Just substitute oil

I spent a corporate career with this in mind as I worked for a global energy company, steadily expanding the awareness of its top decision-makers and, behind the scenes, nudging the rudder of this vast enterprise and steadily shifting its direction while honouring its purpose of safe, reliable and profitable provision of energy to customers.

My wife referred to me as the barnacle on the rudder of the company!

So, while they could be an irritation to others, I genuinely appreciated the challenge to the company of environmental activists, at least while there was credibility in their perspectives.

So, what do I do now when I see well-intended activism causing harm to the most vulnerable people in society? When the appropriate concern for the well-being of future generations is being translated into a clarion call that will be ineffective in its intended purpose while simultaneously damaging to the poor?

I feel I need to call this out and try to spread joined-up understanding, even though some will no doubt brand me a hypocrite or an evil apologist for big energy.

Which is why I’m conflicted.

But I have been coached by good people to respect the genuine perspectives of others and to acknowledge the sense of hurt and outrage they feel, while also trying to promote broader and more effective understanding.

So I will write this to point to the damage being inflicted by promoting the “Just Stop Oil” mindset.

While I’m wary of the current craze in political and influencer circles to try and capture all manner of complex notions in simplistic three-word slogans, I think a compromise may be possible in this case.

Let’s try the, admittedly less snappy, “Just Substitute Oil”.

Let me explain.

The point is that it is the use of fossil fuels that generates greenhouse gas emissions, and we can’t operate, build or move anything without using energy. More than 80% of our energy still comes from fossil fuels so, in the short term, the bulk of everything we do depends on them. In the words of economists, in the short term, demand is very inelastic. Everything needs energy.

What that means is that when there are supply disruptions, such as has happened with natural gas due to the Russia/Ukraine crisis, rationing of shortfalls occurs through soaring energy prices, which feed into soaring prices for everything else in the economy, causing cost-of-living crises, which particularly hurt the poorest in society.

“Just Stop Oil” implies for many the ratcheting back of supply, which is actually a recipe for hurting the vulnerable as just described. It also misdirects attention from where it needs to be.

Instead, we need to aggressively and persistently reduce the demand for fossil fuels by changing the end-use technologies that currently need it, e.g. by using vehicles with electric motors rather than internal combustion engines, making steel in different ways, and adapting aircraft and ships to use sustainable fuels.

This turnover of the capital stock of much of the world will inevitably take time, and the more we can accelerate it the better, but it is key to keep supply well-balanced throughout the journey.

Perhaps a slogan could be “Just substitute oil, and manage supply responsibly”?

It’s not as snappy as the original, but vulnerable people around the world will be better served by that mindset than the current slogan.

But what does “manage supply responsibly” mean? Obviously, there are safety and environmental angles to this, but at the back of my mind were a few things that many people, unfortunately, don’t seem to grasp about the energy system and so provoke all kinds of anger and misunderstanding. I’ll outline these, and ask your forgiveness in advance if they are obvious to you personally already.

First, as indicated, demand reductions need to lead to supply reductions, otherwise short-term imbalances force high prices that hit the poorest hardest.

This has been powerfully illustrated recently when supply disruptions arising from the terrible

Russia/Ukraine war significantly elevated energy prices and the cost-of-living more broadly, whereas the previous demand reductions arising from the terrible period of Covid lockdowns sent oil prices plummeting.

Secondly, even when demand growth can be turned into aggressive demand reduction through substitution, considerable global investment in production needs to continue.

As soon as an oil or gas well is brought online, its initial production begins to decline rapidly due to reserve depletion and pressure reduction. This dynamic is not at all like the factories we are more familiar with, where manufacturing can be maintained at a constant level for many years without major new investments.

Indeed, without ongoing capital investments, global oil supply would decline by about 5% per year, which is much faster than even the most aggressive demand reduction scenarios. The bulk of capital investment in oil that many activists criticise is not associated with growing demand but simply maintaining the supply of what people already need, so keeping prices in check. It is more akin to an “operating cost”.

Finally, the term “exploration” as applied in this industry is widely misunderstood elsewhere.

To many, “exploration” conjures up images of searching across pristine areas for brand-new undiscovered resources. However, in reality, the vast bulk of so-called “exploration” activity in the industry takes place within already discovered fields to guide their safe and efficient development.

In fact, if demand reduction proceeds as hoped, there should be no more need for exploration aimed at discovering brand new fields, but there will still be much need for this other kind of exploration activity. So, managing supply responsibly means maintaining supply in balance with demand, and is completely compatible with the aggressive reduction in demand our environment needs. But it does still involve serious ongoing capital investment and exploration activity. Undifferentiated or blind attacks on those endeavours that just generally discourage them actually work against the kind of just and affordable transition we should hope for.

I hope you will find this article helpful in your quest to accelerate effective and fair energy transitions.

This article is also published on the Business Deccan. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.