Welcome to the year-end issue of BIC Magazine.
While down from previous record highs, everyone knows that gasoline is much more expensive now than it was just a few short years ago. Natural gas prices are also at record highs. Usually, with the laws of supply and demand, high prices would spur the creation of more supply. Instead, we now have a national and global anti-fossil fuel movement that is suppressing the supply of fossil fuels before there is a replacement. This is literally going to lead world economies to crash if we don’t reverse course.
I think it starts with a common fallacy that goes into these policies, that we can and will replace fossil fuels with green energy to eliminate the production of carbon from our environment. Contrary to this goal of energy transition is the uncomfortable fact that never in the history of humanity have we replaced a form of energy with another form of energy.
Figure A
Figure A
See Figure A which traces the evolution of humanity‘s energy system. As you can see on the left side of the graph, in the early 1800s, mankind got 100% of its energy from burning wood and dung and a little bit of coal. Also in the 1800s, the standard of living was not very high; we used none of the tech that gives us comfort today. There was no middle class; the impoverished lower class was huge and life expectancy was much shorter. In the late 1800s, England began its industrial revolution through the burning of coal, and you can see how the use of coal increased substantially over several decades until it provided the majority of the world’s energy. After coal usage was already high, oil became commercial. Then, natural gas. The greener forms of energy — hydro, wind, solar and other renewable energies — have only become widespread in the last 20 to 30 years.
As a percentage of the world’s energy, you can see the use of wood as a fuel has dropped dramatically from almost 100% to maybe 5-10%. Also as a percentage of energy, the use of coal dropped dramatically in the back half of the 20th century. This might encourage one to think that coal and wood are being replaced by other energies.
Figure B
Figure B
Now look at Figure B. This chart has the same data input as the other chart, but instead of showing a percentage of energy consumed by source, it shows total energy units consumed by source. As you can see, the world has steadily used more and more energy from the early 20th century until now, and the curve has gotten steeper. People seem to like using air conditioning, hot water, computers, cars, cell phones and modern medicine …
What I think is super interesting about the chart is the bottom-line traditional burning of wood and animal dung for heat has not decreased, but actually increased slightly over the last 200 years. The world is also consuming basically as much coal in than ever before, despite decades of vilification from the West.
Take the three hydrocarbon groups: coal, oil and gas. At the end of last year they made up about 81% of the world’s energy. This is what many policy makers and green energy advocates want to replace, despite the world’s need for more and more energy every year. Ten years ago, hydrocarbons made up 82% of the world’s energy. Jeff Currie, economist for Goldman Sachs, recently tweeted, “$3.8 trillion investment in renewables moved fossil fuels from 82% to 81% of the overall energy consumption.”
In summary, cheap energy elevates life. Because of this, the world’s energy pie is growing very quickly. Nobel prize winner Richard Smalley said, “Energy is the single most important factor that impacts the prosperity of any society… It is impossible to imagine bringing the lower half of the economic ladder of human civilization — about three billion people — up to a modern lifestyle without abundant, low-cost, clean energy.” It follows that we do need to develop new forms of cheap and reliable energy. World demand is growing so fast that to replace hydrocarbons, the new forms of energy would have to grow at a rate multiples faster than the pie is growing. There aren’t enough trillions of dollars available to make that happen. Our world needs energy addition, rather than an energy transition.
However, we have immense quantities of natural gas and oil here in America, but you can’t have it because it would solve the crisis some people in power need you to go through. For an illustration, simply see Europe’s current crisis. They are shutting down manufacturing plants because energy is so expensive, and will be burning wood for energy this winter in large part because they have ossified their own energy sources. It’s not easy being green.
Our country and the world are requesting more and more energy. Instead of contracting, we should release American innovation and the amazing abundance that God has blessed us with to bless the world and others.
In the words of the American patriot Daniel Webster, “Let us develop the resources of our land, call forth our powers, build up its institutions, promote all its great interests and see whether we also, in our day and generation, can perform something worthy to be remembered.”
I hope the info in this issue of BIC helps you play your role in developing the resources of our land. In this issue, API Economist Dean Foreman echoes similar thoughts as he discusses the lack of economic and energy security in our current context. Additionally, Tim Sutherland of Chevron and Victor Turrion of Covestro both speak timely to problem-solving and interpersonal skills that help lead today’s diverse teams.
Thank you for reading BIC. Please share this article or issue with others, and remember Webster’s call to see if we also, collectively, in our day and generation, can perform something worthy to be remembered.
