There’s a rule in whitewater rafting, where sound is often impeded and gestures distant. Never point at a threat, only point at the correct way to go. “Point Positive” @geonv
Dear Readers,
After the longest, warmest summer I can remember in Chicago, winter is coming and forecasters are predicting that it will be severe. As power shortages flicker across the globe, world leaders will be meeting in Glasgow on October 31st to discuss the future of climate change, which really means they will be talking about energy. Many will tout the advantages of an electrified future free of the environmental effects of carbon energy. But is this realistic or even desirable? Will we discover that energy diversification provides the optimal outcome?
My guest on Episode 20 of the Hale Report is Albert Bressand. His full biography is here but it is important to note that not only is he an expert in the field of energy, he is also one of the original developers of scenario planning at Shell. Now a professor at University College London, he will challenge your assumptions about the future of energy, which is critical to every sector and to the recovery of the world economy from Covid.
As Prof Bressand explains, we are used to thinking about strategy which simply means finding the best way to achieve a predetermined goal. In the current complex environment, we need to zoom out, and look at what might happen, and the scenarios that could unfold, regardless of what our wishes might be.
Bressand believes that we have not thought realistically about the consequences of abandoning carbon energy in favor of electrification, especially for transportation, because the electric grid can be hacked and it is not necessarily sustainable. Renewable energy is not really renewable. The machines that deliver energy in whatever form eventually have to be replaced.
I think about this from a geopolitical viewpoint. The US has just recently become energy independent, thanks to fracking technology. A fully electric future will require us to pivot from the Middle East to the Far East. Commodity minerals required for electric car batteries are primarily sold by China. As Mark Mills from the Manhattan Institute explains in his presentation to the National Association of Business Economists, we probably have those minerals here beneath our feet in the US. But getting mines up and running will require 10-15 years. A single electric car battery requires 500,000 lbs of materials to be mined.
Bressand thinks that we should prioritize using our resources and simultaneously develop better technologies to deliver clean energy from carbon. The reality is that 81% of global energy usage is carbon based—the same as in 1999, as Bob Dudley, the former head of BP recently told PBS News Hour. We fool ourselves with initiatives such as the Paris Agreement, which allows each country to set its own standards and goals, meaning that it is not really an agreement at all. I am similarly pessimistic about the the results of the upcoming COP 26 meetings. Despite virtue-signaling by politicians, we should consider the scenario that a diversified energy plan that includes carbon-based energy is in fact optimal, and fuel innovation in new fields such as solar geoengineering.
I attended the International Banking Seminar of the Group of 30 today, which functions as the closing session of the IMF/World Bank meetings. Inflation and energy were the interlinked topics discussed by key policymakers. I asked a question about the affordability of new requirements for extensive reporting of carbon emissions by private firms worldwide by mid-2022, suggesting that money might be better spent on innovative technologies such as geoengineering. Mark Carney’s response confirmed my fears that regulators don’t understand the true costs they are imposing on private enterprises wracked by uncertainties over taxes, logistics, labor, geopolitics, and Covid’s uncertain path. Augustin Carstens said that he was concerned about premature interest rate hikes; new regulatory regimes are another form of tightening.
Larry Summers responded by citing David Keith at Harvard whose work convinced him that solar geoengineering might be a way out of the climate conundrum. I quote a 2021 paper by Keith below that surprisingly suggests that geoengineering is an area of common ground for China and the US, the two largest carbon emitters.
In the course of our discussion, Bressand argues convincingly that we will fail to reach an international climate consensus and one likely solution will be found in geoengineering. Although derided by Prince William, space exploration by Musk and Bezos might not be off-course at all, but are a point positive towards a sustainable energy future. I hope you enjoy the podcast and the other links below. Comments are open, and appreciated!
October, 2021 / National Association of Business Economists Annual Meeting
VIDEO
Challenges of the US Energy Transition (links below)
Panel
Challenges of the U.S. Energy Transition | Video
Mark P. Mills, Senior Fellow, Manhattan Institute | slides
Karen Palmer, Senior Fellow, Resources for the Future | slides
Jigar Shah, Director, Loan Programs Office, U.S. Department of Energy | slides
Moderator: Martha Moore, Chief Economist, American Chemistry CouncilWhat I learned from this panel: there is no such thing as renewable energy. Energy requires machines and those machines, like wind turbines and batteries, wear out and have to be replaced. All the presentations were first-rate, but I highly recommend Mark Mills’ presentation and slides. Many thanks to NABE for making these presentations available to non-members.
