The first two weeks of November 2022 were a fascinating time in the oil and gas and energy geopolitical ecosphere. There was a confluence of several international gatherings addressing global collaborations across economic, environmental, trade and energy topics. The first week of November saw the start of the 2022 United Nations Climate Change Conference on Sunday, Nov. 6 which ran until Nov .18.
The Association of Southeast Asian Nations- the ASEAN Summit ran from Nov. 10 to Nov. 13. The 2022 G20 Bali summit began on Tuesday, Nov. 15, and ended on Wednesday, Nov. 16. It was a fertile time for energy expert and best-selling author Alex Epstein to address an audience in Calgary on the future of fossil fuels and why humankind needs more hydrocarbons not less.
Alex Epstein got started investigating and developing pro-hydrocarbon arguments in 2011 when he founded the Center for Industrial Progress. He began a journey to promote human development and progress which Alex refers to as “human flourishing”- improving lives by using technology to improve the planet. His prescription for human flourishing is for every individual to have the potential for a longer, happier, healthier, safer, more comfortable, more meaningful, and more opportunity-filled life.
In Calgary on Nov. 16, Epstein delivered an expansive analysis of the energy industry’s historical and current challenges, wins and draws in the geopolitical arena. Ultimately, he is optimistic that there is progress in the areas of information and education.
“I think we’re really at an exciting moment right now, in terms of education-for two reasons. One is what I and some others have done in the last 10 years. We developed arguments that are really easy to make and that are powerful. They didn’t exist when I got started (championing fossil fuels). So you have much better arguments at your disposal than what you used to have, which are much easier to use and share,” Epstein said.
“What we have is a global energy crisis, which is tragic. But what crisis brings is an awareness that the establishment has failed. For years, the establishment was doing all of these destructive things, but they were kind of bailed out by the industry. Particularly the shale revolution in the U.S. bailed out a lot of these bad policies by creating a lot of new, unexpected oil and gas. But now, what’s happened is that anti-fossil fuel policies have really suppressed supply. We’re seeing rising prices. People are struggling. We’re seeing the consequences- all of the things that many of us have talked about for years. So people are more open than ever to the idea that we should have a fossil future. So you have this combination of more open minds and really powerful arguments.”
Part of the presentation included an engaging discussion of the ideas coming out of the last two weeks of international conferences and meetings. The discussion began with COP 27 and the news that although organizers of COP 27 were still catastrophizing about climate change saying “We’re in the fight of our lives and we’re losing” many of the country leaders were saying the war in Ukraine and staggering inflation has reduced the urgency of climate change. Epstein pointed out that the messaging is following what he calls “the same fossil fuel benefit denial playbook of just acting like climate change is “the Apocalypse”, and cost-effective energy doesn’t matter.” Ultimately, he said climate change catastrophists find it difficult to admit their policies are ruining lives and they want to continue on their path. Epstein asserts that eliminating fossil fuels and impacting climate should not be a goal in and of itself. There should be a larger goal to advance human flourishing and global human empowerment.
The idea of climate-related loss and damage payments, which surfaced ten years ago was again floated at COP 27. This is the view that the richer, more developed Western countries that have spent years profiting off fossil fuels should give money to the countries that are poor and may be suffering from climate change. These payments will amount to trillions of dollars.
The U.S. has long resisted these requests for loss and damage agreements. Countries like Bangladesh or Pakistan are used as examples – quoting the extreme flooding losses they experienced in 2022. The private sector is reported to be working on developing an insurance scheme, which Germany favours. However, opponents are saying that the richer countries will still just be profiting from the folks at the bottom of the economic pyramid. No demands are being made of top emitters like China, Russia and India who are the first, third and fourth highest emitters according to 2019 measurements reported by climatetrade.com.
In response to the concept of loss and damage payments, Epstein referred to research on income, population and life expectancy development statistics, charting the rapid rise from the 1700s until present day which he calls “human flourishing hockey sticks.”
The global dramatic rise in income and population is attributed largely to fossil fuels which allowed humans to use machines to be productive and prosperous. It’s also freed up the time to develop sanitation, science and tech innovation, medical care, etc. Epstein points out that our use of fossil fuels has been incredibly beneficial to everyone in the world- “an incredible net benefit to the rest of the world leading to radical experiences, and extension of life expectancy.”
“What we owe the rest of the world is not to impose any of these anti-fossil fuel policies on them. But what they owe themselves is to adopt more pro-freedom policies. The poor parts of the world have a very predictable way to become prosperous, and it is to become freer places and we’ve seen this throughout Asia. Many countries have risen dramatically out of poverty since I was born in 1980.”
This message is echoed by N.J. Ayuk, Executive Chairman of the African Energy Chamber who stated in mainstream and on social media, “I’m going to COP27 because I believe if Africa is not at the table, it will be on the menu. Let me be clear, those of us who are advocating for African countries to continue using their oil and gas resources are not “ignoring” the world’s green agenda – we’re simply not willing to embrace the world’s timetable for transitioning to renewable fuels at the expense of our own energy security and economic well-being.”
Strong words from a representative of countries that UN delegates might just as easily designate as “heavily impacted by climate change” and owed loss and damage payments. Instead, there is a choice to exercise the freedom to develop their own prosperity and rise out of poverty.
Epstein referred to statistics on poverty from his research explaining how extreme poverty- which is defined as living on less than $2 a day- has gone from impacting over 40% of the world to just 10% of the world today. He suggests the focus should be improving areas like Pakistan that need radical economic reform. He thinks the idea that we keep indulging extreme poverty and feeling guilty about improvements made in the developed world is the wrong way to think about the problem.
COP 27 discussions included the proposed imposition of windfall taxes on Oil and Gas profits. It is reported that one Canadian producer, Vermillion Energy could face an estimated $250 million to $350 million for 2022 in windfall tax being imposed by European Union countries on profits by oil and gas producers.
In a news release, Vermilion Energy president Dion Hatcher said “We do not believe a windfall tax is an appropriate solution as it will not incentivize new domestic supply, nor reduce consumption, and it may ultimately result in higher natural gas prices in Europe.”
It is unclear whether the tax will apply retroactively to 2022, prospectively to 2023, or for both years.
Epstein responded to the suggestions of windfall taxes saying that the current energy crisis is entirely caused by the anti-fossil fuel movement which is artificially suppressing the supply of fossil fuels, fossil fuel investment, fossil fuel production, fossil fuel transportation, and fossil fuel refining – all aspects of the industry and that is a huge problem.
“How could it possibly be a solution to punish them even more? This is more punishing of an industry that we want to make more profitable. We want this to be as appealing an industry as possible to go into so we can get a rapid increase in supply. Instead, they’re giving more and more punishments to discourage people from being in the industry.”
Epstein referenced chapter 11 – “Reframing the conversation – Arguing to 100” from his book “Fossil Future.” He explained the importance of the energy industry’s actions to develop positive, confident messaging rather than the current practice of reacting to bad policies.
He advocates for a focus on the message that the fossil fuel industry is making the world a better place for billions of people with confidence. He observed that what often happens in the fossil fuel industry is inaction and a loss of that focus. Epstein says the industry lets “the other side” define the issue in terms of negative side effects.
“The key thing to do is NOT concede this idea of climate catastrophe or apocalypse. If people are afraid of “the Apocalypse”, they are not going to think rationally. They are going to do everything they can to shut down the problem. So this idea of climate change, and climate catastrophe is very damaging and it’s been very destructive for the industry to concede it.”
Maureen McCall is an energy professional who writes on issues affecting the energy industry.