"Americans are worrying about their
gas prices. Germans are turning down their heating. Peru has seen violent protests — and a violent
crackdown on them — over rising fuel and ferttilizer costs. Nigeria’s national
energy grid recently collapsed.
And that’s just this spring. Focused on the future, the United Nations
Intergovernmental Planet on Climate Change warned in a report on April 4 that
too much investment is going into fossil fuels and too little into the energy
transition that could prevent a devastating increase in global temperatures.
This persistent, simmering crisis
around energy, its cost and the politics around it will not end soon.
Sanctions have pushed up prices and forced Europe — until
now the largest importer of Russian natural gas — to begin an attempt to end its
longstanding dependence on Russian gas. For nearly a year supply struggled to
meet demand, causing prices to surge. For the best part of a decade, the
American shale boom met the world’s rising energy needs, but in 2020 shale oil
output slumped and the rate of growth of shale gas fell.
President Biden’s hope that he could focus his presidency on
the climate, not fixing the world’s oil supply, shattered. Unable to resurrect a nuclear deal with Iran
that would have restored Iranian oil to world markets, Mr. Biden began last
year to ask other producers to increase their output. His pressure was to no
avail. Meanwhile, China’s demand for gas imports grew by 20 percent
over 2021, helping push European gas prices up nearly sixfold
between March and December.
That was already putting pressure on politicians, but the
sanctions shock — oil prices rose by one third in the first two weeks after
sanctions — has exposed just how much governments fear rising fossil fuel
costs, never mind their optimistic rhetoric that high prices will encourage a
transition to greener energy sources. By releasing one million barrels of oil a day
from the Strategic Petroleum Reserve between May and November, Mr. Biden will
inject the largest-ever volume of emergency American supply into the market
since the stockpile was established in 1975. It will provide, at best,
temporary relief. And as Asian countries start to adjust to a world in which
ships bearing liquid natural gas turn away from the Pacific and redirect to
Europe, their demand for coal is going up.
All of this means higher energy prices for everyone,
everywhere — unless economies return to the recessions they endured during the
pandemic, an option no one hopes for.
The parallels with the 1970s are
obvious. The oil shock in the wake of the Yom Kippur War in October 1973, which
involved the world’s rising oil producer, Saudi Arabia, was extremely
disruptive economically and geopolitically. That first shock was followed in
1978-79 by the revolution in Iran and Iraq’s invasion of Iran, plunging the two
oil producers into a long war.
Then, one geopolitical era — with
the United States as the world’s largest oil producer and Britain as (when
Washington let it act) the military guarantor of Western energy interests in
the Middle East — unraveled. As the Arab states seized control of production
and prices from the seven big Anglo-American companies that had controlled oil in
the Middle East for decades, Western economies stagnated under the inflationary
pressure, supercharging protests, strikes and electoral realignments across
Western democracies.
What lies ahead promises to be more disorderly — and
ultimately transformative — than the events of the 1970s. This is, indeed, a
bigger disruption. During the geopolitical upheaval of the 1970s, the physical
supply of oil from the world’s reserves was never the issue. Now, with Asian
energy demand vastly higher than it was, it is. And demand for gas and coal may
well also exceed worldwide output over the next few years. We appear to have
entered a time when countries will have to compete for the world’s remaining
accessible fossil fuels and governments openly choose geopolitical alliances to
secure them.
Look to the Mediterranean, for an
example. Europe’s decoupling from Russia will intensify the geopolitical
tensions over gas around the sea. In the eastern Mediterranean, Turkey resents
its exclusion from energy projects and has been increasingly confrontational in
asserting its interests. When Turkey struck a deal with Libya
in November 2019 to claim new maritime economic boundaries for itself in the
eastern Mediterranean, European Union leaders denounced the agreement as a
violation of Greek and Cypriot sovereignty and incompatible with United Nations
law. Now the route for a pipeline to bring eastern Mediterranean gas to Europe
is causing tensions, not just between Turkey and its neighbors, but also within
NATO.
