Embargo on Russian oil could be a 'pivotal moment' for clean energy

I told you about the censored Chinese scholar who said his country should assert influence over Vladimir Putin to end the war in Ukraine.

If China doesn’t, wrote Hu Wei, it could face the prospect of increased international isolation, as the United States and the west draw “the line between democracies and authoritarian states, defining the divide with Russia as a struggle between democracy and dictatorship.”

“[China’s] domestic economy will be unsustainable and will eventually be dragged down,” Hu wrote. “This period will not exceed a few years.” He added: “China will not only be militarily encircled” by the US and its allies, “but also be challenged by western values and systems.”

(The Editorial Boardreposted Professor Hu’s essay. It appeared originally in Chinese in the US-China Perception Monitor, a publication of the Carter Center, which translated it into English.)

If the world is indeed changing due to Putin’s “irreversible mistake,” I hope America’s leaders see the opportunity before them. The US cut off imports of Russian gas and oil. Our European allies have, too. Clean energy and energy independence have been waiting for the right time.

This may be it.

“This is a truly pivotal moment in politics,” said Karin Sung.

Karin is a senior energy analyst for the state of California. She knows what she’s talking about. She told me things could go one of two ways.

On the one hand, the US quits carbon and makes green energy. On the other, the US produces more and cheaper oil for the world, especially Europe, outpacing Saudi Arabia and the other OPEC countries.

“It really could go either way.”

Are we going head off a climate cataclysm or head into it?

This may be the time of choosing.

What’s the effect of cutting off Russian oil and gas?

The first effect, as we're seeing now, is an increase in oil and gas prices worldwide. Reserves will be used to stabilize costs. The US will look to Saudi Arabia and Venezuela to increase their oil and gas production.

However, the US is a net energy exporter. It does not consume much Russian oil and gas. The US is the second-largest gas exporter after Saudi Arabia. So the real effect is the geopolitical risk that the US must weigh, figuring out how to provide oil and gas to Europe.

Longer-term will be price variability with reserves or storage depleted. There’s no time to increase storage inventory before next winter.

We saw this happen during the winter of 2020-2021. After the nation began social distancing due to covid, oil and gas prices plummeted. Big producers in the US scaled back production. After winter passed, production and inventories were still low through summer.

This led to a fossil-fuel crisis, price spikes and startlingly high energy bills in January of this year. We are likely to see this happen again next winter due to the administration’s ban on Russian oil and gas.

What's interesting is that there’s a stall in oil and gas production in the US. Though oil and gas interests are pushing for more production here, there does not seem to be a strong signal coming from the federal government that they can proceed with "drill baby drill."

That ambiguity has a chilling effect.

Oil and gas interests are unlikely to risk more drilling if there’s potential for a drastic decrease in fossil-fuel use over 10 years. These big oil and gas companies in the US have to play the long game.

They cannot afford to increase oil and gas production for the purpose of price stabilization over one or two years only to see a sharp decrease in demand over the next five to 10. Drilling requires large investments recovered over many years, not just one or two years.

I think it was the press secretary who said 9,000 drilling licenses are yet to be used. Does that jive with what you're seeing?

Correct. There are 9,000 drilling permits granted. That has been confirmed in various outlets. So yes, it jives with what I'm seeing

The Republicans, particularly Fox talking heads, say the Biden administration is preventing domestic drilling. Is that hot air?

There does not seem to be overt encouragement by the administration to increase domestic drilling. Despite granting 9,000 permits, there are multiple factors companies weigh for increased drilling, such as return on investment, government subsidies and geologic analysis.

So I wouldn't say they are full of hot air. While the administration is not preventing domestic drilling, it’s not encouraging it either.

Russia's invasion of Ukraine seems like a chance to call for "energy independence" via clean energy. What are your peers thinking?

This is a truly pivotal moment in energy politics.

There are two ways it can play out.

The US dramatically increases fossil-fuel production and exports at levels high and cheap enough to match OPEC or the US dramatically decreases demand and increases clean-energy production.

In other words, the US begins electrifying everything or it locks itself into another decade and more of delayed climate action.

It really could go either way.

Most energy analysts agree clean energy is true energy independence. But the road to true energy independence could be rocky.

Minerals needed for energy storage or clean-energy generation – such as lithium, nickel, cobalt, iridium and platinum – are concentrated and extracted in a limited number of regions and nations around the world.

So there is potential for a new era of geopolitical conflict.

Seems to me you could say, "Look, we can be independent or we can ask a homicidal Arabian prince or South American socialist for help.”

Absolutely, though there are racial implications in that statement. I would be cautious in presenting it that way. That said, I agree we could either move to clean energy or risk coordinating with fascist regimes.

Keep in mind, the geopolitical shift to clean-energy minerals could lead to dangerous dances with fascist and autocratic regimes.

For now, the GOP is resistant to clean energy. So is Joe Manchin for that matter. What would tell you there’s openness to change?

The GOP is open to green energy as long as it maximizes existing fossil-fuel infrastructure. For example, it’s very supportive of hydrogen, because that means fracked gas as well as carbon dioxide removal. Almost every net-zero energy model includes hydrogen.

Geothermal energy is another example. Fossil-fuel companies have translatable skills and infrastructure. There’s higher upfront risk because the geologic analysis is different. But oil and gas companies are best poised to profit from this source of clean energy.

I have yet to see GOP support for that.

I think it’s on the horizon, though.

What about the Democrats?

Democrats are split on this issue because they want to protect the poor. They can't afford high energy bills. People are fighting for a "just transition," but Democrats are right: high gas prices are unjust.

Regardless, they all seem to be unified in favor of the long-term solution, which is clean energy and energy independence.

It seems this can be worked out with a massive investment in clean energy. Protection against high prices on the one hand. Profits for existing gas and oil firms on the other. What's the problem?

A massive investment in clean energy will not have an immediate effect on ratepayers’ pocketbooks. Poor people are most affected by this. They will continue feeling the effects for the near-term.

There needs to be policy offsetting the burden.

If we do not have immediate solutions, we risk losing in the midterm elections, and we could pivot in the direction of prolonged fossil fuel dependence. What happens in the next few years will be critical to shaping our approach to clean energy for the next 10 to 20.