Environmentalists are terrified. Not that polar bears will soon go the way of the dodo or that melting ice caps will submerge Iceland in the near future (or is it Greenland?).
No, the green lobby is very, very concerned that the energy shortage sweeping the globe might cause public officials to think twice before chucking fossil fuels overboard.
That’s the gist of a recent Financial Times (FT) editorial that cautions: “Net zero goals cannot fall victim to energy crisis.”
Just because electricity prices are soaring, gasoline is in short supply, coal costs more than ever, China is suffering rolling blackouts and Vladimir PutinVladimir Vladimirovich PutinPutin's Russia is all we feared it would be Putin looking for guarantees NATO won't expand westward Blinken to meet with Russian, Ukrainian counterparts amid heightened tensions MORE has the EU begging for more natural gas, the FT hopes officials will not temper their war against hydrocarbons.
Natural gas prices today in Europe are up about 600 percent and roughly equivalent to $200 per barrel oil. The cost of electricity and natural gas and oil have risen so fast that France’s leaders have countered with subsidies to the poor and Italy and Spain’s governments are slapping price controls on energy, which will almost certainly make matters worse.
The FT understands that policymakers may have a problem. “The bigger political challenge…is to convince voters to back ambitious policy packages to deal with climate change…just as they are smarting from higher utility bills."
Yes, a doubling of electricity prices, such as recorded recently in the United Kingdom (UK), tends to dull climate anxieties.
Energy shortages are especially vexing to environmental warriors just now since the COP26 Climate Conference starts on Halloween. They so hope to see more governments commit to impossible emissions reductions, even if it means beggaring their voters.
Why are energy prices soaring? First, the wind inconveniently stopped blowing in the North Sea late this summer. The UK derives about one quarter of its power from wind turbines and recently saw those facilities operate at less than 5 percent of capacity.
That happens sometimes; this is not a first. Wind and solar power are by definition intermittent sources of energy and cannot be relied on today for steady power.
Because the wind was disappointing, Europe has had to increase its consumption of coal and natural gas, 90 percent of which is imported, to fill in the gaps. Storage of fuels was low coming out of last year’s chilly winter, which in this era of global warming was yet another unexpected development. Consequently, as nations raced to refill storage and bought gas to tide them through the becalmed fall, prices bounded higher.
The resulting surge in EU demand ran smack into another big increase in natural gas consumption coming from China. Last year, China punished Australia for daring to ask where COVID-19 originated by unofficially cutting off imports of coal from that nation. Given that Australia was China’s biggest coal source, the dispute led to a shortage of fuel and a sudden increase in natural gas burning and a spike in prices.
With natural gas now traded globally as LNG (liquified natural gas) exports have increased dramatically in recent years, energy markets are increasingly intertwined.
Meanwhile, President BidenJoe BidenBiden and Harris host 'family' Hanukkah celebration with more than 150 guests Symone Sanders to leave the White House at the end of the year Overnight Defense & National Security — Senate looks to break defense bill stalemate MORE has done his bit to boost energy prices by displaying hostility to the Gulf Arab nations, and in particular to OPEC leader Saudi Arabia.
Twice so far this year, including just days ago, OPEC has resisted calls to increase output to stem climbing prices. Twice the oil-producing group has continued to steadily ratchet up production, instead of opening the taps. That’s on Saudi Arabia.
Saudi Arabia is still the group’s principle “swing producer”; it can significantly raise or lower output to control prices. The Saudis are currently producing about 9.6 million barrels of oil per day, down from 11.8 million barrels in 2019; they have the ability to produce between 11 and 12 million barrels. Because the nation is rich, it also can drop output to prop up the oil market, as it did last year when energy demand and prices fell due to COVID-19.
In other words, despite the growth in U.S. oil output in recent years, the Saudis still run the show.
Biden has also worked to undermine U.S. oil and gas producers by limiting access to new acreage on federal lands and canceling the Keystone XL pipeline. Officials in states such as New York have also denied permits for new natural gas pipelines, in one of the most idiotic policy decisions in history. The United States, thanks to technology breakthroughs, has an almost unlimited supply of normally inexpensive natural gas, which most energy analysts consider the best “transition” fuel as the world increases its dependence on renewables. To block access to this comparatively clean fuel is absurd.
But no more absurd than the French overreacting to Japan’s Fukushima accident by shutting down its emissions-free nuclear power plants, which generated 75 percent of the nation’s electricity. Or Germany banning most fracking and choosing instead to rely heavily on Russian gas imports.
The Western world’s response to climate change has been poorly designed and aimed at pleasing activists instead of intelligently solving the problem. After all, as Biden's climate envoy John Kerry admitted, whatever the U.S. does on climate is not going to matter much. China’s emissions are greater than those of the U.S. and the entire developed world combined and, along with those of India and other developing nations, rising quickly. Any decrease in EU or U.S. carbon output is a relative drop in the bucket.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.