10 March 2022

The price of powering civilisation

The crisis in Ukraine and the growing embargo on buying oil and gas from Russia is, of course, creating the greatest crisis in energy since 1979. A crisis over half of the population has never experienced, and it is exposing in clear view the irrationality of energy policies in many countries from the past couple of decades.

Until recently the history of energy policy for humanity has been largely driven by a mix of scientific discovery and innovation, and market demand. As the late Julian Simon once wrote, humanity moved from using wood as a primary source of energy, towards coal in the 18th and 19th century (which saved many remaining forests in Europe from decimation), and then towards oil in the late 19th/early 20th century because of price and capacity.  This also paralleled the rise of electricity, largely generated by burning coal, oil and gas (but also some locations, like New Zealand and Norway, benefited from geography and geology enabling hydro). Nuclear emerged in the mid 20th century, but has been constrained to electricity generation (in jurisdictions not taken over by fear, resulting from hyper-catastrophising) and naval propulsion. 

As the world has become ever more electrified, the demand to generate electricity has been fed primarily by fossil fuel burning, albeit the efficiency of this has grown exponentially. The energy intensity of refined fossil fuels has meant their portability literally enabled aviation to become not just viable, but the dominant means of long distance passenger transport, consigning long distance intercontinental rail travel in the United States and Canada to leisure trips.

The economic impacts are palpable, and all of the rhetoric and hysteria from environmentalists about the evils of fossil fuels ignores what they have enabled in the standards of living for billions.  Goods, services, trade and travel are on the scales they are today because of this.

The push to slow down the effects of climate change has resulted in policies that are almost monomaniacally focused on cutting CO2 emissions at any cost. Sure, there are sound reasons to be encouraging a transition towards energy sources that create fewer emissions that contribute to climate change, but there is little point being concerned about climate change if thousands of people literally freeze to death in winter, or starve due to collapses in food production, or the inability of essential goods to be transported long distances. 

So when tyrannies control much of the energy that powers global economies, and the risks of actually going to war with them to stop their aggression are too high (due to the aggressor's possession of nuclear weapons), then cutting off access to that energy has a price, and you're paying it at the pump.

What the crisis in Ukraine has exposed is how utterly vapid and empty the likes of misanthropes like Extinction Rebellion and other environmental extremists are, because there is no easy path away from fossil fuels.  As wonderful as advances in solar and wind energy are, they still have some significant limitations.  Both require significant storage capacity to be sustainable and useful in their own rights, completely unlike fossil fuel or nuclear generated electricity.  Moreover, for most transport, fossil fuels (or biofuel equivalents) have no cost effective or feasible rivals, yet, for aviation, shipping or heavy road freight transport, or indeed many industrial processes like steel production.

One question New Zealanders might ask is what position the country would be in regarding oil and gas supply if the Ardern Government hadn't stopped enabling new exploration of oil and gas in 2017.  Removing this ban today would have no effect, as it takes years to invest, explore and gain any results, but had it happened in 2017, then there might have been a contribution to global supply. The Ardern Government has deliberately decided to constrain supply of oil and gas, not on economic grounds, not even considering national security, but to virtue signal.

The Ardern Government advanced a radical approach to climate change policy, not just to make a contribution equivalent to NZ's largest trading partners, so NZ would be in-step with those it competes with, but to virtue signal.  To cut net emissions by 50% by 2030 is not going to make a measurable difference to climate change at all, but it is all about Ardern and Shaw looking good on the international stage.  

Yet the oil and gas exploration ban does absolutely nothing to contribute to that, at all.  

The wisdom of the US in enabling unconventional oil and gas exploration has disconnected it from being too concerned about oil and gas from Russia (and the Middle East).  

Germany too, with its Green Party Climate Change Minister advocating a natural gas national reserve and to keep coal fired power stations available for energy security, is learning the value of reliable supply. 

New Zealand, on the other hand...

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