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.”
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.
13. Ibid.
14. Ibid.
