- Despite the fact that the current administration in Washington and the most powerful figures within the EU are attempting to switch away from fossil fuels, oil, natural gas, and coal use are soaring.
- The European Commission claims that it will not turn away from its energy transition priorities and will continue to invest heavily in cleaner energy sources.
- The success of fossil fuels in 2021 is not due to an elaborate conspiracy, instead, it is due to poor planning and the unassailable fact that alternative energy source are not yet efficient enough or cheap enough to take over.
U.S. coal use is on track to jump 23 percent this year, for the first time since 2013. European utilities are switching from gas to coal because of the former’s soaring prices. And Brent crude just passed $84 per barrel.
At the helm in Washington is Joe Biden, a president who came into office with a pledge to reduce American energy dependence on fossil fuels. At the helm in the EU are people equally dedicated to phasing out oil, gas, and coal, and replace them with low-carbon alternatives. Yet, it seems fossil fuels have been the only winners from their energy transition efforts.
In a world where conspiracy theories are becoming increasingly popular, someone somewhere must have already started suspecting Big Oil’s influence. After all, a couple of years ago, a U.S. House committee accused Russia of inciting the protests against the Dakota Access pipeline “to suppress the research and development of fossil fuels and stymie efforts to expand the use of natural gas,” per a Fortune report.
Last week, Bloomberg’s Will Wade reported that during Trump’s term in office, coal consumption by utilities in the U.S. had fallen by 36 percent despite all of Trump’s efforts to boost the sector. Now, under the fossil fuel opposing Biden, the decline has reversed to a 23-percent jump in consumption. And that’s in the United States which, until recently, was the biggest producer of gas in the world.
It’s true that U.S. natural gas exports have been growing at breakneck speed this year. Yet the country’s export capacity is still limited, so most of the gas produced locally remains to be used locally. The EIA said this week that gas exports have been rising faster than gas production, so prices were likely to remain high this winter, but, again, there is only so much LNG you can export with existing capacity.
Meanwhile, in Europe, the situation with gas prices has gotten so bad that utilities are finding it more affordable to switch to coal and pay for the higher emissions than stay with gas, which emits less. In other words, the frontrunner in the energy transition race, the EU, is on track to emit more this year amid its emission-reduction efforts because it is finding itself still addicted to fossil fuels.
This is not to say that the energy transition camp will veer off course, and this, in a world where conspiracy theories were true, would have been suspicious. The European Commission this week released what it calls a toolbox to tackle the “exceptional situation” with energy prices.
Among the measures envisaged in the toolbox, the EC has included aid to energy-poor households, tax cuts, and help for industrial users. The focus, however, is on sticking to the transition priorities or, as the EC puts it, “Our long-term transition and investments in cleaner energy sources should not be disrupted.”
“The clean energy transition is the best insurance against price shocks in the future, and needs to be accelerated,” the document goes on to say. “The EU will continue to develop an efficient energy system with high share of renewable energy.”
All this comes after lower wind speeds for much of the year dramatically reduced the actual share of wind power in parts of Europe, contributing to the energy shortage amid growing demand. Solar doesn’t do particularly well in the autumn and winter by definition, too, which increases reliance on fossil fuels. And yet, the EC proposes acceleration rather than a reconsideration of the energy transition in its current form and increased reliance on both wind and solar.
If this was a movie, it would end with the clever protagonist uncovering an elaborate plot devised by Big Oil to boost its profits by first building our reliance on unreliable energy sources and then cunningly reducing the availability of the reliable ones – fossil fuels – to push prices higher.
However, this is not a movie, and Big Oil has been forced to rethink its own priorities with a view to staying relevant in a low-carbon world. The supermajors are spending billions on renewable energy projects, although to many, it is still too little, too late. Yet the industry will still reap the benefits of the energy crisis that has gone from regional to global in less than a month.
One could argue that this is an energy version of a dead cat bounce and the long-term outlook for fossil fuels remains bearish. However, with the EC and Washington still unable to influence wind speeds and the Earth’s spin around the Sun, chances are even the long-term outlook for fossil fuels is brighter than many might expect. Unless, of course, we manage to slash global energy demand by a sizeable chunk in short order. But that’s another conspiracy theory entirely.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
Published at Mon, 18 Oct 2021 17:00:00 -0700