Not everyone is like us, folks. Not like us Canadians, that is. Or even North Americans. Take one interesting example. Imagine a country where children are taught not to smile in school. Where beer wasn’t recognized as an alcoholic beverage until 2011. Where one region registered a voter turnout of 146 percent in a 2012 election. A country that spends $50 billion to host the Olympics, with a slogan of “Great, New, Open” then, within a month of the end of the games, invades and annexes part of a foreign country. A country that halts critical natural gas supplies to Europe during a bitter cold snap in the dead of winter to prove a point.
These colourful bullet points describe the one and only Russia, of course, and this isn’t necessarily a critique of the country; much is admirable about the place, it is interesting as hell, and, frankly, without Meanwhile in Russia the internet is useless.
Commercially though, Russia, or Russia with Putin at the helm anyway, is something else – a creature that should be dealt with as one would deal with a grizzly bear, but not just any grizzly bear; more like a very smart grizzly bear that knows where you live and what you keep in your fridge. One shudders to think of Canada playing on that international playground, of our ex-drama teacher Trudeau going toe-to-toe with ex-KGB Putin – a negotiating mismatch of epic proportions, like sending your teacup poodle to negotiate a peace treaty with a panther.
What does this have to do with anything? For starters, this fundamental miscalculation: the western world is racing to distance itself from hydrocarbon production, to starve oil and gas companies of capital, to thwart any development plans with regulatory/legal barrages, to shame producers into abandoning the process of providing the fuel that keeps the world alive. We get it, that many think CO2 from combusting hydrocarbons will kill us all. As a strategy, hobbling production might have some merit if the outcome was to reduce the world’s demand for hydrocarbons. It does nothing of the sort. Hydrocarbon consumption is almost exclusively dictated by price and availability. Consumption has rebounded remarkably quickly after the first large COVID-19 lockdown, and in fact, consumption did not fall as much as some had feared at all.
Looking at this whole mess from 35,000 feet, we see multinational oil companies announcing plans to slash investment and let production fall over the coming decades. We see the smaller end of the sector starved of capital, we see insurance companies being pressured not to insure hydrocarbon businesses, and generally, in small but are hugely influential circles, we see the hydrocarbon industry being viewed as a tobacco-smoking racist leper. The social media shaming machine is in top gear, and it’s working.
But the likes of Mr. Putin do not operate from a boardroom. He does not respond to ten thousand orchestrated screaming banshees on Twitter (unless they are banshees in his employ). He does not care one little bit for self-immolation.
No, what Mr. Putin is doing is announcing plans for hundreds of billions in new hydrocarbon development (specifically, per this article, over $200 billion for nine new arctic oil developments, among others). He is many things but not a fool, and he can see where all this is heading. While the west succumbs to mob rule and puts a pillow over the face of common sense, other parts of the world spend their days worrying about energy security. (And Russia is also studying ways to be a part of the burgeoning hydrogen economy as well, as a use for their huge natural gas resources.)
As such, this western obsession with crushing hydrocarbons is handing the future of the industry to the likes of Putin. If anyone thinks that’s a good idea, poll the Ukrainians who had their natural gas cut off that cold January a few years ago. This is geopolitical insanity the likes of which we haven’t seen since the famous 1938-ish British observation that went something like “I say old chap, don’t we have bigger things to worry about than that odd, angry little German?”
This isn’t to single out Russia/Putin as some sort of unique visionary; other large players in the energy world are tactically advancing as well in a way that most nations do, by playing the hand they’ve been dealt to best advantage. OPEC is showing solidarity after having finally damaged US shale in a meaningful way (before US shale could do it to itself – no one else seemed able to halt the “growth at any cost” mentality), and China is, well, China – one notch less cunning than Putin, but just as purposeful and ten times larger – and is actively securing all forms of energy, from coal to solar and everything in between. (A curious footnote here is the enthusiasm some activists have for China’s communistic ability to direct policy, which they selectively view as being revolutionarily pro-renewable, when in reality China is singularly pro feed-1.3 billion-people-so-they-don’t-riot. China does build huge solar farms, just as they build large coal-fired power plants, and just as they committed $20 billion to a coal-to-fabric scheme, which is in effect shouting through a bullhorn that their priorities are resoundingly related to the nation’s menu for next week and not to the globe’s temperature next century.)
The “consensus” is, in ruling circles, that we need to be net-zero by 2050 to save civilization from irreparable harm, or some such target at some such date with some such dire consequence. The rich west has the time, the wealth, the political freedom, and therefore the luxury to take that goal at face value and then attempt to force society on a path to get there.
Most of the world however has no such zeal. One hundred and sixty million citizens of India would prefer to have access to clean drinking water. Hundreds of millions of Africans would rather have access to the above plus 24/7 power. China and the rest of heavily populated Asia want secure energy, secure food supplies, and a rising standard of living, and they will all act accordingly, by using every energy source at their fingertips. Renewables are part of the mix, but the reliance will remain on the most energy-dense – hydrocarbons.
In the west, we should do all we can to limit our footprint, to reduce/reuse/recycle, to slash emissions and high-grade everything, but if we choose economic sacrifice to do so, we should at least be aware that it will all have been for nothing, globally speaking. Picture the landscape if we against all odds get to ‘net-zero 2050’. We are a huge cold country that makes a living largely through exports, so some aspects of Canada’s economic machine will have to be in tatters – we can’t assume that some massive new industry will leap into existence simply because we need it. We won’t get there by switching in toto to EVs, even if we could and wanted to.
Meanwhile, in other parts of the world, Africa is projected to have 2.5 billion people by 2050 (up from 1.3 billion today) and Asia is expected to have 5.3 billion (up from 4.6 billion now). What will be the emissions toll of adding those 1.9 billion people to Asia and Africa be? As a reference point, the amount projected to be added in those places equals the entire current population of the rest of the world.
On top of those added mouths, the existing 5.9 billion people in Asia and Africa are rapidly developing their lifestyles, and, short of an economic catastrophe, there is no stopping that.
So here’s another thought exercise, a lens through which to view the overall emissions problem. Imagine countries that are not like us at all, ones that don’t show up on the world’s wealthiest list, or the world’s healthiest, or the world’s most content. Imagine scrapping for survival, imagine searching for clean water, imagine a place where a family joyously celebrates not a holiday in Hawaii but a vehicle with four wheels that can move the entire family.
A few observations roll out of this fairly quickly. First is that demand for all types of energy is going to continue increasing rapidly for decades. Second is that if we want to get serious about emissions, the absolute priority should be to move away from coal as a heat/power source globally, and we should realize that accomplishing that alone will likely be all the world can handle.
Third, and possibly most pragmatically important to Alberta/western Canada, we are more than likely to see a significant upswing in oil prices over the coming years. It’s not hard to figure out what happens when supplies are limited but demand stays high. It will take much higher prices to truly lower global demand. If Canada chooses to go against its national interest by hobbling its very own petroleum industry unduly, then the wealth will be handed to the Russias of the world, the countries that were smart enough to see this coming. We should use the momentum of that price recovery to move the yardsticks, and we should start planning how best to do that right now.