The World is Not Running Out of Oil – but Europe Is
If Europe thought it had a crisis on its hands in the Eurozone, it’s nothing to the crisis a lack of oil would inflict. Thanks to the EU’s disastrous energy policies, while the world is proving to be awash with black gold in one form or another, Europe is fast losing the security of its oil supply. And, just for good measure, a UK House of Lords report just published concludes that the EU will need a trillion euros of new investment if it is to stave off an energy crisis; investment its “muddled” policies are currently failing to attract.
Contrary to popular belief, peak oil alarmists and Greenpeace propaganda, the world is still and will continue to be for at least a century, largely powered by oil. And not just for transport. An endless number of consumer goods depend on a steady supply of petroleum products for their manufacture. As Marin Katusa, chief energy investment strategist for Casey Research points out, “A country without oil simply cannot continue to expand or even be competitive on the world stage.” Katusa explains, most of Europe’s oil comes from the North Sea region. A source where production has dropped to less than half of what it was in 2002. Much of the rest of it comes from countries such as Libya, Saudi Arabia and Nigeria, all countries threatened by political instability and social unrest. Europe could, of course, push development of its own potential oil resources. Or they could if the ludicrously inept EU Energy Road Map wasn’t studded with anti-fossil fuel pot holes and renewable energy cul-de sacs that are deterring investors.
Here is just a taste of the type of non-joined up Euro-think that drives EU energy policies.
We all know that the US shale gas revolution has cut US gas prices in half, rejuvenating the US manufacturing industry. It is even threatening to prove to be an economy-turner. But what many do not understand is that where there is gas there is often oil. In the US, land and mineral rights tend to promote exploration. In Europe, however, mineral rights belong to the government and exploration is controlled by the bureaucrats. So while fracking the process in the US free market has released a bonanza of shale gas it has also led to enormous oil shale production. But that’s not all. The use of coal has fallen significantly facilitating a steep drop in carbon dioxide emissions (if you think that’s important). Meanwhile, Europe’s policy of favoring renewable energy through massive subsidies that have pushed up the costs of energy-intensive industries making them uncompetitive, is keeping domestic prices abnormally high. One unforeseen result has been to boost ‘dirty’ King Coal back to no 1 in the fuelling charts, offering Europe no chance of hitting its key carbon cutting targets.
Here’s a question. Which of the renewable energies has Europe favoured most? Wind? Solar? Not even close. It’s that old pre-industrial favourite: wood. Believe it or not, wood currently accounts for almost 50 percent of Europe’s renewable-energy consumption. In some eastern European countries, including Poland, it’s up to 80 percent. That’s because the EU classed wood as a ‘renewable’ energy resource on the basis that when you cut one tree down you can plant another. (Nobody seems to have considered that it can take a tree up to a hundred years to grow – and won’t what’s left of mankind be all living on a small island off Greenland by then?). The thinking in limo-travelling EU circles was that wood equals low carbon; except it hasn’t turned out that way. Cutting down trees in ‘managed’ woodland in theory would be offset by the carbon sequestered from factory chimneys and stored in planted trees. That piece of Euro-think prompted a huge surge in wood burning. That in turn led to a new alliance of users demanding public subsidies for ‘renewable’ biomass (read mostly wood).
Europe’s largest coal-fired power station immediately got in on the act. The Drax power station in the UK began converting half of its boilers to burn wood. Drax now expects to receive over half a million pounds in subsidies to burn biomass after the boilers come online in 2016. At current prices, that’s just short of a cool £300 million more than its pre-tax profit of £190 million in 2012. But the fact is that Europe cannot sustain this kind of wood usage and it is scouring the globe to seek new sources. As a consequence, wood prices are soaring, with the index of wood-pellet prices published by Argus Biomass Markets spiking at a new high last year.
Unfortunately, it’s all to no avail CO2-wise as wood-burning doubles up in its carbon footprint anyway. First, through the process by which wood is made into pellets for industry use and second, through its actual burning. France could help Europe avoid increasing coal use, but it has banned the fracking process that would offer it the option of significant domestic (shale) gas production. Germany’s knee-jerk idiocy in announcing the closure of its nuclear plants after Fukishima and investing heavily in solar energy has also massively back-fired. But then Angela Merkel’s green-lighting of over 25 new coal-fired power stations aims to pick up the energy – though not the carbon cutting – tab.
As the US Washington Post, hardly a bastion of the pro-hydrocarbon right, recently observed “Europe is becoming a green-energy basket case” and “a model of what not to do” when it comes to fighting climate change (if you believe it needs to be or can be ‘fought’). All of which has contributed significantly to the EU carbon trading scheme recently ending up on life-support when even the EU Parliament voted down an ill-thought through rescue plan.
The fact is, while the ideological carbon jihadists in Brussels were out fighting mythological eco-wars, the highly pragmatic Chinese were out buying up much of the world’s remaining conventional oil and gas resources. And while the Russians were annexing over half of the Arctic’s subsea hydrocarbon wealth, the Americans were busy devising cutting edge technology to open up the tenth of the world’s surface ‘hiding’ massive unconventional (shale) gas and oil deposits. Over in Japan they were working on a process that could well enable extraction of gas from methane hydrates which could mean gas resources, for all practical purposes, to be infinite.
Meanwhile Europe has been desperately casting about to divest itself of a high dependency on Russian gas supplies. And when Israel discovered massive gas and oil reserves in the eastern Mediterranean it looked like it could. That was until Russia’s state-owned Gazprom bought a slice of the Israeli global distribution deal action for gas. And with Russian feet now firmly under the eastern Mediterranean table, even greater collaboration, possibly with Israel’s shale oil operation, is highly likely.
It’s almost as if the world is turning while the Eurocracy, somehow, manages to stand still. While the rest of the world recognises the on-going inherent reality that oil is still an indispensable player, ideological Brussels politicians prefer playing with windmills and funny plastic sheets. The great petroleum geologist Wallace Pratt said, “Oil is found in the minds of men”. He was referring to the theory of making new discoveries. In the case of Eurocrats, however, it’s more of an illusion.
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