My 2021 year-end column entitled “Fossil Fuel Follies” focused on the bizarre impacts of the great march by “net-zero” green energy zealots to replace the approximately 84 percent of global energy supplied by crude oil, natural gas and coal with wind turbines and solar panels. Some were so ridiculous as to be humorous, but there’s nothing funny about the enormous damage inflicted by pursuit of this technically impossible goal that became evident in 2022.
Exhibit #1 last year was Germany. That country’s ill-conceived policy of decommissioning its zero-emission nuclear plants – the last of which were to close in 2022 and 2023 – combined with its aversion to developing domestic natural gas resources (featuring a ban on hydraulic fracturing or “fracking”) and its failing attempt to power a modern industrial economy mainly with unreliable wind and solar power left Germany with no alternative but to import Russian natural gas. Russia’s contemptible invasion of Ukraine in February pushed Germany into a classic Hobson’s Choice: help fund Russia’s murderous invasion by continuing to import Russian gas or devastate the economic and personal wellbeing of Germany’s citizens. Fully aware of the enormous power that Germany’s need for Russian gas gave him, President Vladimir Putin lowered gas flows, driving European gas prices to stratospheric levels.
Events of 2022 also demonstrated the impact of another fossil fuel folly that similarly increased the Russian dictator’s power. Years of net-zero-inspired policies discouraging capital investment in traditional energy sources had reduced crude oil supply replacement in Western countries, leaving markets dependent on the so-called OPEC plus coalition. OPEC+ accounts for approximately 45 percent of the world’s current 99.9 million barrels per day of crude oil production, and Russia is a key member. OPEC+ meets regularly to set production targets and thereby manipulate global crude oil prices. The Ukraine crisis revealed just how narrow the global oil supply margin had become. Then came the shocking realization that most of that small margin was in Putin’s hands.
Nearly all Western countries were already producing at full capacity. The main exception was Canada, a country with the world’s third-largest oil reserves and the resource potential to greatly increase production beyond its rate of approximately 4 million barrels per day. Urgent calls went out for help to loosen Putin’s grip on oil supply. But it was impossible for Canada to contribute because Prime Minister Justin Trudeau had presided over a seven-year anti-oil-industry pogrom, thwarting multiple export pipelines that could have helped supply countries now dependent on Putin’s blood oil.
Trudeau’s shameful answer to those calls for help revealed our country to be an impotent imposter on the global stage. During the prime minister’s trip to Latvia in March, a reporter asked whether Canada could help make up for the oil supply reductions. His response: “We will be there to support, as the world moves beyond Russian oil and indeed beyond fossil fuels, to have more renewables in our mix.” As I stated in a column following his visit, this breathtakingly bizarre answer came as innocent Ukrainians and their beautiful country were being ravaged by a tyrant who was also threatening the world with nuclear Armageddon.
World crude oil demand will increase by 1 million barrels per day annually. The global oil supply/demand margin will continue to be small, with virtually all of it in the hands of OPEC+. Crude fuels over 95 percent of all transportation of goods and people. And it is now clear there is no other viable alternative.
Trudeau’s answer was triply ludicrous. First, Germany (and other European countries) specifically needed additional fossil fuel supplies – not imaginary “renewable” energy. Second, they needed help right now, while Trudeau was musing about dreamed-of projects that might be built in 10 or 20 years. Lastly, even if Canada were to succeed beyond Trudeau’s wildest dreams in adding vast amounts of green power, this could never help Europe: electricity from wind turbines in Alberta or solar panels in B.C.’s sunny Okanagan simply can’t be sent across the Atlantic Ocean.
In any event, even as the windmills of the former substitute drama teacher’s mind were spinning fantasies about hydrogen plants in Newfoundland, world oil prices soon skyrocketed to a staggering US$120 per barrel. Prices have since fallen, but they are still vulnerable to manipulation by OPEC+ (the cartel’s most recent production cut was announced in October) and the International Energy Agency projects world crude oil demand will increase by 1 million barrels per day annually. The global oil supply/demand margin will continue to be small, with virtually all of it in the hands of OPEC+. Crude fuels over 95 percent of all transportation of goods and people. And it is now clear there is no other viable alternative. Likewise, the natural gas supply/demand margin will remain narrow, and as with oil it is clear that modern industrial economies cannot function without natural gas for heating and industrial processes.
Twenty twenty-two will go down in history as the year when the net-zero fantasy hit hard and very costly reality. Among many examples: Germany has spent over 264 billion Euros – 7.4 percent of its GDP – just on subsidizing energy prices for hard-hit consumers and institutions. And Germany is hardly alone; as the accompanying chart shows, virtually every country in Europe has been doing the same on a somewhat less ruinous scale.
As we look ahead, the West’s focus must be aimed at avoiding debilitating fossil fuel shortages. That doesn’t mean the net-zero crowd will toss in the towel. They will continue to advocate starving the energy-producing sector of the funds needed to replace, let alone grow oil and natural gas production.
Equally destructive, North American and European politicians worshipping at the net-zero altar have implemented policies mandating costly and unreliable wind and solar power generation, combined with escalating carbon taxes. This regrettable combination makes it impossible for many of the West’s factories to compete, leaving consumers no choice but to buy Chinese goods. China uses those enormous revenues to, among other things, produce weapons intended for global military dominance and to manufacture the very solar panels and wind turbines that Canada’s government insists we install. Who could ever have imagined that the legacy of the West’s net-zero policies would leave two dictators in control of global energy security and the supply of manufactured goods?
As we look ahead, the West’s focus must be aimed at avoiding debilitating fossil fuel shortages. That doesn’t mean the net-zero crowd will toss in the towel. They will continue to advocate starving the energy-producing sector of the funds needed to replace, let alone grow oil and natural gas production. But when the cost of driving your car and heating your home starts taking an oversized portion of disposable income, and when oil-endowed despots continue their predatory behaviour, those net-zero voices should increasingly meet deaf ears. Canada simply must turn off the net-zero path or we will eventually experience a similar crisis as Europe – although ours will be entirely self-inflicted.
Gwyn Morgan is a retired business leader who was a director of five global corporations.
Source of main image: IRINA SHI/Shutterstock.com.
