Until recently, the idea of a Fortune 500 company boss criticizing the energy transition would have been considered far-fetched, to put it mildly. Now, two Fortune 500 bosses have slammed the transition in a single week. JP Morgan’s Jamie Dimon finished first. Monday he Told CNBC in an interview that the Biden administration had fundamentally ruined the country’s — and the world’s — energy security by doubling down on the energy transition instead of driving oil production growth.
Calling the current energy crisis “predictable”, Dimon said that “in my opinion, America should have pumped in more oil and gas, and it should have been supported.”
He then added that the United States had to step up and become a leader in handling the crisis because “America is the swing producer, not Saudi Arabia. We should have done things well from March.
In fairness, the Biden administration has tried to appeal to the US oil industry to increase production, but the industry has failed to respond to appeals for a variety of reasons ranging from understandable dissatisfaction with federal energy policies inflation of materials and equipment and labor shortages.
The situation appears to have inspired some candor among executives – earlier this year several oil independents said they would not increase oil production, regardless of price levels. Today, Chevron’s Michael Wirth openly accused Western governments of being behind the energy crisis because of their preoccupation with the transition to renewable energy.
In a interview with the Financial Times, Wirth said this week that “the conversation [about energy] in the developed world has certainly skewed towards the climate, taking affordability and security for granted,” adding that “the reality is, [fossil fuel] is what runs the world today. He will rule the world tomorrow and in five years, in 10 years, in 20 years.
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It’s hard to argue with those remarks, especially when you look at Europe and the European Union, which has become a classic example of how not to transition. EU diplomacy chief Josep Borrell said again this week in unusual candour speech that the bloc’s prosperity depended on cheap Russian gas and that with that gas gone, so was the prosperity.
It’s worth noting that after making that point, Borrell went on to say that the best energy was that generated at home, possibly suggesting more wind and solar generation, but the fact that he didn’t specifically mentioned these types of energy says a lot. And he says we may have seen the start of a possible review of transition plans.
Such a review would, if not quite timely, be better late than never. As Chevron’s Wirth noted in his interview, the world still derives 80% of its energy from fossil fuels, despite massive investments in renewable energy over the past two decades.
Indeed, according to BP World Energy Statistical Review for 2021, fossil fuels actually accounted for 82% of the global energy mix. This figure was down one percentage point from 2019 and three percentage points from 2016. Not only that, but coal use increased in 2021 compared to the previous year as economies were growing again after the first and biggest wave of pandemic lockdowns.
Speaking of coal, JP Morgan’s Dimon also had something critical to say about it. He said in his CNBC interview that if the world produced more oil and gas, we wouldn’t have to use so much coal and produce so much emissions.
The issue of coal consumption, he said, was critical, and “it should be treated almost like a war issue at this point, nothing less.”
Indeed, it should be noted that Dimon and Wirth did not directly attack the transition as such. Instead, they primarily targeted the approach to this transition. While Dimon focused on eliminating coal from the global energy mix, Wirth made sure to note that Chevron has a generous medium-term low-carbon power investment program and net plan. zero for the period up to 2050.
“We now have a longer term problem that the world is not producing enough oil and gas to reduce coal, make the transition [to green energy]keep people safe,” Dimon told CNBC.
This is consistent with Wirth’s prediction that oil and gas will still be powering the world 20 years from now, although he also noted that investment in alternatives to oil and gas was “woefully short”. And this despite the billions already invested in these alternatives.
Both talks will likely draw fire from the environmentalist camp, which as a rule does not distinguish between different fossil fuels and wants them all gone. Yet the fact that business leaders are starting to talk openly about the shortcomings of the transition as it is being pursued by policy makers in the West is a positive sign.
It’s a sign that we might be starting to have a more honest conversation about how energy really works and what alternatives to oil and gas are, in fact, viable in the long term when it comes to energy security. It would be a good start for a smarter and less risky transition.
By Irina Slav for Oilprice.com
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