Energy war in the name of climate.
In the debate on oil supply versus oil demand, high oil prices destroy demand. When oil costs reach 6% of global GDP, demand will be reduced. The price however, may be anywhere from $130-150 or > $150 / barrel.
In the opposite direction, Tracy Shuchart calculates that peak capital expenditure on oil in 2014 leads to peak supply in 2024. Webster Drake and Derek Brower have argued that oil supply has to come down before demand will come down.
These are serious analysts in the commodities world, yet the phrase “supply has to come down before demand comes down” is discussed academically, as if there is no social cost.
What does pushing down supply actually entail? Experience from Europe’s gas crunch this winter shows that high-energy-use industry is cut first such as France’s biggest aluminium smelter Dunquerque, or UK’s CF Industries Holdings fertilizer plants in Tyneside and Cheshire. GDP is reduced. Less fertilizer equals less food. Then end users endure high prices, and reduced standard of living, and some decide whether to eat or heat (their home).
Right now Putin has invaded Ukraine, but many say the US, EU and Nato provoked him to do so with eastward expansion of Nato. Among the potential responses are banning Russian oil, even though they produce over 10% of world production and export 5 - 7 million barrels per day of oil or products. This equates to purposely creating an even greater global energy crisis.
If your goal is to kill off the oil and gas industry in the name of climate change, your targets are the three biggest producers - the US, Russia and Saudi Arabia. Oil producers ranked 4, 5 and 6 are Canada, Iraq and either Iran or the UAE.
At present there are sanctions on Russia but not on its oil. However, tanker operators, banks and traders are self sanctioning because of risk. Cargoes of Ural oil are being rejected despite discounts up to $23 / barrel.
Sanctions on Russian oil likely will occur. An even greater energy crisis will be provoked. But here is the kicker: when a negotiated solution occurs between Ukraine and Russia, the west and in particular the present US administration will do all it can to keep sanctions on Russian oil. The goal will be to reduce its oil supply, and therefore global oil supply.
In the US, rather than foment greater domestic oil production to alleviate the crisis, the administration is soliciting oil from Venezuela and Iran. Hmmnn. As if a Venezuelan or Iranian barrel emits less CO2.
With the top 2 global oil producers thus hobbled, who is next in line? Saudi Arabia. Watch out for a renewed concerted effort to “cancel” Mohammad bin Salman, and to sanction Saudi Arabia blaming the Yemen situation.
What will it be for Canada, Iraq, and the UAE? Maybe that is academic depending on what happens to the top 3 producers, and whether the “great reset” proceeds successfully in the name of climate.