How to turn a non-problem into a problem

It's much easier than you'd think

The peak oil supply issue would have by now acquired a legendary status in popular culture if there was any justice in the world. But because there is no justice in the world, the public discussion right now is on oil demand, whose peak various authorities are trying to forecast with, so far, variable success, to put it mildly.

Twenty years ago, there was real worry that we may run out of oil before we’ve managed to drive ourselves into extinction. That was a big argument in favour of alternative sources of energy. Now, the situation is reversed: we need to switch from oil and gas not (only) because they are running out but because they are evil.

Sadly for those incessantly calling for an end to oil production, demand is not going anywhere — on this there seems to be a somewhat surprising consensus among a politically diverse group of individuals, including the CEO of Aramco, the chief of the IEA, and the U.S. president, to mention but a few.

Also in this group are the analysts working at Wood Mackenzie who recently produced a report titled Scraping the barrel: Is the world running out of high-quality oil and gas?

If you know anything about question-format headlines you already know that the answer to that question is “Yes. Yes, it is”. The more interesting part, however, is the why. And the answer to that question is “Because of emissions.”

You might think high-quality oil and gas would mean oil and gas that is abundant and cheap to extract. According to Wood Mackenzie, this is only part of the definition. per that part, there is more than enough oil and gas left in the Earth’s crust to keep us going for decades to come.

Yet to be considered truly high-quality, oil and gas reserves also need to be extracted with low emission generation rates. And this sort of oil and gas reserves are insufficient to meet future global oil demand.

I swear I could hear someone say “So, what’s the problem?” a moment ago. Indeed, if there is twice as much oil and gas (in discovered and prospective reserves) as there will be demand in the years until 2050, there really is no problem. But those analysts disagree. Because of the emissions element.

When you add the low-emission requirement to the cheap and abundant requirements, the world’s reserves of oil and gas drop to half of what we’ll need to cover demand until 2050. Now that certainly sounds like a problem. But if you just thought “What’s the problem?” again I have to give it to you — you’re stubborn.

The basic truth appears to be that there is enough oil and gas in the world to keep demand covered until 2050. But because this is boring and wouldn’t scare anyone, and, most of all, does not contain the word “peak”, Wood Mackenzie, whom, by the way, I greatly respect for their industry insight, have come up with “peak advantage”.

“Peak advantage” is the danger of running out of low-cost and low-emission oil and gas assets and the danger is real, whatever you or I may think about it condescendingly. So, faced with this danger, companies can do one of three things or all three together, why not.

They can, according to the report’s authors, update their asset portfolios, expanding into new fields and divesting from mature ones because the latter’s operation has a higher carbon footprint. What a bummer that Big Oil pulled out of the Vostok project.

Besides a portfolio adjustment, oil and gas companies can also put more effort into lowering the emission footprint of their existing operations — something that I dare say is quite an obvious move that many must have made already unless they’re too evil and too private to care.

Lastly, Wood Mackenzie analysts suggest that oil and gas companies work towards reducing demand for oil and gas by investing in alternatives such as biofuels. That’s right — get up and get out before the real hassle starts. Go grow corn and sugarcane. Demand will take care of itself when scarcity pushes prices sky-high because everyone’s growing corn and sugarcane instead of extracting oil and gas.

What we have here is a classic example of finding an empty space shaped like a serious problem and creating a problem to fill it. A lot of the energy transition amounts to pretty much the same thing, arguable as this statement may be for many.

For context and clarity, air pollution is a real problem. It is a result of burning fuels, predominantly fossil fuels in vehicles and at industrial sites. The problem motivated a technological innovation drive that resulted in major fuel efficiency improvements, meaning more of the fuel in an ICE is burned without a trace, and significant tailpipe emission reductions. Stricter regulation took care of industrial polluters. Problem solved or, if not fully solved, then certainly reduced in gravity.

Meanwhile, Global CO2 emissions have been flat for a decade, new data reveals. Indeed, they may have even declined slightly over the period. No joke. That’s Global Carbon Project data and it’s in Carbon Brief. The twist is that this is actually bad news because this flat level of emissions is a record one and obviously we can’t wait for it to go down gradually thanks to further tech improvements, so let’s push things in the right direction by problematising non-problems.

It’s not enough that Europe’s emissions are on a decline thanks to carbon permits, EV subsidies, and even more subsidies for wind and solar. Let’s try for phasing out all fossil fuels. It’s not enough that peak oil supply is not going to happen any time soon. Let’s try for making it happen by adding modifiers to “oil supply”.

The silver lining of all this is that the enthusiastic push to problematise non-problems is leading to some hilarious outcomes. That is, they are hilarious to the non-casual and increasingly annoyed observer that is me but they are probably not so hilarious for the people involved. It’s almost tragic.

The European parliament voted in favour of phasing out internal combustion engine cars from 2035. Days later, Germany asked for what Euractive called ‘wiggle room” for e-fuels, or fuels produced from carbon dioxide using electricity.

But that’s not all. Last month, the EU failed to agree on a declaration for phasing out fossil fuels because it couldn’t reach consensus on the role of nuclear in the transition. These are just a couple of examples because I’m keeping the others for another post. Meanwhile, evidently hyped by all the transition activity around, Wood Mackenzie produced the following sentence:

“Even our much lower accelerated energy transition (AET-1.5) demand scenario – which lays out what is needed to achieve the most ambitious targets of the Paris Agreement, keeping emissions within 1.5 °C of pre-industrial levels and reaching global net zero by 2050 – will require some disadvantaged supply.”

We’re measuring emissions in degrees Celsius now, people. We’re this close to adding the climate to the list of endangered species.