October 14th, 2021 / PBS News Hour
VIDEO
Why Energy Prices Are Spiking Globally and How it Affects Green Initiatives
1999, 81 percent of the world's energy was oil, gas and coal. 2019, 81 percent of the world's oil and gas and coal produce the energy. By 2050, we will have two billion more people on the planet. We're going to need all forms of energy, and we have got to take the emotion out of it. Bob Dudley, former CEO of BP
Humanities and Social Sciences Communications Volume 8, Article number: 18 (2021)
PAPER
Elicitation of US and Chinese expert judgments show consistent views on solar geoengineering
Zhen Dai, Elizabeth T. Burns, Peter J. Irvine, Dustin H. Tingley, Jianhua Xu, David W. Keith
Our work hints at a basis for US–China collaboration on SG as climate experts agree on a broad range of issues despite some striking differences. In particular, there is unanimous agreement that funding for SG research should increase, even though experts remain very cautious about deployment. These results are surprising given that prior literature assumed sharply different levels of support for SG research and focused on factors that might cause Chinese and US decisions on SG to diverge.
September 29,2021 / IHS Markit
ARTICLE
Keeping Us Warm this Winter: Oil to Bridge the Gap While Natural Gas Price Soars
Hedi Grati
As natural gas prices climb higher, and with relief not forthcoming on the supply side, consumers are switching to cheaper alternatives. Besides a switch to coal, the oil complex has a role to play in providing an alternative to gas…That said, global oil demand is set to remain well below prepandemic levels. Bearish risks remain as we enter winter and the specter of COVID-19-related containment reemerges.
Jan 1, 2000 / Energy Monitor
Article
Opinion: LNG exports are backfiring on the US oil and gas industry
Justin Gerdes
Until recently, the US natural gas market stood apart from the world. Exports by pipeline to Canada and Mexico increased steadily over the past decade, but North America remained a regional market. …However, that closed system has cracked open.
October 9, 2021 / the Economist
ARTICLE
The age of fossil-fuel abundance is dead
For much of the past half-decade, the operative word in the energy sector was “abundance”….In recent weeks, however, it is a shortage of energy, rather than an abundance of it, that has caught the world’s attention.
October 8, 2021 / Bloomberg
ARTICLE
It’s Tough Taking ESG Investors Too Seriously
Jared Dillian
An emerging-markets ETF that invests based on political, economic and civil freedoms and has outperformed should have no trouble attracting assets, but it does.
October 4, 2021 / OilPrice.com
ARTICLE
The Oil Major Primed To Profit In The Permian
David Messeler
European oil majors are working hard to cut their emissions by shedding assets as they attempt to become energy majors
September 8, 2021 / New York Times
ARTICLE
Your Batteries Are Due for Disruption
Cade Metz
This week, a more efficient type of battery arrives in a wristband fitness tracker. It could soon reach smart glasses, cars and even aircraft.
Recent Podcasts
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The New New Economy: How We Got Here & What’s Next
Robert J Shapiro
In Episode 19 of the Hale Report, Economist Robert Shapiro shares his insights on economic policymaking and the future of the US economy, and the dark side of globalization.
EPISODE 18 | 52 mins
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In Episode 18 of the Hale Report, Lyric Hale interviews Robert Madsen, Senior Economist at Hale Strategic, and an EconVue contributor. They discussed China, Japan, South Korea, Taiwan, and US economic policy.
EPISODE 17 | 46 mins
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Joe Atikian
In Episode 17 of the Hale Report, Joe Atikian discusses his new book, Autonomous, The Coming Crash of Self-Driving Cars. Especially interesting in view of the news about the Tesla probe today.
Lyric Hughes Hale
Editor-in-Chief
EconVue
Chicago
lyric@econvue.com
Twitter: @lyrichues
@HaleReport
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