This appears to be an unprecedented time in modern history, where a handful of zealots can wield enough power to derail, well, pretty much whatever they want. Another important pipeline project is in jeopardy, in the US this time, for some vague and not credible historical reasons as well as the grave “concerns about water” that only pipeline foes seem to share.
President Obama is blocking a major pipeline out of the Bakken region after pressure from the usual coalition of fossil fuel haters and whomever they can convince to hang out with them. The presidential action is supposedly temporary, but witnesses to the Keystone XL debacle know how that ended. This smells the same. A few pumped up protesters, fueled by the righteous certainty that only militant fanatics seem able to feel, can now derail pretty much any project they choose. It is now obvious to any enthusiastic idealist that fossil fuel development can be stopped by chaining one’s self to a highly dangerous valve.
There is no point in raging about this particular development; that is the way the world is now. Little can be built because someone somewhere is inconvenienced, and the drama created by any given protest causes politicians to cave; blocking any one of these projects has no discernible negative impacts on the whole so it’s easier to avoid the fight.
Obama is catering to the theatrics because the protestors are acting in the name of the environment, which is a pulpit from which one can do or say anything without fear of repercussion. It’s too bad there is no foresight to envision the chain of events these blockades will precipitate.
The energy industry simply isn’t equipped to deal with these tactics. Energy companies go to unbelievable lengths to meet regulatory requirements and maintain safe operations, but do little to spell this all out for the public, believing the act of compliance is enough. It’s not, because any positive image is overridden by obsessive coverage of every incident in North America, no matter how minor. Yes, the BP Gulf of Mexico spill was terrible. Yes, the Enbridge Michigan spill was a sizeable mess. But since the summer of 2010 when those events happened, about 15 million barrels per day in North America, or 27 billion barrels in total, have moved from thousands of producing locations to market, under intense scrutiny, almost without incident. It is an incredible record of safe and environmentally friendly operations. But no one in the business is on the offensive in getting this message out.
That is in part because the business reacts to negative developments like NIMBY protesters simply by shifting capital. It won’t hurt business’ feelings if these projects can’t proceed (though it does hurt many honest working people); capital simply shifts elsewhere or exits the energy business. And that is a bomb that’s going to go off under the environmental movement, at some point, when they succeed at these tactics and the world unfolds in a manner they simply have no ability to mentally construct. Cumulatively, the damage caused by these little blockades could be remarkable.
First off, these acts of vandalism and mob rule will not stop fossil fuel use, which will continue as long as the price is not ridiculously high. The great price run-up of 2007-08 showed a point where demand actually stops growing and possibly recedes. But high prices encourage oil development everywhere, so the product will not stop flowing, and the accumulated oil-run infrastructure of the world will not stop for decades.
Green power will not replace oil in the short or even medium term as oil prices rise, no matter the fantasies of its proponents. It will certainly make inroads, and will no doubt continue to grow in significance over the coming decades. The timing of green development is actually working quite well for an eventual shift to green power in perhaps 20-40 years, when cheap petroleum supplies are exhausted.
But choking off the oil supply from the few regions in the world with open and top-notch environmental standards is stupid beyond belief. Oil production will continue in closed economies around the world where standards are completely unobservable. As an example, oil spills are meticulously documented in Canada, which produces 4 million barrels per day, or the US, which produces 9 million barrels per day. What was the largest oil spill in Russia, which produces 10 million b/d? Saudi Arabia, also 10 million? Venezuela? China? There are estimates of spills in some global jurisdictions but these only come to light if the spills are in international waters or under the watch of international oil companies that must maintain open reporting (one study of 113 major spills in the former Soviet Union notes that “The 113 recorded accidents are widely thought to represent only a fraction of the total number of spills that have actually occurred”).
This isn’t rocket science; it takes no intelligence at all to see that choking oil production in Canada and the US will serve almost no purpose on the global scene. Well that’s not true, it will serve several purposes, either of which should cause protesters to switch their brains on at least momentarily.
First, oil production, if throttled in North America, will simply pick up in regions with little or no environmental standards. That is unstoppable; the hundreds of millions of cars on the road globally will by themselves keep demand high for decades. There are of course many other industries including basic industrial transportation that require cheap fossil fuels as well; that is what gets bananas to northern mouths, moves cheap clothing from China to the world, and fuels planes that move environmental documentary producers steadily around the globe. So oil demand will not go away, and production will shift to places with the least environmental hurdles, where protesters don’t enjoy the same liberties (to put it mildly).
Second, choking off North American oil production will drive up global prices for energy, and 7 billion people cannot survive on expensive energy. We can enthusiastically explain to them how to switch to green power, as long as we don’t mind watching them starve or freeze to death in the transition period because it can’t happen overnight. What will happen is that, if oil prices get prohibitively high, fuel will be sourced the way it has been for hundreds of years – by burning stuff. Wood and coal are the obvious choices; the transition time to implement those technologies is about 15 minutes with a sharp axe and 30 with a dull one. Coal will return in a big way on the smallest of scales; coal requires little processing compared to any other form of fuel and can solve the rather urgent problem of staying warm or cooking food quite quickly.
We can’t see these global realities because we are mesmerized by headlines about storage levels at Cushing, Oklahoma or rig counts or pipeline protests in North Dakota. These are, globally speaking, nothing. But pipeline protests have now been proven simple and effective, and like an invasive species, the tactics will soon spread to every corner of the earth (wherever protesters aren’t thrown in jail, anyway). And just as a glut of several million barrels per day caused prices to crash, a deficit of that magnitude would have a similar effect the other way.
To convert the world to green power by blocking pipeline construction is about as misguided an endeavor as can be imagined. There is no thought whatsoever behind it; like most extremists, emotion is trumping common sense. The law of unintended consequences is going to bite back hard, but it’s difficult to see how it can be stopped.
Where does that leave the energy business? The options aren’t great; the PR war is being won by professional social media ‘ninja’s’ who are masters at swaying public opinion, while the oil patch stands there in grey suits with a handful of facts no one could care less about. I have no clue how this ends, but it’s painful to watch.
Read more insightful analysis from Terry Etam here