7th January 2015: 'Environmentalism's 'oil price panic'' » 2015 » Mobbsey's Musings » Paul Mobbs/MEI » FRAW

method not allowed
Method not allowed!

Environmentalism's 'oil price panic':
concerns reflect their own existential crisis, not the victory of fossil fuels

Paul Mobbs, "Mobbsey's Musings", 7th January 2015


"Collapsing oil prices should give everyone in the 'green movement' cause for reflection."

Say what! Really? Why is that?

I see the introduction to Steve Melia's recent article[1] for The Ecologist as indicative of a more general problem of how the environmental debate handles complex issues. Simplistic statements, such as that above, don't necessarily reflect the complexity of the available evidence.


The article continued in the same vein...

"With lower prices forecast to last for the next couple of years...".

Really? Yet again there's little evidence to support those rosy projections, and many would state the contrary[2]. Even environmentalism's detractors question such assumptions these days[3].

For me, recent articles such as this[4] expose the environmental debate's quiet existential crisis. A movement whose outlook has become narrowed by external forces as it has become skewed towards a media-led agenda; and which has shifted towards popularity rather than objectivity in addressing our ecological position as a species[5].

If we were to rely solely on what we see in the mass media, environmentalism is no longer a search to reconcile human needs to the limitations of their ecological circumstances. It has become a debate over competing consumer choices which reflect, unquestioningly, the dominant consumer debate[6] over affluence and, albeit "green", growth; and dominated by the single metric of carbon.... oh, and pandas![7]

The fact that we only significantly cut emissions[8] and consumption during recessions[9], or that we're running out of the resources to manufacture green technologies[10]oh, that's so 1970s![11]

It's not environmentalism's fault, but it requires their participation.

As outlined recently by Adam Curtis[12], the purpose of the modern, engineered media debate is not to inform, it is to confuse. "Doubt is their product"[13].

The purpose of this approach is not advance a specific debate over change, instead it deflects criticism from existing practices. This happens because statements and arguments are not based upon evidence[14], but rather popularly acceptable and often contradictory assumptions – all of which engenders a widespread cognitive dissonance over precisely what 'reality' is.

That's also a problem for major players in the environmental movement today, whose raison d'etre is to chase the media agenda to advance their cause.

Especially with on-line and 24-hour rolling news, the herd mentality governing the media melee overrides the 'deep green' fundamental questions about lifestyle which 'traditional' environmentalism raises. This is especially true in relation to evidence which contradicts the media's dominant political message of growth and affluence[15].

For example, one of the ground-breaking – but little discussed – recent climate documentaries is Cowspiracy[16]. It examines the range of available evidence on one of the single biggest practices harming the global environment today; meat-eating. One startling part of the film[17] is when they interview campaign groups, who largely ignore or side-step the issue, or failed to acknowledge it altogether (Greenpeace refused to appear).

Why do media-led campaign groups feel the need to follow 'the script' the modern managed media assigns to them? Rather than, for example, standing apart and seeking to define their own agenda outside of the 'usual channels'. This is what the movement did during the 1970s and 1980s – and, thirty or forty years later, contrary to its anti-consumerist 'hair shirt' depiction[18], the weight evidence today shows that stance to have been correct[19].

So what is happening with oil prices?

The recent environmental debate on oil prices is an exemplar for how a failure of analysis is leading to a wholly mistaken assumptions about present trends. And again, it's because people are following a simplistic mass media agenda, rather than seeking to understand the range of evidence available – and use that understanding to their advantage.

Oil prices are falling because many the world's strategic investors think the global economy is knackered. To understand why we need to look across all commodities, not just oil[20].

It if was just fracking, or a glut of conventional oil driving prices down, oil prices would be falling relative to other commodities. That would be a boon the the global economy and global growth – and yes, people would consume more oil.

But that's not what we see.

Instead, nearly all commodity futures – from copper to cotton to tin – have been trending down over the last year[21]. That's due to the global economy stalling, cutting consumption generally, reducing demand, and thus driving all commodity prices down. In fact, economists are now worried about deflation. As prices fall, people put off buying stuff in the hope they can get it cheaper in the near future – which depresses the economy even more.

Objectively though this is brilliant for the environment. Far more so than the paltry measures governments are using to address ecological issues – as the Australian finance minister recently admitted[22].

Whether you 'believe' in economics or not, the markets are reflecting the belief that, irrespective of the contradictory hogwash that lobbyists push into the media, there's potentially another global crash coming. Remember, the problems of 2007/8 were never solved – they were just bailed out.

This is about economic power, not prices

The recent fall in oil prices has little to do with fracking. It arguably does have a link to the 'ecological limits' outlined by the peak oil debate, due to the changing the balance of power between OPEC and non-OPEC producers it creates. But the greatest factor here is geopolitics.

For the last fifty years OPEC has been what's called the 'swing producer'[23]. Whether OPEC opens or closes the taps largely determines the global supply oil – allowing them to manipulate the price. That power can be used for the benefit of the industry, raising prices to encourage investment, or for more nefarious political purposes[24].

