I started this series of blogs about energy companies and their shift toward greener power sources with a citation from an earlier blog (July 17, 2013), quoting then-CEO of ExxonMobil, Rex Tillerson, who opined, “What good is it to save the planet if humanity suffers?” His statement equated a more limited use of fossil fuels with inherent suffering.
While I didn’t state it explicitly, I have hinted strongly that the destruction of the planet would lead to infinitely more suffering than would the impact of limiting our use of fossil fuels. My last two blogs have provided some evidence that—directly or indirectly, mostly due to external pressure—many energy companies are starting to realize the validity of this argument. However, there is no escaping the conclusion that if limiting the supply of fossil fuels does limit the availability of energy overall, humanity will suffer.
Energy is probably the most important ingredient in the supply chain for almost everything that society does. Recently, we have encountered some of the symptoms of limited energy supply on a global scale:
UK electricity prices have hit record highs to become the most expensive in Europe, with “day-ahead” power prices (the price of spot electricity) hitting £540 per megawatt hour (MWh) on Monday. UK prices are at their highest since 2008, says Cornwall Insight, an energy-market analyst.
Gas prices quoted in therms (a unit of heat) are trading at £1.89, doubling in as little as two months, and five times higher than September last year. In a taste of what is to come if energy prices keep rising, two fertiliser plants in the north of England have been shuttered because they have become too expensive to run. The operator, CF Industries Holdings, did not say when production would resume. And the rise in energy prices has stoked fears that we may be in for a very cold and expensive winter. So why are prices rocketing and what might it mean for investors?
Wholesale European electricity prices have shot up, too, and natural gas futures in the Netherlands have raced past €60/megawatt hour to hit a record high this week. Dutch gas prices have risen by around 450% over the year, and French and German wholesale electricity prices are also trading at record highs. To add to the problem, gas stockpiles are at their lowest in ten years.
These shortages are not limited to England or Europe; they are worldwide. China, too, is now suffering from an acute lack of supply and its energy prices are shooting up. Unsurprisingly the instabilities in the energy markets are causing smaller companies to default:
At least four of the smaller UK energy companies are expected to go bust next week amid soaring wholesale gas prices. Industry sources have told the BBC that four firms have asked larger players to bid to take over the supply to one million customers.
The price rise has left some companies unable to provide their customers with the energy they have paid for.
Industry rules mean supplies will continue for affected customers, and they will not lose money owed to them. The new company is also responsible for taking on any credit balances the customer may have. But paying that credit out to customers is a further disincentive for companies to take on new business.
The US state of Wyoming provides an especially powerful example of the strain of maintaining energy supply while shifting to greener power sources. Wyoming legislators are so terrified of the prospect of losing both fossil fuel jobs and energy supply that they are requiring the companies offloading such plants to offer them up for sale rather than let them go fallow:
Wyoming has been the US’s top coal producer since 1986. But while the state stubbornly clings to the fossil fuel, its largest utility is dumping coal in favor of renewables.
PacifiCorp is ditching coal in Wyoming
Rocky Mountain Power is Wyoming’s largest electric utility, and its parent company, PacifiCorp, announced on Friday, according to KPVI, that its biennial Integrated Resource Plan is expected to “include substantial investment in renewables — and no new investment in coal or natural gas. The 2021 plan will be finalized next week.”
In response, Wyoming legislators tried to stop utilities from shutting coal plants by passing a bill that went into effect last month. Oil City News explained in March 2020:
Wyoming Governor Mark Gordon [R-WY] signed Senate File 21 into law on Tuesday, March 10. That bill will require electric public utilities to “first make a good faith effort” to sell coal-fired electric generation facilities before retiring such facilities.
The rules will go into effect July 1, 2021, and will allow non-utilities to purchase otherwise retiring coal fired power plants and sell energy to industrial customers.
Forbes, one of the most conservative publications in the US, does a great job at summarizing the energy industry’s predicament:
This week has produced a spectacular batch of news stories highlighting the many contradictions facing us as we embark on the greatest technological transition in our history: abandoning fossil fuels.
Shell, one of the world’s largest oil companies, has been forced by a Dutch court to cut its emissions much faster than originally planned: 45% by 2030, with the court arguing that the company’s decarbonization targets were incompatible with the Paris Agreement.
The news, which could (and should) trigger a wave of similar cases around the world, coincides with increased pressure on the boards of two other of the world’s largest oil companies, America’s Exxon and Chevron, some of whose shareholders are demanding faster responses to the climate emergency, rather than merely greenwashing.
The oil industry will find it increasingly difficult to ignore social pressure to reduce its emissions. We are facing a fundamental change, the end of the oil era, which could lead to a financial meltdown among the companies dedicated to exploiting a resource that is still far from being exhausted, but which is becoming increasingly uneconomical to exploit. Over the course of the next thirty years, 80% of the oil industry is set to disappear.
The combination of technologies that involved the exploitation of fossil fuels and the internal combustion engine brought enormous economic progress to mankind over many decades, but we now know at what cost. Abandoning the use of fossil fuels, and leaving behind an industry that we have long subsidized and financed to prevent the economy from grinding to a halt, is absolutely essential, however impossible it may seem today, because the real cost of these fossil fuels is actually much, much higher.
It is possible, and also essential, to make this transition: the world should be powered exclusively by renewable energies by 2030. They have long been the cheapest option, despite the self-serving myths spread by the oil industry and its lobby, and they could well be enough to cover all our needs.
It is time to put an end to the contradictions.
Does all of this mean the end of oil? My next blog will argue that the truth may be more complicated and may require all of us to get involved.
Thank you for this informative article.
well updated.
Adding on to your point about contradictory claims over renewable energies, there is an article highlighting and correcting the anti-renewable energy propaganda (found on CleanTechnica) The major point of the propaganda is that renewable energy is too expensive and that the more traditional sources are the better option. As you stated in your article this is far from the truth, narratives are powerful tools in controlling what the general public will do- especially since the general public aren’t energy experts or delve deep into what they can do to be more green. While there is social pressure to change, the anti-green propaganda is very difficult to overcome especially combined with political ideologies (like many republicans and right-wingers will dismiss programs and plans to better the environment only because a democrat created it). It is and I’m predicting it will continue to be an uphill battle to convince a majority of US residents to become more environmentally friendly.