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It was the worst of times, it was the best of times. For the people working in the corner offices of Calgary’s corporate towers, that’s been the story of 2022 so far, especially when it comes to the war in Ukraine. After years of watching their industry get beaten down, first by a price war and then by growing concerns about climate change, it’s suddenly a very good time to be an oil and gas company executive. After briefly trading in negative territory less than two years ago, Canadian oil is poised to set a new all-time high.
But the joy being felt in those Calgary towers is misplaced because the renewed surge in commodity prices is a long-term defeat disguised as a short-term victory.
Russia’s invasion of Ukraine will almost certainly prove to be the tipping point in the global energy transition as entire continents move to make their economies and societies less dependent on oil-exporting countries like Russia and Saudi Arabia. Yes, those executives in Calgary will see their stock options increase in value, and the Alberta government will collect billions more in royalty revenue.
But this is the death rattle of the fossil-fuelled global economy, not its latest renaissance.
That’s because unlike the last time oil prices traded above $100 a barrel, consumers and companies alike have options for reducing their exposure to high fuel prices. Those options will only continue to grow in number in the year to come, as every major automaker on the planet rolls out its own range of electric vehicles.
“Oil staying above or near $100 a barrel for a protracted period of time just makes renewable investment look better,” Sarah Ladislaw, managing director at the think tank RMI, told the Los Angeles Times. “If the price environment and the strategic conflict lasts a bit longer, I think it drives people to find alternatives.”
Investors have already twigged to this. Case in point: When the markets opened on Feb. 24 in the wake of Russia’s invasion of Ukraine, it seemed likely that a huge increase in oil prices would be the story of the day. But by the time it was over, a much different one had emerged. Yes, global energy stocks were up, with the largest energy ETF in the world gaining 1.7 per cent on the day. But that was nothing compared to the iShares Global Clean Energy ETF, which was up 7.6 per cent — and on a day when the overall market fell.
High oil prices, and the impact they’re already having on household budgets, aren’t a good thing for the vast majority of people. But when it comes to driving down global emissions and increasing the sense of urgency people feel about climate change, they might just do the trick. The longer prices stay at these nosebleed levels, the more likely it is that consumers, businesses, industry and even entire countries will look to find alternatives. Once they do, it’s unlikely they’ll ever look back again.
That’s particularly true in Europe, where the combination of high energy costs and Russia’s reckless invasion of Ukraine could prove transformative.
“The stuff coming out of the mouths of European leaders has never come out of their leaders’ mouths before,” said Nikos Tsafos, the James R. Schlesinger Chair for Energy and Geopolitics with the Centre for Strategic & International Studies, in an interview with Scientific American. “There is a different strategic resolve coming out of Europe, and if you’re not factoring that into your model, I think you’re missing something.”
That’s why the federal government needs to hold its nerve when it comes to its promised plan to regulate and restrict oilsands emissions. Premiers like Jason Kenney and Scott Moe will renew their demands for more pipelines and production, and industry advocates will repeat their tired arguments about ethical oil. Let them. What they can’t see, or won’t, is that the transition away from fossil fuels has shifted into a higher gear.
If Canada can’t keep up with that, it risks getting left behind in years and decades to come — especially as global demand for oil starts to roll over and fall off.
Most fossil fuel enthusiasts, including the well-paid ones in those Calgary corporate towers, refuse to believe that’s even a possibility. Mick Dilger, the former CEO of Pembina Pipeline, told the Calgary Herald’s Chris Varcoe in November: “The key question right now is: What is the tenure of hydrocarbon production? And I think it looks a lot like it’s four to five decades, rather than one to two decades.”
But if the pace of the energy transition starts to really pick up in the years ahead, we’ll almost certainly look back to early 2022 as a key influence on that.
It’s long been said that the cure for high oil prices is high oil prices. This time, it might be a permanent one.
Comments
Not sure where our battery materials for renewables are coming from these days (hopefully not Russia or its modern day Axis), but from a perspective of oil, in the 70's temporary lack of it due to OPEC certainly focused the minds of politicians south of the border on energy efficiency. In the longterm doing more with less because of scarcity or instability, whether or not it is a setback for globalization, and though not intentional, and unforeseen consequences to it of war notwithstanding, might be a reprieve for the planet, but it's certainly not the way I'd hoped for the West to reach a unity of purpose required to face the urgency of a real emergency.
When the 70s oil price spiked, I immediately reacted by buying a much more fuel efficient vehicle and still drive smaller fuel efficient cars today, 50 years later. My wife and I designed and built three energy efficient homes between 1976 and 1986. At the time, they were innovative with 2 x 8 walls, R50+ in the attics, heat exchanger, some triple panels windows.
Not every one will or can do this. But cost was the main driver.
