Big Oil’s Bid to Control New Energy

More than a year ago, I wrote two blog posts summarizing my view that “the kind of energy a society uses plays a key role in determining how that society operates and even people’s perceptions about how the world works.” Energy from fossil fuel was not only the fuel for globalized industrial capitalism in the 19th 20th centuries, it helped determine the form and values society adopted. Renewable energy from sun and wind can help determine a very different, cleaner, and more distributed and just world in the 21st Century. But that’s not a given. A rearguard campaign is underway to keep the economic structure and values of the oil era in place. Carbon capture and storage (CCS), world-scale green hydrogen, and massive use of biofuels are the tools Big Oil and its supporters have chosen in this campaign. It must fail if the Earth is to be saved from the worst of climate change — and from broader environmental and social collapse.

Oil was the archetype for globalized capitalism. The oil age was marked by Big, Cheap Everything, produced so as to optimize the return on capital, at the expense of people and the planet. Renewable electricity could serve as an archetype for a very different society, marked by small, localized production, with globalized sharing of information and experience which values the welfare of the planet and all its inhabitants — not globalized commerce.

However, the capitalists who rose to the top in the Oil Age aren’t abandoning the field without a fight. Backed by oil-rich Mideast monarchies, Western oil defenders are aiming to develop a “clean energy” system that fits the old model, minus only the greenhouse gases (GHG). As Sultan al-Jaber, head of the Abu Dhabi National Oil Company (Adnoc) and, amazingly enough, designated president of the COP28 UN climate confab to be held in Abu Dhabi late this year, puts it: What the world must get rid of is “fossil-fuel emissions,” not fossil fuels themselves.

This declaration of intention to keep globalized industrial capitalism alive without carbon emissions — to foster maximum economic growth and resource exploitation as we’ve known it for 250 years — might help contain climate change, albeit slowly. It will do nothing about plastics-filled oceans, species extinction, or gross economic and social inequity.

Oil Age

The oil industry operates in a way that is markedly similar to both the cotton industry under the British Empire and the ocean-spanning manufacturing chains that flourished under the neoliberal Washington Consensus: Most of the world’s crude oil is produced in a few places where reserves are most plentiful and cheapest to extract. Optimal location and scale guarantee high profits.

The crude must then be “refined” into usable products such as gasoline and diesel. Sometimes that is done near production sites, but more often the oil is moved thousands of miles in huge ships to distant centers where refining can reach the largest scale and generate the highest profits. Nowadays, that tends to be Singapore, India, China, and the US Gulf Coast.

Often the gasoline or diesel is put back into tankers and shipped to yet other places, where it goes into pipelines, barges, trains or trucks for movement on to customers. While all that movement costs money, consumers pay the bill, and the back and forth actually adds to oil producers’ and refiners’ profits: Every one of those tankers and trucks burns oil, creating increased, profitable demand for oil.

Crude production centers may be in absolute monarchies, such as Saudi Arabia and the UAE, which control prices with Opec-agreed production limits. The refineries may belong to state companies. But the operating principles for the industry are neoliberal to the core. To the owners of resources and other capital go the profits. Government intervention to protect capital from profit-sapping interference is fine. The government intervention so aborded by neoliberals is that which reduces profits.

Electricity Age?

Renewable electricity is in many ways the exact opposite of oil. While the materials used to construct solar panels, wind turbines, or batteries may be manufactured in large and distant factories, the electricity itself is best used close to where it’s generated.

Investment and environmental costs are mostly upfront, to build and install generating equipment. The fuel — wind and sun, instead of oil, natural gas or coal — is free. This flips the physical and financial dynamics of providing energy. Some places have much more sunshine and wind than others, but transportation of electricity over long distances is costly and contentious enough, and yields little enough profit, that few argue for consolidating renewable generation to anything like the extent done with fossil fuels.

You may group wind turbines in the flat “wind corridor” that extends along the North America plains from Western Canada to the Texas Panhandle. But the power will probably go to the closest markets available, in the US Middle West — not to Shanghai and then Seoul, as might happen with oil.

The local advantage is clearest with solar. The best place to start building out solar is on the rooftops of the buildings where the electricity will be used. Next come small to mid-sized solar arrays within a few miles of end-users. Battery backup is best installed where it can use the same wires as solar.

Splintering Global Economy

Simultaneously — and not coincidentally, in my view — the globalized manufacturing model in which Africa and South America provide raw materials, China and East Asia manufacture, and the US consumes, banks, and innovates is fraying.

