Wars bring together surprising alliances. Today, we have America and its NATO allies backing the brave Ukrainians fighting to save their country from being torn to shreds by Vladimir Putin. And we have Russia, Saudi Arabia, Iran, Bernie Sanders, the House progressive caucus and the whole G.O.P. all working — deliberately or because they are dupes — to ensure that Putin has more oil revenue than ever to kill Ukrainians and freeze the Europeans this winter until they abandon Kyiv.
In another dark corner, Putin and Saudi de facto ruler Crown Prince Mohammed bin Salman are also probably hoping that the soaring energy inflation since Russia’s invasion helps the Donald Trump-led Republicans to regain control of at least the House of Representatives in next month’s elections. That would be icing on the cake for both, who view Trump as a president who still loves black crude over green solar and knows how to look the other way when bad things happen to good people.
Too cynical you say? No, sorry, you can’t be too cynical with this cast of brutes, bandits, and useful idiots. Just look at the facts.
On Wednesday, with the world already heading toward recession and with the global oil and natural gas market already tight, the OPEC Plus cartel, which includes Russia, agreed to collectively reduce its output by two million barrels a day — to ensure oil prices don’t retreat, but instead go back over $100 a barrel and stay there.
While the actual cut in output will most likely amount to close to one million barrels a day, because many smaller OPEC producers are already pumping below their quotas, in today’s market it will still pinch. As The Financial Times noted: At roughly $90 a barrel today, “crude is well below levels reached soon after Russia’s invasion of Ukraine but higher than at any point between 2015 and early 2022.”
Putin’s motivation for this price hike is no mystery. With his army in Ukraine suffering steady loses of territory — and his having annexed portions of Ukraine that he doesn’t even control — Putin has one hope before he’s forced to do something really reckless: squeeze the supply and jack up the price of oil and gas high enough to force the European Union to abandon both Kyiv and Washington and accept his annexations in return for a cease-fire and resumption of Russian energy exports.
Putin’s strategy is neither crazy nor without hope because of two decades of Western nations’ failing to think strategically about energy. They willed the ends — a world no longer dependent on fossil fuels as soon as possible. But they did not will the means to reach that goal in a stable way — by maximizing their climate security, their energy security, and their economic security all at the same time.
Instead, they pretended.
In Europe they pretended — with Putin’s covert encouragement — that they could abandon large-scale, largely emissions-free energy like nuclear power, as the Germans did, and just jump directly to intermittent wind, solar and other renewables and everything would be just peachy. Oh, my goodness. The Germans felt so virtuous in doing so — without acknowledging that the only reason they were getting away with this pipe dream was that Putin was selling them cheap gas to make up the difference. When Putin ended the charade, here’s what happened: On Sept. 28, Reuters reported from Frankfurt, “Germany’s cabinet on Wednesday passed two decrees to prolong the operation of sizable hard coal-fired power generation plants up to March 31, 2024, and to bring back idled brown coal capacity up to June 30, 2023, to boost supply.”
In America, we did our own version of this green virtue signaling. Green progressives demonized the oil and gas industry — for good reasons in some cases because of how much the industry worked to deny the reality of climate change and refused to clean up its own act — and basically told it to please go off and die somewhere quietly, while we moved to wind and solar. Oil and gas investors and bankers got the message and began delaying or stopping investment in new oil and gas production at home, and instead focused on reaping as much profit as they could from existing wells.
As a Goldman Sachs newsletter in April put it: “How much future production have we lost because of all the delays in investment decisions on new oil and gas projects? The answer is 10 million barrels per day of oil, which is the equivalent of Saudi Arabia’s daily production and three million barrels per day of oil equivalent in liquefied natural gas (LNG), which is more than the equivalent of Qatar’s daily production. If we had not kept delaying new investment decisions in oil and gas since 2014, we essentially could have had a new Saudi Arabia and a new Qatar.”
While America can still theoretically take care of most of its own needs for oil and gas today, unlike Europe, we do not have enough to export at the scale required to make up for Putin’s and OPEC Plus’s cutbacks and ease Europe’s transition to a decarbonized future. But the green progressives never got that message. At a House committee hearing two weeks ago, Representative Rashida Tlaib demanded to know if JPMorgan Chase C.E.O. Jamie Dimon and other banking executives appearing before the panel had any policies “against funding new oil and gas products.”
Dimon answered, “Absolutely not, and that would be the road to hell for America.” Tlaib then told Dimon that any students who had student loans and bank accounts with JPMorgan should retaliate by closing their accounts. Have no doubt: This kind of juvenile moral preening by Tlaib surely made Vladimir Putin’s day. She’s nowhere nearly as bad as the G.O.P. senators who were inspired for years by ExxonMobil lies that climate change is a hoax, and then used that to block our transition to clean energy. But Tlaib still made Putin’s day.
What lifted Putin even more was when he watched Bernie Sanders, House progressive Democrats and the whole G.O.P. last week come together to kill a bill backed by President Biden and the Democratic leadership to streamline the permitting process for domestic energy projects, particularly permitting for gas pipelines and wind and solar transmission lines — one of our biggest impediments to a stable green transition.
Hard to know who is worse, the progressives who did not understand how much solar and wind energy require quicker transmission permitting to safely scale clean energy or the Republicans, who knew oil and gas companies need quicker pipeline permitting to grow gas production but killed it so Biden would not have another success. As Joe Manchin, a fossil fuel-friendly Democrat who championed the bill, put it: “What I didn’t expect is that Mitch McConnell, my Republican friends, would be signing up with Bernie or trying to get the same outcome by not passing permitting reform.” All in all, Putin had a bad month in Ukraine — but a good month in the U.S. Congress. This is not complicated, folks: Do you want to make a point, or do you want to make a difference? If we want to make a difference, we need to maximize our energy security, natural security and economic security, all at once. The only way to do that effectively is to incentivize our market to produce a stable and secure supply of energy, with the lowest possible emissions at the lowest possible costs as fast as possible.
The only truly effective way to do that is with a strong price signal — either taxes on dirty stuff or incentives for clean stuff — plus steadily increasing clean energy standards for power generation along the lines proposed by Hal Harvey and Justin Gillis in their new book “The Big Fix: Seven Practical Steps to Save Our Planet.”
As long as we are not ready to do that, we’re just faking it, indulging in virtue signaling on the left and the right — and Putin and M.B.S. are laughing all the way to the bank.
(The author writes on foreign affairs, globalization and technology)
(Source: New York Times)