Gas, it seems is the way forward, according to the Prime Minister.

It seems to me that the conflicted debate about the evolution of our energy sources between fossil fuels and renewables, who wins and who loses, is more about the deployment of capital, and the beneficiaries of that deployment, than anything else. Platitudes about consumer energy prices, offering manufacturing the opportunity to have power at competitive rates is all very fine, and correct, just a few decades slow in coming.

For the whole of the 20th century, the geopolitical landscape around the world was driven by fossil fuels, and perhaps to a lesser extent other extractive industries.

The enterprises, public and private, made their owners and leaders rich by extracting profits, most often rewarding themselves for the largess provided by geography and to a lesser extent, politics and luck. They were, and continue to be an extraordinarily powerful force, often below eye level of the general public. Communities and the individuals in them have benefited from these industries, but not nearly as much as those that control them.

Now, the economic worm has turned, and renewables are becoming rapidly more economically viable, the extractive fossil fuel industries are being squeezed. As the battle for market share has intensified, we see the price of oil has dropped dramatically, and productive assets and their supply chains are being increasingly stranded.

The current oil price is around $40/barrel and under significant downward pressure, while at the same time, extraction is increasingly capital intensive, as the ‘easy oil’ is running out. This combination of downward price pressure, increasing competition from other energy sources, and increasing capital intensity is a harbinger of a wave of bankruptcy as the higher cost wells are closed as uneconomic. I am old enough to recall the very real concern about ‘Peak Oil’ back in the seventies, when the world was supposed to be running out of the stuff. Now the price in dollars is almost the same as it was 30 years ago.

Ref https://tradingeconomics.com/commodity/crude-oil

Listen to the discussion of the modest resurgence of US manufacturing, the low price of fuels comes up, particularly natural gas as the driver. Gas is now at about 2.40/MMBtu, the same price it was back in the early nineties, a sixth of the price 15 years ago, having undergone a roller coaster ride.

This would appear to me to be commercially unsustainable. Gas is (as I understand it) even more capital intensive than oil, as gas wells generally do not have a long life before the resource is exhausted, and therefore need a return in a very short time frame to justify the investment risk.

This is before the environmental risk is considered.  I have absolutely no expertise in this area, but have heard a very knowledgeable source describing the fracking process as: ‘being like locking the exit doors in a multi story building , and yelling fire, then watching where the leaks occur as the pressure builds’.  In areas of sensitive geology, this is unlikely to have any positive impacts at all, particularly after the gas has been released, and the gas company moved elsewhere to repeat the exercise.

(Gas is measured in BTU’s, or British Thermal Units, which is the quantity of heat content in a fuel. 1 BTU is the quantity of heat required to heat a pound of water by 1 degree Fahrenheit when the water temperature is at 39 degrees Fahrenheit. A MMBtu is 1 million BTU’s)

Then there is coal, a similar roller coaster, and currently below the prices of 20 years ago. There are many grades of coal, some less price sensitive than others, but they all share similar characteristics as being dirty, and now cheap, under the cost of production of all but the most productive mines.

Then you have the cost of renewables, dropping by huge amounts over the last decade, photovoltaic by over 80%, less for wind .

(CSP is concentrated solar power) Graph https://www.irena.org/newsroom/articles/2020/Jun/How-Falling-Costs-Make-Renewables-a-Cost-effective-InvestmEnt

Of course the numbers depend a bit on who you use as a source, and what sort of granularity on the data you are seeking, but the trends are unmistakeable.

At some point, fossil fuels will become completely uneconomic, and we are probably not far from that point. When that happens, investment will cease, the ownership of these entities will pack up, having extracted all the returns that can, and move on. What will be left is the massive clean-up bill.

Who will be paying the clean-up bill?

We will, taxpayers, the public, from whom the fossil fuels industries have already extracted super profits from the jointly ‘owned’ resources.

I am not a green lefty by any means, but am concerned at the legacy being left to my children and more specifically my grandchildren. It is them that will carry the greatest burden of the clean-up.

There are many people with the chops necessary to speak on these topics from a point of expertise, I am little more than a concerned observer. However, the science is unequivocal, and there are paths to improvement.

Barry Jones when Minister for science in the Hawke government keynoted with Al Gore in a 1984 an ‘Ozone layer’ summit in London, sponsored by the darling of conservatives, Maggie Thatcher. This led to the Montreal Protocol, an international agreement to ban the manufacture and distribution of CFC’s. They were replaced by HCFC’s, which did less damage, and have been subsequently replaced again by chemicals with even less impact. Perhaps I am being cynical, but I see the profits of chemical companies driving this change, rather than the need to act for the general long term good. Nevertheless, the science has been undisputed by experts for almost 40 years.

It seems that so far, there are insufficient numbers in the halls of political power listening to scientists, unless it suits them to do so, as in the current Corona crisis.

I cannot believe it is because they are stupid, or blind, rather that they comply with that wry observation made in varying forms by several including Upton Sinclair: ‘It is useless to argue with a man whose opinion is based upon a personal or pecuniary interest’

Somehow, we need to poke a lighted stick up the arses of those who continue to push for the retention of fossil fuels as a core of our energy mix and export income. In the absence of any action to make change, we will be in even deeper trouble than I think we are.

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