There is a temptation,
especially since the global average temperature reached the 1.5C increase threshold in 2023 much faster than anticipated, to focus narrowly on the
progress in renewable energy sources without placing it in perspective relative
to the total amount of energy being used globally, the annual increases in
energy demand, and the root cause, the explosive growth in human population
since the early 20th century. The strategic geo-political
international interests of countries impacted and should thus be considered as
well.
According to Nick Butler, a
former advisor at BP, a European oil company, the global use of energy
increased 4-fold by 2024 since 1965. The increased use of energy commercially has
led to increased trade as supply has become global. The world has thus become
even more interdependent, which means that yet another basis for political
instability has sprung up. Interruptions in supply led to a political push in
the U.S. for energy independence. Even though as of 2024 every country still depended
on the global trade in energy, the U.S. was trending towards energy
independence and could eventually even be in a position of being able to export
energy supplies without importing any. It’s debatable, however, whether
exporting energy increases a country’s power. It had not worked for OPEC in
managing prices, although the oil shocks in 1974 and 1979 gave the impression
that OPEC could have considerable leverage over the U.S. As it turned out, substitution
and the development of new supplies undercut OPEC’s higher prices. In contrast,
Butler contends, building up sources of energy is a source of wealth,
though political instability can also result as fights can break out over the
new wealth.[1]
Besides being at odds with
efforts to reduce carbon emissions if the stock is exported to be consumed,
maximizing stocks of oil, natural gas, and coal as a source of a country’s
wealth be wrongheaded. It may suffer from the same fallacy that is in
mercantilism. Under that economic policy, a country minimizes imports and
maximizes exports in order to accumulate as much silver and gold as possible. According
to Adam Smith, “The exportation of gold and silver in trade might frequently be
advantageous to the country.”[2]
Historically, “the exportation of gold and silver in order to purchase foreign
goods, did not always diminish the quantity of those metals in the [British]
kingdom. That, to the contrary, [the exportation] might frequently increase
that quantity.”[3] This
still assumes that increasing the stocks represents an increase in a country’s
wealth. Before critiquing that assumption, let’s look at the argument wherein
exporting gold and silver to pay for imports actually winds up increasing the
domestic supply of those metals to a net-increase.”
How could trading away some of
those precious metals that were used as money increase a country’s wealth?
If a country has gold and silver in surplus, part of it could be exchanged “for
something else, which may satisfy a part of [the domestic] wants, and increase
[the people’s] enjoyments” at home.[4]
The benefits from the exports of the metals to pay for imports of goods extend
back to domestic manufacturers being able to produce more output, given the
increased demand, and thus increase the division of labor—Smith’s big thing!—and
thereby produce goods more efficiently. According
to Smith, “By means of [the increased demand], the narrowness of the home
market does not hinder the division of labour in any particular branch of art
or manufacture from being carried to the highest perfection.”[5]
The increased division of labor enhances efficiency of production, which in
turn makes the pricing of exports more competitive, and thus demand increases.
As exports to satisfy the increased foreign demand for the goods rise, the gold
and silver that are used abroad to pay for the goods come into the home country
and thus increase its supply of the two metals.
As for the need to increase
the holdings of gold and silver as much as possible, the assumption that this
enhances a country’s ability to fight a war is something else that Smith
contests in his text. Regarding the need for stocks of silver and gold from
which to be able to send abroad some in order to pay for the home army while it
is fighting abroad, “(t)he commodities most proper for being transported to
distant countries, in order to purchase there, either the pay and provisions of
an army, or some part of the money of the mercantile republick (sic) to be
employed in purchasing them, seem to be the finer and more improved
manufactures.”[6] These,
rather than sending silver and gold, have the benefit of increasing the demand
of manufactures. “The enormous expense of the late war,” Smith contends, “must
have been chiefly defrayed, not by the exportation of gold and silver, but by
that of British commodities of some kind or other.”[7]
So the need to accumulate silver and gold by minimize the imports of
manufactured goods while maximizing exports—the key tenet of mercantilism—is,
according to Smith, less beneficial than free-trade. Moreover, he holds that the
market mechanism is much better than government fiat in allocating goods,
services, and even metals used as money and wealth.
Similarly, perhaps exporting
other commodities than coal, liquified natural gas, and oil might benefit the
U.S. more by enhancing the efficiency of domestic producers of other goods (and
services), especially if economies of scale exist, and increasing employment
since more workers would be required and each could be more efficient and thus
valuable to the companies. Additionally, carbon emissions would not be as high were
the U.S. to sit on, rather than export, its stockpiles of “dirty” energy
sources.