On the other side of the
Mediterranean, Algeria is another potential energy source for Europe. But this,
too, comes with geopolitical complications: The state-owned Algerian energy
firm Sonatrach announced last month it might increase gas prices
to Spain after Madrid withdrew support for Algeria in mid-March over the
longstanding dispute between Algeria and Morocco over the Western Sahara.
Less Russia also means more trouble
in the Middle East. Without Russian help, another Iran nuclear deal becomes
less likely, even as Moscow amplifies all of Mr. Biden’s incentives to restore
Iran’s energy exports. Rather than breaking with Russia, Arab oil producers
appear to have doubled down on OPEC Plus, the world’s new oil
cartel with an implicit anti-American bent. The shale boom forced Saudi Arabia
to seek wider alliances, including with Russia. Now, as tensions between Russia
and Saudi Arabia over Syria and Yemen lessen, the Saudis will prioritize
managing their competition with Russia over China — the world’s largest oil
export market — and the two states’ shared interests in a nondollar payment
system.
It’s not just international politics
that are being shaped by the sustainability of present energy consumption.
Domestic politics are being shaken up, too.
By damning oil companies that aren’t
ramping up production, Mr. Biden has decided to privilege the voters desperate
for lower immediate prices over the Democrats who insist the climate crisis
should remain the priority. For the European Union, the fact that European
consumers are filling Moscow’s coffers has forced unpalatable ethical issues to
the surface. As the prime minister of Italy, Mario Draghi, asked Italians: “Do
you prefer peace or the air conditioning on?”
But the reality is, as Robert
Habeck, Germany’s vice chancellor and economic minister, acknowledged
before departing for a trip to gas-rich Qatar last month, there is no
“value-based” fossil fuel energy strategy for European countries other than
importing all their energy from the United States, Canada or Australia, which
is impossible.
In Europe, an innocence about energy
has been shredded and won’t readily be restored. There, the Western political
taboo about talking about reducing energy consumption by means other than
greater efficiency is morally exhausted. It remains to be seen whether in the
United States, ghosts of President Jimmy Carter’s failed exhortations for
sacrifices to personal comfort (wearing sweaters indoors, for instance) as a
way to restore American energy independence will prove any less fleeting.
Thanks to shale, the United States is the world’s largest oil and gas producer,
rendering the country’s energy politics vastly different from that in most
European countries, where foreign-energy dependency has been an uncomfortable
fact of life for more than a century.
What does this mean for the most
existential geopolitical issue of all — climate change?
Back in 2019, an energy
transformation to address the climate crisis appeared on the horizon. Across
the world, more new renewable power was added than ever before, and
sustainability-minded investors looked to pour capital into green energy
innovation. Several Group of 7 governments passed legislation to establish legally
binding net-zero targets for 2050.
But over 2021, as prices rose,
optimism dissipated. Mr. Biden’s signature climate change bill stalled in Congress. In Britain,
the Committee on Climate Change set up to advise Prime Minister Boris Johnson’s
government reported that the country was nowhere near hitting its transition
targets because “the policy is just not there.” As much of Europe experienced
low winds in 2021, it became clear that there was still much work to be done to
operate electricity grids based on renewables. There were a number of factors,
but the overall impact was the same.
Now the momentum has changed again.
For the green transition, the renewed public awareness that the supply of
hydrocarbons does not take care of itself, even as Western governments promise
to curtail their use, is — paradoxically — a step forward. If governments and
citizens are serious about transitioning away from fossil fuels and toward
greener energy, a necessary transformation that requires nothing less than
changing the material basis of modern civilization, then they will have to
admit that oil, gas and coal — the energy sources of the past, on which we
continue to rely — can’t be taken for granted. Their extraction and use are
inseparable from the difficult work of politics. That is evident today. Let’s
hope we can remember it in the future."