A report from the International Energy Agency (IEA), published last week, claims that the world will reach peak demand for oil, coal and gas by 2030. This has been seized on by the likes of the World Economic Forum as proof that we’re about to enter a brave, green future, free of evil fossil fuels.
But other developments this month suggest otherwise. At the same time as the IEA and the WEF have been heralding an imminent end to fossil fuels, Germany has been firing up an extra coal facility, energy giants Exxon Mobil and Chevron are doubling down on their fossil-fuel businesses and the wind-power industry has been begging governments for more subsidies and bailouts.
It is difficult to avoid the conclusion that those anticipating an imminent decline in fossil-fuel use are indulging in wishful thinking. This is largely because they are ignoring the huge geopolitical changes the world is now undergoing. The fact is that global energy markets have been fundamentally transformed after the Russian invasion of Ukraine. It means that governments and nations are now putting energy and national security above concerns over climate.
The war in Ukraine exposed the reality of the energy transition in Europe. It showed that far from having made any real progress towards developing a green energy infrastructure, European nations had become increasingly reliant on imported fossil fuels from Russia and a few other liquified-natural-gas-exporting countries. Losing access to Russian gas after the invasion of Ukraine put the Europeans into competition with the rest of the world for any molecule of fossil fuel available on the market. And so, since 2022, we have seen European nations leverage their economic power to outbid poorer competitors, particularly in Asia, for oil and gas.
Europe’s scramble for fossil-fuels pushed many of these Asian countries into energy crises of their own. And so, as a result, those same countries, contrary to the green hopes of the IEA or the WEF, have been intensifying their own domestic fossil-fuel industries. Indeed, Pakistan has announced plans to quadruple its coal-fired power capacity, and Indonesia and other regional powers have since followed suit.
Across the world, there’s little sense that fossil-fuel use will be in decline any time soon. Germany’s foolish decision to shut down its nuclear-power plants, and the failure of its wind- and solar-power industry to come anywhere close to meeting its energy needs, has left it in dire straits. That is why German coal plants are now on standby ‘for longer than planned’. After all, no politician, not even one as delusional as Robert Habeck, the Green economy minister, can risk the lights going out all over Germany.
Then there’s China, the real fly in the ointment of those expecting fossil-fuel demand to peak in the next few years. Beijing has certainly made plenty of pledges to reduce carbon emissions. But coal continues to dominate domestic energy supplies. Indeed, China’s coal-power capacity is still expanding as it desperately tries to reduce its dependence on imported petroleum products. After all, most of this fuel comes by sea. And the Communist leadership is well aware of the US Navy’s capacity to intercept or stop these vital maritime supplies. Given the current geopolitical tensions between Washington and Beijing, there is no realistic scenario in which China will give up on its plans for coal use anytime soon.
Even the US is gradually realising that the changed geopolitical conditions will affect its energy policy. At the moment, the Biden administration is trying to square the circle of achieving energy security while simultaneously satisfying the demands of the domestic environmentalist crowd. In practice, this has meant easing sanctions on Venezuela’s oil industry in order to gain access to more fuel, while simultaneously making a showboating decision to cancel the Keystone XL pipeline to Canada. In other words, the US is attempting to get more fossil fuels to market while hoping the American left doesn’t notice. Hence Washington encourages drilling for oil and gas everywhere except at home.
Even the most ardent environmental zealot will soon have to reckon with the new geopolitical reality. After all, if Greens in Germany’s governing coalition can be convinced to defend coal plants, there’s every chance American politicians will soon be encouraging fracking and drilling from Alaska to Texas.
Those who think the world will soon be doing without fossil fuels need to get real. Far from entering terminal decline, fossil-fuel use is set to scale new heights.
Ralph Schoellhammer is an assistant professor in economics and political science at Webster University Vienna.
