This year’s most important energy insightThe World is awash with fossil fuels
The conventional wisdom, beloved of the Greens, is that fossil fuels are running out; that fossil fuel prices are going up; that as they do, renewables become more competitive; and that anyway renewables are the only alternative as we face “Peak Oil”, and fossil fuels run out. The truth is almost the exact opposite, and that has huge implications for our economy, and for geo-politics.
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Yesterday I heard a presentation in Brussels from a very well-informed academic, Professor Alan Riley of the City of London University, and though I though I knew a bit about energy, his global over-view was a striking revelation. The event was an open meeting of the parliament’s Foreign Affairs Committee entitled “Energy Roadmap 2050: EU External Policies for Future Energy Security”.
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Fracking safety: The first thing that caught my attention was an observation on the safety of shale gas and fracking. Prof Riley pointed out that they’ve been fracking for decades in the USA, a country with perhaps the most litigious society in the world. There are queues of lawyers willing to take up perceived grievances on a no-win-no-fee basis. The fact that this hasn’t happened is the best possible evidence that there is no major risk from fracking, despite the alarmist campaigns of the Greens and the media.
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The US is awash with gas: As we all know by now, shale gas has created a revolution in energy in the US. Gas prices have halved. There’s been a big switch from coal to gas (resulting in a reduction of CO2 emissions, driven by market forces, not draconian regulation). The Boston Consulting Group believes that the US can look forward to a new industrial revolution based on cheap energy. As a consequence of plentiful gas, coal prices are coming down, and the EU (ironically) is importing more coal.
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But China has more shale gas than the USA: This could be a game-changer. Although China is currently building coal-fired capacity, they too are likely to increase gas use for electricity generation. Both the US and China are likely to become self-sufficient in gas — so gas prices should come down. Even Europe has shale gas, if only we can break out of our inertia and start exploiting it.
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Serious implications for Russia: Russia’s economy is hugely dependent on energy exports. But Russia’s gas extraction infrastructure is getting old. It needs (says the Prof) 90% replacement in the next fifteen years. And much of it is in hostile environments in the far north. It is very expensive to extract. There may be no market for high-priced Russian gas in the face of a global glut. This could have very serious consequences for Russia’s economy — and social stability.
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Not just gas. Oil too. The Professor says that the USA should be “hemispherically independent” in oil very soon, with oil from continental USA, Alaska, South America, off-shore — and unconventional oil from Canada. The USA may no longer need oil from the Middle East.
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That has geo-political implications: Right now, the USA is happy to keep a battle group in the Middle East to protect the oil routes and the Straits of Hormuz. But if they no longer need Middle East oil, they may not provide that service for the EU. Maybe Europe will at last have to get serious about defence. Those British aircraft carriers may have a job waiting for them.
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Every home a gas-station: The USA is well down the road on transportation and storage of natural gas — including domestic storage. We can envisage US homes with their individual gas storage which could not only power the home but also fill up the car. We can forget the green dream of all-electric cars — it’s much more likely we’ll see significant use of gas-powered vehicles. This in turn will depress oil demand — and oil prices. This too carries geo-political and social implications for oil exporters — especially the Middle East.
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The EU a dumping ground for cheap coal: The Professor fears that the EU could become the world’s dumping ground for cheap coal that no one else wants. In a nod to environmental orthodoxy, he points out that this would play havoc with our emissions targets (Germany is already building 25 new or refurbished coal power plants). Less concerned about emissions, I think that cheap coal could be the saviour of European economies.
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None of this is good for renewables — or nuclear: The renewables industry has been pursuing the Holy Grail of “Grid Parity” (although they never cost-in the premium for conventional back-up, run intermittently and inefficiently). But with fossil fuel prices set to come down, Grid Parity retreats to infinity. This makes wind turbines even more absurd and unjustifiable. It also represents a serious threat to the nuclear industry.
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Europe’s choice: This scenario throws a new and stack clarity on the EU’s decision to embrace a “low-carbon future”. The policy was always going to give Europe the world’s most expensive energy. Indeed it already has. But if we carry on with renewables, we simply rule ourselves out of global competition, and out of the global econpomy. We mortgage our children and bankrupt our grandchildren. If Europe is to have a future (other than as a depressed third world continent) it’s time to come to terms with the fossil fuels revolution.
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Roger Helmer is UKIP’s spokesman on Industry and Energy
Filed under: Enviroment, Politics Tagged: fossil fuels