Of course the Middle East, by cutting production, potentially takes a hit on their income[25]. To make matters worse, all their own loss does is to prop-up the more expensive production in the non-OPEC regions of the world – especially off-shore, in the Arctic, and unconventional production.

With a possible climate deal looming in December[26], and with the issue of 'stranded assets'[27] beginning to sink-in to the thinking of market investors, does being the 'swing producer' benefit OPEC any more? That is perhaps what this current "crisis" is really about.

The Middle East produces almost half the world's crude oil[28], and it does so relatively cheaply. However, the idea that OPEC's 'cheap oil' will guarantee low prices ignores the near fifty trillion dollar cost[29] which the IEA consider essential[30] to maintain global energy production – which requires a near $100 to $115/barrel price to be economically viable.

Over the last decade, the fossil fuel industry had never invested so much money for such a small return[31]; and that lower productivity is worsening the ecological footprint[32] of their product. Somewhere between 60% and 75% of current production might be considered 'conventional' or "easy oil". The remainder – the more extreme[33] 'conventional' and unconventional sources, from the Niger Delta, to the Arctic, to the deep waters of the Gulf of Mexico, to fracking – is causing some of the highest ecological damage per unit of fuel produced.

If a climate deal, and acceptance of stranded assets[34], preserves the global balance of production in 2015/16, then it's in OPEC's interest to make sure they are the only oil producing group in the room. By driving down prices – making all that marginal production in Europe, the Americas, Africa and Australia uneconomic – they may well be the last guys standing, if/when we have to ration future production to meet the needs of a realistic climate deal.

That turns Melia's argument on its head

Far from weakening the environmental argument, as production limits begin to bite, the tussles within the industry are actually benefiting (at least in the short term) the objectives of the environment movement. Obviously OPEC are not doing this to help the environment, but we have to recognise this as a potential short-term outcome of their actions.

And on the far side of the present economic downturn? If OPEC get their way there will be less oil and gas capacity available in a year or two. If demand rises energy prices will spike once more, holding-down demand – again, a benefit for the environment (and OPEC).

Of course this is all geopolitics; and all these geopolitical power plays are incredibly short-term. It does absolutely nothing to address the fundamental ecological trends defining peak oil[35], nor the greater 'limits to growth'[36] which may collapse the global economy well before dangerous climate change does. But that's another – and far more complex – debate!

Environmentalists should be cheering on OPEC! They're bankrupting the companies environmentalists love to hate! From the North Slope of Alaska, to tar sands and the Keystone pipeline in Canada, to the fracking patch of the Dakotas, they're curtailing the development of some of the most damaging sources of petroleum operating today. We don't have to like OPEC, but we have to recognise the 'unintended consequences' their actions may have for the global environment.


References:

  1. 'Peak oil' – the wrong argument for the right reasons, Dr Steve Melia, The Ecologist, 23rd December 2014 – http://www.theecologist.org/blogs_and_comments/commentators/2687782/peaknbspoil_the_wrong_argument_for_the_right_reasons.html
  2. Oil prices likely to rebound in second half of 2015, Koustav Samanta and Vijaykumar Vedala, Reuters, 22 nd December 2014 – http://www.reuters.com/article/2014/12/22/us-oil-prices-idUSKBN0K00W320141222
  3. Facing Up to End of 'Easy Oil', Ben Casselman, Wall Street Jounal, 24th May 2011 – http://www.wsj.com/articles/SB10001424052748704436004576299421455133398
  4. New era of cheap oil 'will destroy green revolution', Tom Bawden, Independent On-line, 12th December 2014 – http://www.independent.co.uk/environment/new-era-of-cheap-oil-will-destroy-green-revolution-9922217.html
  5. Tracking the ecological overshoot of the human economy, Wackernagel et al., PNAS, vol.99 no.14 pp.9266-9271, 9th July 2002 – http://www.fraw.org.uk/files/limits/wackernagel_2002.pdf
  6. Naomi Klein: the hypocrisy behind the big business climate change battle, Naomi Klein, Guardian On-line, 13th September 2014 – http://www.theguardian.com/environment/2014/sep/13/greenwashing-sticky-business-naomi-klein
  7. Conservation must stop wasting money and energy on giant panda and other cute animals, warns Chris Packham, The Independent on Sunday, 13th October 2013 – http://www.independent.co.uk/environment/nature/conservation-must-stop-wasting-money-and-energy-on-giant-panda-and-other-cute-animals-warns-chris-packham-8877739.html
  8. Growth, degrowth and climate change: A scenario analysis, Peter A. Victor, Ecological Economics, vol.84 pp.206-212, December 2012 – http://www.fraw.org.uk/files/economics/victor_2011.pdf
  9. On the Cusp of Global Collapse?: Updated Comparison of The Limits to Growth with Historical Data, Graham M. Turner, Gaia, 2/2012 pp.116-124, June 2012 – http://www.fraw.org.uk/files/limits/turner_2014.pdf
  10. Critical Metals in Strategic Energy Technologies: Assessing Rare Metals as Supply-Chain Bottlenecks in Low-Carbon Energy Technologies, Moss et al., EC Joint Research Centre, November 2011 – http://www.fraw.org.uk/files/limits/ec_jrc_metals_2011.pdf
  11. Can a collapse of global civilization be avoided?, Paul R. Ehrlich, Anne H. Ehrlich, Proceedings of the Royal Society B, vol.280 no.1754, 7th March 2013 – http://www.fraw.org.uk/files/limits/ehrlich_2013.pdf
  12. Charlie Brooker's Wipe 2014 – Adam Curtis, YouTube, 31 st December 2014 – https://www.youtube.com/watch?v=wcy8uLjRHPM
  13. Wikipedia: 'Doubt is their product'http://en.wikipedia.org/wiki/Doubt_Is_Their_Product
  14. My wish for 2015: a machine to judge political claims against reality, Paul Mason, Guardian On-line, 4 th January 2014 – http://www.theguardian.com/commentisfree/2015/jan/04/economy-accurate-model-greek-debt-social-house-building
  15. Paul Mobbs/MEI: 'Ecological futures'http://www.fraw.org.uk/mei/ecological_futures.shtml
  16. Cowspiracy: The Sustainability Secrethttp://www.cowspiracy.com/
  17. YouTube: 'Cowspiracy – official trailer'https://www.youtube.com/watch?v=nV04zyfLyN4
  18. Porritt warns greens to mend 'negative' ways, Juliette Jowit, The Observer, 6th November 2005 – http://www.theguardian.com/politics/2005/nov/06/uk.books
  19. Limits to Growth was right. New research shows we're nearing collapse, Graham Turner and Cathy Alexander, Guardian On-line, 2nd September 2014 – http://www.theguardian.com/commentisfree/2014/sep/02/limits-to-growth-was-right-new-research-shows-were-nearing-collapse
  20. BBC News: 'Commodity Prices'http://www.bbc.co.uk/news/business/market_data/commodities/default.stm
  21. Oil price crashes through $53 barrier sparking equity sell-off, John Ficene and Ben Martin, Telegraph On-line, 5th January 2015 – http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11325616/Oil-price-tumbles-through-55-barrier-sparking-equity-selloff.html
  22. Fall in greenhouse emissions due to economy not carbon tax, Coalition says, Oliver Milman, Guardian On-line, 28th December 2014 – http://www.theguardian.com/environment/2014/dec/28/fall-in-greenhouse-emissions-due-to-economy-not-carbon-tax-coalition-says
  23. Wikipedia: 'Swing Producer'http://en.wikipedia.org/wiki/Swing_producer
  24. Cheap oil will win new Cold War with Putin – just ask Reagan, Andrew Critchlow, Telegraph On-line, 10th November 2014 – http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11220027/Cheap-oil-will-win-new-Cold-War-with-Putin-just-ask-Reagan.html
  25. How low could oil prices go?, Jennifer Rankin, Guardian On-line, 6th January 2015 – http://www.theguardian.com/business/2015/jan/06/how-low-could-oil-go
  26. COP21, Parishttp://www.cop21paris.org/
  27. Wasted capital and Stranded Assets, Carbon Tracker, 2013 – http://www.carbontracker.org/report/wasted-capital-and-stranded-assets/
  28. Oil section – BP Statistical Review of World Energy, June 2014 – http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-oil-section.pdf
  29. World needs $48 trillion in investment to meet its energy needs to 2035, IEA (press release), 3rd June 2014 – http://www.iea.org/newsroomandevents/pressreleases/2014/june/name,72035,en.html
  30. World Energy Investment Outlook 2014 Factsheet, IEA, June 2014 – http://www.iea.org/media/140603_WEOinvestment_Factsheets.pdf
  31. How increased inefficiency explains falling oil prices, Gail Tverberg, Our Finite World, 29th December 2014 – http://ourfiniteworld.com/2014/12/29/how-increased-inefficiency-explains-falling-oil-prices/
  32. EROI of different fuels and the implications for society, Hall et al., Energy Policy, vol.64 pp.141-152, 2014 – http://www.fraw.org.uk/files/peakoil/hall_2013.pdf
  33. Extreme Energy Initiativehttp://extremeenergy.org/
  34. Stranded Carbon Assets: Why and How Carbon Risks Should Be Incorporated in Investment Analysis, Generation Foundation, 30th October 2013 – http://www.fraw.org.uk/files/climate/generation_foundation_2014.pdf
  35. Economic vulnerability to Peak Oil, Kerschner et al., Global Environmental Change, 13th October 2013 – http://www.fraw.org.uk/files/peakoil/kerschner_2013.pdf
  36. Looking Back on the Limits of Growth, Mark Strauss, Smithsonian Magazine, April 2012 – http://www.smithsonianmag.com/science-nature/looking-back-on-the-limits-of-growth-125269840/?no-ist