LONDON – The oil and gas industry remains one of the world’s biggest and most complex. Yet it is also now becoming one of the world’s shakiest.
But before the champions of green energy raise too loud a cheer, waving happily goodbye to hydrocarbons and their dangerous emissions, they should pause to look at the dangers, as well as the undoubted longer-term gains.
A sudden demise of the oil giants, both the still vast international oil and gas companies and the even bigger national oil giants, would have devastating consequences for world financial stability, for billions still depending on cheap energy (almost 40 percent of humanity) and of course for geopolitics generally.
Nations could collapse into deprivation and violence. World power could shift even more dangerously than it has already. The great world energy transformation, which so many desire, could turn out to be anything but a free ride.
Indeed, the International Panel on Climate Change (IPCC) has now estimated that the cost of changing the world energy supply pattern sufficiently, and speedily enough, to save us from serious climate damage will be some $3.3 trillion annually — a guess of course and a figure that hides under it a truly enormous diversion of resources from existing uses, a lot of shorter-term human suffering and almost certainly the outbreak of struggle and violence on a scale threatening aspects of civilization itself.
For example, the IPCC says that to curb emissions to safe levels — well beyond those promised (but not always delivered) by the 193 nations in the Paris agreement three years ago — big sections of energy supply in India, China, Indonesia and the United States (still the highest carbon dioxide emitter per head) would have to close down now.
Whole sectors of human activity, such as farming and agriculture, would be sent reeling as populations respond to the panel’s injunction immediately to cut down eating meat and diary products. Countryside landscapes would return either to re-afforestation (not so bad) or to wilderness.
Those dedicated to fighting global warming might reply that such disruption and suffering is the price to be paid and that it is small compared with the horrors of an overheated world, with whole regions reduced to desert, islands and coastal cities drowned and the entire future of the planet, and the human race, in jeopardy.
But for the oil and gas industry, and its investors, this polarized picture of the future presents a head-splitting dilemma. If the industry is to produce by 2030 or 2040, the oil, gas and coal as well — which realistic estimates suggest will still be needed — then massive new investment in exploration, development and distribution of hydrocarbons should be going ahead right now, a decade in advance. Almost no other industry has to plan so far ahead or so badly needs some degree of certainty.
But if the policy-setting world is to respond seriously to the IPCC doomsters (all of whom are expert scientists of integrity, despite getting a bad-mouthing from U.S. President Donald Trump) then oil and gas demand will — and must — have shrivelled by then.
So what do these hitherto mighty enterprises, and oil-rich nations, do?
A saving grace for some oil producers may be that petrochemicals are as big a driver of oil demand as burning their product in power stations or motor vehicles. And from petrochemicals flow not only plastics (bad) but also a thousand vital products in areas such as medical treatment, fertilizers and myriad basic home utensils.
Even so, if the oil companies now find themselves under confrontational attack from every side, with attempts to devalue (or strand) all their assets in the ground and investment from giants such as the Norway sovereign wealth fund drying up, we are going to see a prolonged struggle between the still enormous resources, innovative skills and technology of big oil and the equal determination, ardor and technologies of the green empire — a struggle that will delay all progress, disrupt world growth and development, and benefit none.
As usual in such wars it is the poor civilians who will be most harmed.
So this is surely a time when calm and moderate-minded thinkers should be coming forward with middle ways of cooperation, rather than allowing unending collision between the greens and the blacks, the empire of renewables and the empire of the hydrocarbons.
Fortunately there are signs that some of the best brains in today’s energy giant corporations and think-tanks are beginning to see things this way (although somewhat belatedly), and one hopes the same is true in policy circles and governments as well.
To quote from one source, “The low carbon and greener path lies not through the destruction of energy companies and their investing power, but through their innovation projects and their new investment programs, through the vigor with which they develop and commercialize new low carbon technologies.”
That comes from a year-old book titled “Energy Empire in Collision,” which I confess is by the author of this column. It is my plea for clash-free sanity in a world in which otherwise a great many people are going to get badly hurt — unnecessarily.
David Howell is a Conservative politician, journalist and economic consultant. He is chairman of the House of Lords International Relations Committee.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.