study by the International Energy Agency predicts only 330 million electric cars on the world’s roads in 2040, about 16 percent of all passenger vehicles. That would only reduce oil demand by 4 millions barrels a day, or 4 percent of last year’s consumption.
Heavy over-the-road trucks, airplanes and large seagoing vessels will continue to be powered by oil and natural gas for the foreseeable future. And there are no ready substitutes for the thousands of products, ranging from asphalt to pharmaceuticals, which are derived from petrochemicals.
Energy and environmental policies should be based on reality, not ideology. Here are some facts: According to the Rhodium Group, an independent international consultancy, carbon emissions in the U.S. fell 2.1 percent last year and are 14 percent lower today than they were in 2005, while data from the Bureau of Economic Analysis show real GDP increasing 28 percent between 2005 and 2019.
Methane releases from oil and gas production have dropped markedly in recent years, and the Oil and Gas Climate Initiative has announced a goal of reducing methane intensity from 9 percent to 0.25 percent by 2025. Growing American exports of liquefied natural gas are helping to lower global CO2 emissions as countries around the world substitute gas for coal in power generation.
America’s legacy of cheap and abundant energy, so critical to sustaining our economic growth, has been put to the test as COVID-19 has decimated the oil and gas industry. What’s needed now, with a presidential election in sight, is an examination of America’s energy future that acknowledges the growing importance of renewables but relies primarily on market forces, not public policy interventions, to determine energy choices.
Bernard L. Weinstein is associate director of the Maguire Energy Institute and adjunct professor of business economics in the Cox School of Business at Southern Methodist University.