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Analysis

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The age of oil is far from over

by Ralph Schoellhammer

European Central Bank President Christine Lagarde has previously championed renewable energy. Credit: Getty

The Eurozone economy is “set for a painful reckoning”, culminating in a hit of at least 3.8% on the economy which could rise to 5% depending on energy prices, according to Bloomberg. In light of this forecast, it is about time Europe adapted its energy policy, placing it on a more realistic footing.

It would seem that a new energy crisis is already baked into the cake. Despite the bloc’s efforts to wean itself off the oil, the truth is that it will hardly make a dent in consumption. The International Energy Agency (IEA) predicted an oil demand peak of 100 million barrels per day (mb/d) in 2019, to be followed by a decline to 75 mb/d by 2030. Now, the IEA has reversed course and projects 105 mb/d in 2028, yet that number is, as things stand, set to be attained much sooner. Analysts believe that renewables can replace crude oil, but a closer look shows why these hopes are futile. 


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According to energy economist Anas Alhajji, only about 3% of global electricity is produced from oil. No matter how quickly we are building out wind and solar, then, this will only have a very small effect on the need for crude oil, and that demand is going to grow. The wealthiest billion people on the planet use roughly 13-14 barrels per capita of energy; the other seven billion inhabitants, by comparison, only use about three barrels per capita. Unless we assume that 7/8ths of the world’s population have no interest in improving their living standards, global energy consumption will increase rapidly in the coming decades, just as it has in the past. 

Can it be covered by renewable energy alone? The largest investor in renewables is China, but at current investment levels it would take Beijing 211 years to reach Net Zero. Looking at these numbers, it is no surprise that in 2022 China used more coal than the rest of the world combined. 

None of this precludes the use of renewables where appropriate, but there is a serious risk that blackmailing investors and companies into stopping the necessary expansion of oil and gas exploration will lead to supply shortages in the coming years. This is especially true if the global economy picks up speed once again. Even some of the most vocal renewables proponents acknowledge this — including Norway, which has recently approved another $18 billion in oil and gas investments.

To say that the world is on the brink of a transition away from fossil fuels is simply not true. A glance at the data shows that, at best, renewables can slow down the growth of energy produced from traditional sources. Elimination is another matter entirely.

As the UK and Germany demonstrate, forcing people into an energy policy that threatens their standard of living can only turn them against the entire project of a renewables-based economy. If we do not switch to a more gradual transition that protects personal interests, an economic crisis in 2024 could mark the end of the entire renewables industry, as they will become a primary target for public ire and populist parties alike.



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