Global Coal Surge Undoes 17 Years of US Emissions Reductions // Why We Can't Just Press the "Make More Oil" Button // Social Backlash Troubles Ecuador's Oil Industry

Global Coal Surge Undoes 17 Years of US Emissions Reductions

Climate politics are now playing second fiddle to economic necessity. The result? Coal's come back to take its crown. And the "surging use of coal around the world shows, once again, that the Iron Law of Electricity remains in force," Robert Bryce writes.

Here's a rundown on the coal resurgence per Bryce:

• "In April, China announced it will increase coal output by 300 million tons this year."

• India wants to raise its coal production by more than 400 million tons by the close of 2023.

• Germany, as we know, is replacing Russian gas with its domestic coal.

• The Dutch have removed environmental restrictions on coal until 2024 in response to the energy crisis.

• Austria plans to convert one of its gas plants into a coal plant.

• And Poland is going to increase its coal production to reduce energy costs.

Bryce points out that the coal increases from India and China alone are "about the same volume of emission reductions that were achieved in the U.S. between 2005 and 2020."

The takeaway?

Renewables were never going to get decarbonization done. If we were serious about decarbonization, we would move from coal to natural gas to nuclear--not everything to renewables.

"The good news," Bryce writes, "is that the U.S. is well-positioned to lead on both natural gas (via LNG exports) and in the development and deployment of the next generation of nuclear reactors."

Why We Can't Just Press the "Make More Oil" Button

Peter Tertzakian of ARC Financial joined the Odd Lots podcast over at Bloomberg to talk about why we're struggling to ramp up oil production.

Here are some key takeaways from the interview that help illuminate our present situation:

• The industry is getting hit with a workforce "double whammy": "[W]hat we're seeing and we're going to see more of is that the older generation is set to retire and now with these higher commodity prices, they're going to cash in [...] and be much more apt to exit the business and with nobody coming into the business, it's going to make the problem more acute." The industry will lose institutional knowledge along with the older workers.

• The vilification of fossil, the "end of oil" narratives, and industry emphasis on rewarding shareholders rather than re-investing has hobble oil and gas.

• Shale drilling was so prolific it created a supply glut in the mid-2010s, which then inspired the Saudis to begin their price war to maintain their market share. The situation--along with the negativity accumulated around the industry--drove oil field service companies out of the game.

• Inflationary effects on raw materials and supply chains would make it hard even without the labor problems.

• Years of low prices and low profits drew investors out of oil and gas. ESG has made it worse by cutting off access to other financing available to the industry.

Tertzakian ultimately suggested that to get out of this mess we need to, at least, quit maligning fossil fuels. American leaders need to publicly come out in favor of the industry rather than threatening to end it within the next decade. I encourage readers to listen to the whole episode--I don't agree with everything the man says, but it's quite rich.

Social Backlash Troubles Ecuador's Oil Industry

Like the rest of the world, Ecuador was hit hard by Covid--its oil industry most of all. Now that the country's oil and gas sector is trying to regain footing it's encountering heavy resistance at home while facing serious infrastructure issues.

The United States was hoping to fill the gap made by its Russian energy sanctions with oil from Ecuador, but it's been plagued by setbacks in increasing its production.

"While oil majors such as Shell as well as refiners Valero and Marathon, during March 2022, were sourcing Ecuadorean petroleum the impoverished South American country is incapable of filling the supply gap left by the removal of Russian oil," reports Oilprice.com. "Ecuador, which has proven reserves of over 8 million barrels and was once an OPEC member, keeps experiencing major setbacks that are sharply impacting its petroleum industry."

Civil unrest sparked by rising energy costs has forced the government to declare a state of emergency. Yet, due to infrastructure problems that have caused damaging spills and leaks, protestors have also stormed the Andean country's oil fields, further gumming up its works.

"The industry fallout from the protests in Ecuador and the petroleum industry’s rapidly disintegrating social license is further complicated by a February 2022 Constitutional Court ruling," writes Oilprice.com. "The Andean country’s most powerful tribunal’s finding awarded indigenous communities final decision over oil and mining projects that affect their ancestral lands which cover up to 70% of Ecuador’s oil-rich Amazon."

Put all this together and Ecuador probably grows less enticing and most risk-laden to foreign oil firms by the day. They will struggle to get the money they need to get the industry in proper working order.

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Conversation Starters

• Sri Lanka's energy crisis has gotten so bad it has banned private vehicles from refueling. "The government announced on Monday night that it would also close schools in urban areas for two weeks and would only allow fuel supplies for essential purposes such as medical services, trains and some buses, and vehicles that transport food."

• Russia has defaulted on its debt for the firs time in over a century. While the G7 have claimed this is a sign of how damaged the Russian economy is, Russia insists that it "has the means to fulfill its foreign debt obligations and blamed sanctions for leaving creditors out of pocket."

• Javier Blas has a thoughtful take on how rough winters will be in Europe. European manufacturing is going to take a huge hit. This graph of German electricity prices stood out.

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