ADAM CREIGHTON
11:00PM OCTOBER 12, 2022
The best and perhaps only way to undermine Russia’s war machine in the long term is for the US and Europe to junk their unrealistic and failing quest to eradicate fossil fuels from their energy supply and instead flood the world with hydrocarbons. It is political heresy to say it, but it may turn out we have to respond to climate change, if and when it comes, rather than try to avert it and sacrifice peace.
The transition to solar and wind energy has supercharged Russia’s war machine, pushing up the price of oil, coal and gas, lining Moscow’s coffers and laying the groundwork for its invasion of Ukraine, and who knows what further calamities lay ahead.
Russia’s share of global oil and gas exports is about 10 per cent and its share of coal exports about 20 per cent, giving it economic power far beyond its emaciated gross domestic product. Those shares could and should be reduced to choke the Russian war machine at source. If it’s not obvious enough, in 2019 Vladimir Putin denounced US fracking as barbaric for the damage it caused the environment. I’m not sure he cares much about the environment but he knows this threatens Russian energy dominance.
In a powerful new research paper, teeming with realism and facts, Manhattan Institute senior fellow Mark Mills, who has spent his career analysing the global energy supply since his time in the Reagan administration, lays out the argument. It should be compulsory reading for anyone who wants to understand the science and economics of energy policy, shorn of the political rhetoric that’s becoming ever more divorced from reality.
The shale revolution in the US – before the pandemic lockdowns – shattered global supply chains and boosted US energy supply by nine times the energy that emerged from highly subsidised solar and wind installations over the same period.
“The growth in US production over the past decade was greater than Russia’s total supply of oil and gas to Europe,” Mills says.
Any deliberate disruption to the EU’s energy infrastructure would meet a “robust and united response”, its top…
North America has fossil fuels in about four times the quantity of the Middle East, but they are locked up, despite improved drilling technology.
Pioneer Natural Resources chief executive Scott Sheffield said not even oil at $US200 a barrel would tempt his business to expand supply owing to regulatory impediments and future policy uncertainty.
The inevitable retort that the West can weaken Russia’s grip on energy markets by redoubling efforts to decarbonise, as the EU appears to be attempting, is a destructive fantasy. Dimming the lights on the Eiffel Tower to save power after 11pm, as France did last week, won’t cut it.
Consider a few facts, brilliantly assembled by Mills, who argues the “energy transition” is a delusion. As the International Energy Agency has recently estimated, the net-zero path would require supply increases of lithium, graphite, nickel and rare earths by 4200, 2500, 1900 and 700 per cent respectively by 2040, with all the devastating consequences for the planet from extra mining.
There’s a ‘self-inflicted’ energy crisis across much of Europe
Lithium prices are already up 1000 per cent in two years, dooming hopes of cheaper batteries, and the electric vehicles we’re all supposed to be driving by 2035.
“Fully replacing hydrocarbons with solar and wind technologies would require a quantity of minerals that exceeds the known global reserves of those minerals,” Mills says. Moreover, these minerals are found in nations such as Russia, Indonesia and China.
From California to Germany, the jurisdictions furthest down the transition path have seen power prices increase by between 60 and 110 per cent. The relentlessly repeated argument renewables are cheaper is empirical nonsense given the vast capital costs of relaying it.
Mills estimates replacing US energy infrastructure to accommodate net-zero targets would be “analogous to replacing – not repairing or augmenting – all existing US highways built since 1921 and doing so in about one-third of the time it originally took while using 1000 per cent more materials per road-mile”.
The world has spent trillions on subsidies for solar and wind during the past 20 years to reduce dependence on fossil fuels from 86 per cent to 84 per cent, a shocking failure. “Over the past two decades, the cumulative subsidies across the world for biofuels, wind and solar approach about $US5 trillion, all of that to supply roughly 5 per cent of global energy,” Mills says.
Opinions on climate change and what is causing it and our desire to avert it, however genuine and laudable, are irrelevant to whether the world’s net-zero plans are feasible. They aren’t, based on prevailing scientific and economic laws.
Europe’s doubling down on solar and wind in the face of Russian aggression might be popular with a public that has been misled, but it is harebrained. It is pushed by a political class that will be out of office when the results materialise and won’t be much affected by the increase in costs. The US, where climate fanaticism is less popular, is the only, slim, hope.
The potential horror of the forthcoming European winter, thanks to years of shutting down perfectly functional cheap energy sources, when hundreds of elderly people could freeze to death, might be a watershed moment.
Russia is playing hardball with energy and we must too.
ADAM CREIGHTON -WASHINGTON CORRESPONDENT
Adam Creighton is an award-winning journalist with a special interest in tax and financial policy. He was a Journalist in Residence at the University of Chicago’s Booth School of Business in 2019.
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