China, Russia and Iran will exploit the U.S. retreat on fossil fuels.
The U.S. is barreling toward one of the greatest self-inflicted wounds in its history. This came into sharper focus last week when President Biden suspended oil leases in Alaska’s Arctic National Wildlife Refuge (ANWR), even as Russia and the Organization of the Petroleum Exporting Countries (OPEC) announced production increases.
Mr. Biden’s anti-carbon fusillade will have no effect on the climate as global demand for fossil fuels will continue to increase for decades no matter what the U.S. does. Meantime, Russia, China and Iran will take advantage of America’s astonishing fossil-fuel retreat.
Not long ago, the U.S. depended on OPEC for much of its oil supply. But hydraulic fracturing and horizontal drilling enabled producers to extract oil and natural gas once believed unrecoverable. Shale frackers from North Dakota to Texas unleashed a surge of oil and gas onto global markets, breaking OPEC’s dominance on supply. OPEC tried to break U.S. producers by flooding markets, but frackers became more efficient. By 2019 the U.S. was producing nearly two-and-a-half times as much crude as in 2008. OPEC and Russia have had to limit their production to lift prices to shore up budgets that depend on petrodollars.
Two weeks ago the hedge fund Engine No. 1 allied with big asset managers, government pension funds and proxy advisers ousted three Exxon Mobil board members in a climate proxy battle. Shareholders also passed a resolution requiring Chevron to reduce its downstream emissions. The latter is a de facto mandate to withdraw from oil and gas.
America’s big banks have red-lined U.S. coal companies and refused to finance oil projects in ANWR, which the 2017 GOP tax reform opened up to development. Now the Biden Administration is trying to wall off the Arctic again as it launches a regulatory assault on fossil fuels—from tighter emission rules to endangered-species protections.
The anti-carbon left says the U.S. must banish fossil fuels to meet the Paris goal of limiting global warming to 1.5 degrees Celsius relative to pre-industrial temperatures. This is incompatible with a worldwide population that is expected to grow by two billion by 2050. It would require an enormous reorganization of the global economy that would keep billions in poverty.
Electric vehicles would have to make up 60% of worldwide car sales by 2030, according to a recent International Energy Agency report. “You have 800 million people who do not have access to electricity. You can’t say that they have to go to net zero [carbon]. They have to develop,” Indian Minister of New and Renewable Energy Raj Kumar Singh said in March.
Unless there is some technology breakthrough, demand for fossil fuels will continue to grow for decades. And Russia and China will take advantage of U.S. energy disarmament. Russian oil giant Rosneft warned last fall that retrenchment by U.S. and European companies would result in higher prices and shortages. “Someone will need to step in,” Rosneft senior executive Didier Casimiro said.
In November Rosneft announced a $170 billion oil and gas project in Russia’s north, which it claims can supply the entire world’s oil demand for a year. It says the project will become the world’s largest liquefied natural gas producer by 2030. Russia is also laying down thousands of miles of oil and gas pipelines to supply Europe and Asia.
Vladimir Putin is gloating that Russia’s Nord Stream 2 gas pipeline to Germany will soon be finished, as Mr. Biden has refused to sanction Russian companies running the project. But he didn’t care about upsetting Canada when he killed the Keystone XL pipeline. Nor Alaskans when he suspended the ANWR leases. Mr. Biden wants to curtail North American energy development while he stands by as Russia uses its natural resources for strategic gain.
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June 10, 2021
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