I laugh at Kenney, here we are in the most energy rich province with a leader who is the most neoliberal free market advocate in the world, implementing government policies to counter the free market of oil and natural gas and of all things electricity, as Alberta has the highest Electricity rates in Canada. The beneficial consequence of high fossil fuel costs are conservation though when one watches drivers in Alberta, with excess speed, acceleration and idling, I guess money isn't their priority to many of the workers in the highest wage province in Canada. But high cost means ,less use, just a fact of financial well being. And that means less CO2
I suppose with 2x8 wall stick framing you could build on 32" centres and with the wider spacing there'd be a lot less thermal bridging. Should have considered that when we were building. :)
And yes, Sammy Hagar's "I can't drive 55" rock anthem applies to a relatively high percentage of our local population, and so likely even more applicable on flatlands. And as we learned in high school physics wind resistance is a function of surface area and so varies as a square of velocity, and so reducing speed, even a bit, can make a noticeable difference in energy efficiency. On a personal note, I notice that when I'm driving in the States and have pegged my cruise control at 55mph, I notice that my car goes down from about 8L/100km which I see while on Canadian highways driving "with the flow", down to as low as 6L/100km.
We're in agreement on your last statement....because the war is demonstrating something else, at least for me. It shows the degree to which even very smart and well read people, on the side of a sustainable economy, can't resist those war drums. What is happening in Ukraine is a humanitarian and environmental disaster....and it that's what its going to take to get our heads out of the (tar) sand and our choices moving to sustainability...we may not make the transition fast enough. Oil and gas not only fuels war; war is totally dependent on it. If we refrain from all conflicts.....we prevent a lot of greenhouse gas emissions....and for sure: All our conflicts lead to short term profits for fossil fuel corporations.
"Not sure where our battery materials for renewables are coming from these days ..."
Ukraine has some significant lithium and iron deposits in Donbas and other southern reaches, which may help explain a small part of Putin's invasion rationale beyond a delusional Czarist empire fantasy. (Kyiv is much older than Moscow.)
Power storage with renewables for large-scale stationary generation has experienced some new entries into the commercialization field that don't use lithium or other rare metals. Iron-air (Form Energy) and metallic calcium, antimony and salt (Ambri liquid metal batteries) are two very promising technologies mainly because they use cheap, common materials that are found practically everywhere, and they are scalable to city size. Neither of them have the problematic dendrite issue that plagues lithium ion with fires, higher costs, questionable human rights practices in some source nations, and supply chain disruptions. Elon Musk will no doubt see his large-scale stationary power storage tech eventually outcompeted by these less expensive and longer lasting batteries, especially as mass production ramps up.
It's important to note that deep, large-scale power storage is key to levelising the peaks and valleys of the intermittency that comes with renewables. In fact, with enough output banks of batteries will help provide stable, on-demand base load power in microseconds.
These MIT companies should be invited to set up shop in Canada and to participate in the electrification of the domestic economy.
"the iShares Global Clean Energy ETF, which was up 7.6 per cent"
Remarkable that this clean energy fund has done just about nothing since 2008. If you bought the fund at its inception, you would have lost your shirt. A terrible investment.
https://finance.yahoo.com/quote/ICLN/
iShares S&P/TSX Capped Energy Index ETF has done nothing since 2014. The ten-year return is negative. The oil & gas market is a rollercoaster ride. Not buy-and-hold investments. Investors who can successfully predict when to get on and get off do well. But that's the trick, isn't it? Not everyone has a crystal ball.
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European leaders have known for decades that they need to kick the fossil-fuel habit. Evidently, increasingly urgent IPCC and IEA reports on top of mounting climate disaster costs have so far failed to sway them.
If climate change is an emergency, world leaders have failed to respond to it as such.
What accounts for such massive failure? Future generations will be asking.
War is a Force that Gives Us Meaning: Chris Hedges....a brief summary of his experiences as a war correspondent...written around 2002 I believe.
Transitioning to Green Energy simply can't compete with war games....and capitalist investment is mostly a kind of war by other means. Winners and losers yes?
The collateral damage...or war, or extractivism, is what the women and children experience first....sad but unavoidable in any blood sport.
"...look to find alternatives. Once they do, it’s unlikely they’ll ever look back again."
That has certainly been my experience with my 2019 battery electric vehicle; better than expected...great drive train..can't imagine buying another ICE vehicle again.
We're with you........bought our Kona in 2019 and love it. Funny thing is, the people who waited will pay more than we did for a new Kona....we know, a friend looked into getting one recently. And the prices will likely keep going up in tandem with the price of gas.
So unless we ramp up production everywhere........only the well heeled will be able to enjoy what you and I enjoy....and those predatory pay day loan sharks will increase as the common folk can't afford the gas to get to and from work.
Functionally, high oil prices are like a carbon tax. Except the money goes to assholes instead of the public. But it has the same impact on consumption.
Indeed. Gas prices hit $2.00 in Vancouver yesterday, and it was at the top of the news. One commenter on a related Daily Hive story tried to turn the issue on its head and blame government for the rise due to "high taxes," completely ignoring the fact that the unprecedented price spike was driven by the private companies instantly reacting to Russia's war on Ukraine. Moreover, the vast majority of the price is not in the form of taxes, which have a direct return to public services and infrastructure, but in corporate machinations.
Tesla and Leaf owners are having a rib-splitting belly laugh right about now.
And 0 impact on taking the planet to where she needs to be.
drop speed limits to 80 km/hr like we did in 70’s. would benefit everyone. chances of DoFo doing that? zero