The U.S. role as the world’s leading oil and gas producer doesn’t feel as empowering as it recently did, with oil prices heading into negative territory for the first time ever this week.
Yet there is an opportunity in the oil industry’s unprecedented crisis — and in the further months of market volatility that will come with it. This period presents a chance for the United States to forge a better and more sustainable path to global energy leadership than can be found even within the vast riches of U.S. shale.
What President Trump and his administration could do – perhaps better than any other country in the world due to its dual leadership in fossil fuels and renewables technology – is to help inspire and convene a global energy crisis conversation that points to the future.
Its purpose would be to reimagine the energy world post-Covid-19.
It would be a cleaner world that invests more deeply in renewables, for sure, leveraging the trillions of dollars in national stimulus programs around the world. However, it would at the same time safeguard oil and gas industries and their millions of global jobs by advancing promising, new technologies that decarbonize their use.
Clean energy producers would have a prominent place at the table – to include everything from advanced batteries and solar to nuclear and carbon capture. So would major consuming states like China and India. The institutional setting would go far beyond anything possible even in an expanded OPEC-plus-plus, but producing states would be there.
With Saudi Arabia in the chair of the G20 this year, the world could build on its convening of energy ministers on April 10 for an ongoing, structured conversation to include all relevant government and industry stakeholders.
The aim would be to lay out a practical path to a more sustainable energy system that recognizes we’re going to need a lot of different technologies and that the approaches and economic implications will vary across geographies.
The climate community will confront the uncomfortable truth that oil and gas will remain a critical part of the mix for the foreseeable future; the fossil fuel industry will need to accelerate the lowering of their carbon footprint.
In working to convene such a conversation, President Trump would be building on the credibility he has gained among oil producing countries by brokering the recent, unprecedented production cut, without which the oil prices crisis would be far worse.
“We are most grateful my friend, President Trump, played a leadership role in midwifing our historic agreement,” Mohammed Barkindo, secretary general of OPEC, told me this week. “His engagement with his counterparts in the Kremlin, the Royal Court in Riyadh, and Mexico was timely.”
At the same time, President Trump could confound his critics among climate activists by embracing their job-creating technologies through stimulus and new infrastructure programs. Thus far, political polarization has blocked creative action on the U.S. energy future.
U.S. officials will find an ally in Fatih Birol, the executive director of the International Energy Agency. OPEC officials say he inspired the recent G20 meeting on energy. Yesterday (April 24) he convened a virtual ministerial roundtable that focused on recovery packages around the world, with special attention on energy efficiency and renewable energy.
The IEA intended that meeting to be the first of many in the coming weeks “to exchange ideas, reflect, and drive strategic action,” wrote Birol and Dan Jorgensen, Danish minister for climate energy and utilities, describing their convening’s purpose.
“Around the world, leaders are getting ready now, drawing up massive economic stimulus packages,” they write. “Some of these plans will provide short-term boosts, others will shape infrastructure for decades to come. We believe that by making clean energy an integral part of their plans, governments can deliver jobs and economic growth while also ensuring that their energy systems are modernized, more resilient and less polluting.”
Some in the climate activist community have seen a silver lining in the Covid-19 crisis in improved air quality, captured in before-and-after photographs from around the world. Yet suggesting this could be the new normal neglects the unacceptable human pain of our ongoing economic shock.
Randolph Bell, the director of the Atlantic Council’s Global Energy Center, writes in a forthcoming article that before the layoffs of the past few weeks, the U.S. oil industry directly employed over 150,000 people, supported more than 10 million additional jobs, and made up 8 percent of U.S. GDP. There were 51,000 oil and gas job losses in March alone, with layoffs hitting blue-collar workers first.
“The polarized politics in Washington make the desired orderly transition impossible in a timeframe that is relevant to the current employment crisis,” says Bell. “All-or-nothing measures will only cause more paralysis while workers suffer.”
Letting the U.S. oil and gas industry collapse is a political non-starter and it won’t address environmental issues meaningfully. Without accompanying demand-side action, the U.S. will still consume significant amounts of oil and gas.
“We will just import it from countries with potentially weaker environmental regulation,” explains Bell.
A pandemic-driven drop in emissions is certain this year, but the lesson of the financial crisis of 2008-2009 shows that’s nothing to celebrate. Says the IEA’s Fatih Birol, “Although carbon dioxide emissions declined by 400 million tons in 2009, they rebounded by 1.7 billion tons the year after, the sharpest upswing in history, driven mainly by developing Asia,”
For him, the lesson is that smart policy decisions should be taken during the mind-focusing period of the crisis to protect jobs but also put emissions into structural decline.
That could involve betting big on game-technologies, such as lithium-ion batteries and hydrogen electrolyzers, which Birol says are now in a stage of development where wind and solar were in 2008-2009.
Here’s an idea:
Perhaps President Trump could use one of his daily Covid-19 updates, standing beside Energy Secretary Dan Brouillette, to announce that he has instructed his administration to reimagine the energy world with global partners in a way that will tap America’s best brains and its vast resources.
He could protect at-risk producers, bring stability to markets and decarbonize the environment – all at the same time.
That would be true energy dominance.
Frederick Kempe is a best-selling author, prize-winning journalist and president & CEO of the Atlantic Council, one of the United States’ most influential think tanks on global affairs. He worked at The Wall Street Journal for more than 25 years as a foreign correspondent, assistant managing editor and as the longest-serving editor of the paper’s European edition. His latest book – “Berlin 1961: Kennedy, Khrushchev, and the Most Dangerous Place on Earth” – was a New York Times best-seller and has been published in more than a dozen languages. Follow him on Twitter @FredKempe and subscribe here to Inflection Points, his look each Saturday at the past week’s top stories and trends.
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