Gwyn Morgan: The painful return to energy supply reality
The Ukraine crisis revealed just how narrow the global oil supply margin has become
Last year my year-end column, “Fossil fuel follies of 2021,” focused on the bizarre impacts of the Great March Greenward by net-zero zealots intent on replacing the 84 per cent of global energy supplied by fossil fuels with electricity from windmills and solar panels. Some effects were so ridiculous as to be almost humorous. As 2022 made painfully clear, however, there’s nothing at all funny about the enormous damage currently being inflicted by pursuit of this technically impossible goal.
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Germany’s ill-conceived decision to shut down its zero-emission nuclear plants and replace them with unreliable wind and solar power left it no alternative but to import Russian natural gas. Russia’s contemptible invasion of Ukraine left Germany with a classic Hobson’s choice: either help fund the murderous invasion or devastate its own citizens’ economic and personal wellbeing. Realizing the enormous power that Germany’s need for Russian gas gave him, President Putin cut back gas flows, driving European prices to stratospheric levels.
Events this year also demonstrated the impact of another fossil fuel folly that handed the Russian dictator enormous power. Years of net-zero inspired policies reduced oil supply replacement in Western countries, leaving markets dependent on the so-called “OPEC+ Coalition,” of which Russia is a key member. The Ukraine crisis revealed just how narrow the global oil supply margin has become. Then came the shocking news that most of that thin margin was in the hands of Vladimir Putin.
Western countries were already producing at full capacity — except for Canada, that is, though we have the world’s third largest oil reserves. Urgent calls went out for Canada’s help in lifting Putin’s stranglehold on oil supply. But to no avail: Prime Minister Justin Trudeau had presided over a seven-year anti-oil industry pogrom, thwarting multiple export pipelines that could have helped supply countries now dependent on Putin’s blood oil.
Trudeau’s shameful answer to those calls for help revealed our country as an impotent imposter on the global stage. During his trip to Latvia in March, a reporter asked whether Canada could help make up for the oil supply reductions. His response: “We will be there to support, as the world moves beyond Russian oil and indeed beyond fossil fuels, to have more renewables in our mix.” As I wrote at the time, this breathtakingly bizarre answer came as innocent Ukrainians and their beautiful country were being ravaged by a tyrant who was also threatening the world with nuclear Armageddon.
World oil prices soon skyrocketed to a staggering US$120 per barrel. Though they have since fallen the International Energy Agency projects world oil demand will rise by one million barrels per day annually. The global oil supply/demand margin will continue to be narrow, with virtually all of it in the hands of OPEC+. Oil still fuels over 95 per cent of all transportation of goods and people, with no viable alternative in sight. And the natural gas supply/demand margin is also, and almost certainly will continue to be, narrow.
History is likely to see 2022 as the year when net-zero fantasy ran smack into hard reality. The world’s focus now needs to be on avoiding debilitating shortages of fossil fuels.
That doesn’t mean the net-zero crowd will toss in the towel, of course. They will continue to advocate starving the industry of the funds needed to replace, let alone grow production. But when the cost of driving your car and heating your home starts to squeeze your disposable income, especially as oil-endowed despots continue their predatory behavior, those net-zero voices will fall on deaf ears.
How ironic that the net-zero fantasy has empowered a despicable despot named Vladimir Putin. But he has not been the only beneficiary. The net-zero ideologues have also lauded Chinese President Xi Jinping for his promises to reduce emissions. In reality he has authorized the building of over 200 carbon-spewing coal-fired power plants to supply cheap power to his factories. At the same time, North American and European politicians worshipping at the net-zero altar have mandated costly and unreliable wind and solar power generation and imposed escalating carbon taxes that make it impossible for the West’s factories to compete, leaving consumers no choice but to buy Chinese goods. China then uses those enormous revenues to produce weapons to further its military ambitions.
Who would have imagined that one legacy of the West’s net-zero policies would be two dictators in control of both global energy security and the supply of manufactured goods?
Gwyn Morgan is a retired business leader who has been a director of five global corporations.