Admittedly, the pressure from
unmet energy demand in other countries that are not energy-independent would
tempt the U.S. Government and American companies to respectively allow and make
more exports of coal, liquified natural gas, and oil because such sales would
be lucrative. Behind this pressure is the relationship between a steeply
growing global population and the ongoing prevalence of the “dirty” energy
sources in meeting the increasing demand from an exponentially growing
population. Indeed, because of shale, the US had become the largest exporter of
natural gas in the world by 2024.
As of February, the world had
4 billion more people than in 1970. That translates into a 10,000 increase per
hour, which in turn means 200 million new customers for commercial
energy supplies every year.[8]
Along with the increased global population, oil consumption increased by 150%
since 1970. Because renewables were still focused on electricity, which was
only one fourth of energy demand globally in 2023, the “dirty” sources were
still supplying most of the increased demand.[9]
Put another way, the increased supply of renewables was not even keeping up
with the annual increases in demand for energy. In spite of the carbon-emission
targets, oil and gas still accounted for 80% of global energy in early 2024.[10]
Most of the increase in energy
demand and all the increase in carbon emissions during the previous 20 years
was in Asia Pacific (esp. China). By
2024, China was importing a lot of energy supplies—even markedly changing the
patterns of global trade away from the U.S. being the dominant import market—and
accounted for about a third of total global emissions.[11]
Crude oil imports doubled from 2013 and 2023.[12]
Unfortunately, forecasts did
not include a dramatic reduction in oil and coal use. In China, 300 million
poor people in China were projected in 2024 to move into the middle class by
2050. This means more energy use, and thus more oil and gas. Nuclear energy was
being developed there, but coal was still a major source of employment in 2023,
and fit the Party’s goal of shifting wealth inland. Also, wanting to be the
world’s leading industrial power is not in the direction of decreasing the
commercial demand for energy.[13]
It is important to include the
impact on international relations. As of the start of 2024, China was dependent
on imports from Russia and the Middle East. As the U.S. strategic oil-imports
interest in policing the Middle East diminishes as the U.S. gets closer to
energy independence, the increased interest of China in exercising control in
that region meant that a new conflict-zone might open up between the two
empires.
With the world going from over
8 billion people in late 2023 to a projected nearly 10 billion in 1045, we can
anticipate more demand for energy, and with it, more international (and
domestic) instability. With plenty of oil still in the ground and decreased demand
due to substitutes such as electric cars and nuclear energy, the world won’t
run out of oil.[14] This
is bad news for our species as the planet continues to warm. Even as the press
highlights the increase in renewable energy sources, the default is much, much
larger and thus diminishing the share of “dirty” sources will not come as
quickly as we might think. In short, we are in quite a mess as a species both
because it isn’t easy to reduce our sluggish reliance on sluggish oil and
invisible gas, and our global population grew so fast and so much in the 20th
century and has continued to increase in the first two decades of the next
century that, as biological organisms needing external sources of energy, the
energy demand of our species is likely to keep on increasing even if we become
more efficient. The expediential increase in population can be so large that
its baleful effects outweigh any gain from increased efficiency. Again, the
baseline is so massive that changes from greater efficiency merely mitigate the
increased harm done.
Similarly, the large amount of energy consumption from “dirty”
sources relative to the increased supply from renewables renders any shift very
gradual. The Titanic could not turn fast enough to avoid the iceberg in 1912
because the rudder was too small for the mass, and thus momentum, of the ship.
We would like to turn away from “dirty” sources of energy, but our rudder pales
in comparison to the magnitude (and proportion) of those sources. We need a
bigger rudder, or we too may flounder. The global economy does not “turn on a
dime.”
1. Nick Butler, Lecture on Energy and Security,
Yale University, February 15, 2024.
2. Adam
Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 4th
edn., R. H. Campbell, A. S. Skinner, and W. B. Todd, ed.s (Oxford, UK:
Clarendon Press, 1776/1976), sec 9, p. 433.
3. Ibid., sec 7, p. 431.
4. Ibid., sec 31, p. 446.
5. Ibid., sec 31, pp. 446-47.
6. Ibid., sec 29, p. 444.
7. Ibid., sec 27, p. 443.
8. Nick Butler, Lecture on Energy and Security, Yale
University, February 15, 2024.
9. Ibid.
10. Ibid.
11. Ibid.
12.
Ibid.
13.
Ibid.
14.
Ibid.