The US under President Donald Trump finally awakened to the realization that China is on track to soon have a larger economy than its own, with geopolitical power to match. And China under President Xi figured out that it doesn’t always have to do things the US way. China’s huge political and financial capital position it to challenge US “hegemony.”

The US under President Joe Biden is putting flesh on the bones of Trump’s ideas, with planning and funding to rebuild manufacturing that was lost during the neoliberal decades. Europe, suddenly deprived of Russian fossil fuels, is seeking ways to retain and rebuild its manufacturing base without becoming too dependent on China in the process.

Similarly, Western consumers are showing willingness to pay more for locally produced goods. People are gravitating to local food, too, as the agribusiness model flails under climate, soil depletion, and legal pressures. Political support in the US for low-end wage increases further challenges the consumer culture, as does strong support in France for retaining early retirement.

These are all strong signs that people are starting to value “good lives” more and “stuff” less — even in the historically consumption-obsessed US. This value and behavior shift is absolutely necessary if the Earth is to be saved from the onslaught of over-development that typified the Oil Age.

Even if cause-and-effect linkage between these broad economic trends and the transition to renewable electricity is not obvious, the alignment is clear. Nations, communities and individuals want more secure and cleaner energy just as they want more secure food and basic manufactured goods.

Big “Clean” Energy

But Big Oil and Big Finance are fighting back, staging a strong rearguard action to retain as much as possible of the globalized economy, including unquestioning acceptance of economic growth as a social good. CO2 emissions have to go, but everything else can and should stay, is the idea.

This is the strategy behind the ESG (Environmental, Social and Governance) movement. It’s the strategy of the Davos crowd and big investment funds such Larry Fink’s BlackRock. It’s the strategy underlying the push for carbon capture and storage (CCS), which removes carbon at high cost from fossil fuels and buries it back in the ground for “permanent” storage; hydrogen made with renewable energy (green) or natural gas after CCS (blue); or biofuels that don’t actually lower CO2 emissions much and use land needed for agriculture or rewilding.

These technologies share some important oil-era attributes: They move large amounts of energy over long distances. They perpetuate the colonial-style division of labor in which the Global South sends raw materials to distant manufacturing centers in over-developed places to the benefit of big corporations. Not just construction but continuing operation of these energy forms utilize “project management skills” long advertised as a core strength of Big Oil.

The International Energy Agency says as much in its high-profile Net Zero in 2050 scenario for reaching the 1.5℃ UN global warming target: “..the oil and gas industry could play a key role in helping to develop at scale a number of clean energy technologies such as CCUS, low carbon hydrogen, biofuels and offshore wind. Scaling up these technologies and bringing down their costs will rely on large-scale engineering and project management capabilities, qualities that are a good match to those of large oil and gas companies.”

The US Inflation Reduction Act (IRA) favors these same technologies through provisions such as tax credits of $85 per ton of CO2 removed by CCS projects. That’s about what Exxon has said is needed to make CCS economic.

What’s At Stake?

The latest step in the CCS, hydrogen and biofuel promotion campaign is enlisting the president of the next UN COP 28 carbon conference, Adnoc’s Sultan al-Jaber, to keep language out of the conference communique and other UN documents that specifies an end to use of all fossil fuels. The chosen substitute is a call to end “fossil fuel emissions,” or similar language that encompasses CCS. Jaber can also be expected to seek funding that will give these technologies a competitive leg up on simpler solar, wind, battery and longer-term storage technologies that don’t benefit Big Oil.

Success for these efforts would make the transition to low-carbon (it wouldn’t be carbon free) energy costlier and slower. Solar with wind and battery backup is already cheaper in most places than fossil fuel electricity — even without the added expense of CCS. And its technology is more advanced. So much so that renewables are widely expected to take over the bulk of baseload power generation within a few years, despite the rearguard action.

What is at stake with that campaign is not baseload power, but the question of which technologies are used to cover periods when solar and wind aren’t available, as well as how many “hard to mitigate” industrial processes — steel, concrete and perhaps long-distance trucking — will be electrified or replaced, and how many will continue into the post-carbon age in the old way, thanks to CCS and hydrogen.

What is at stake is also the much more fundamental issue of how humans organize themselves socially and economically. Do we go on as is, or do we abandon the notion that economic growth is crucial to human “development” and happiness, and seek a better way of feeding, clothing and housing ourselves, and of relating to each other and to the planet. There is, indeed, a lot at stake.

“Out with the old, in with the new” by Dee Ashley