A World Without Fossil Fuels
Updated: Aug 22, 2021
A world without fossil fuels would ruin our quality of life. There would be rolling blackouts. Just look at California this past August where a heatwave and wildfires conspired to force the California Independent System Operator to order utilities to implement rolling blackouts. This was the consequence of an inadequate backup of reliable energy sources such as natural gas power plants and relying on power from neighboring states that lacked surplus power. Our electric vehicles would stall without an adequate electric grid, as would our cell phones. In fact, we would not have cell phones or computers because their materials are derived from petrochemicals. The spread of Covid-19 would be more difficult to contain because personal protective equipment, sanitizers, and medical devices are also made from synthetic materials derived from petrochemicals.
A world without fossil fuels would damage energy intensive industries. Steel, aluminum, pulp and paper, chemicals and cement require high-grade process heat that can’t be generated by electricity. About 40% of natural gas is used for process heat and as a feedstock.
A world without fossil fuels would hurt the U.S. economy. Today the U.S. is the world’s number one producer of natural gas and crude oil and a major exporter of energy. America’s oil and natural gas industry accounts for nearly 8% of U.S. GDP and more than 10 million jobs based on figures from the American Petroleum Institute.
A world without fossil fuels would increase the U.S. reliance on China. China today is the world’s largest producer of rare earths necessary for electric vehicles and wind turbines. It is also the dominant producer of solar panels with an almost 70% market share. The U.S., after nearly 40 years of dependence on Middle Eastern oil, will now become energy dependent on China. Does it make sense to put U.S. energy security at risk?
A world without fossil fuels would halt the humanitarian progress of developing nations. According to the World Health Organization, almost 3 billion people, about 38% of the world’s population, rely on solid fuels (wood, animal dung, charcoal, crop wastes and unprocessed coal) burned in inefficient and highly polluting stoves for cooking and heating. In 2016, about 3.8 million children and adults died from illnesses caused by household air pollution. LPGs (propane and butane), fossil fuel hydrocarbons, are a cleaner burning solution that can save lives. Energy companies in the United States are meeting this humanitarian need through the export of LPGs to developing countries. Indeed, the U.S. is the world’s number one exporter of LPGs. In addition, world food supplies would be in jeopardy as fertilizers, derived from petrochemicals, are used daily by farmers and families to help crops and gardens grow.
A world without fossil fuels would face a global energy crisis. There are 7.8 billion people in the world today. That is nearly one billion more people than just a decade ago. Developing nations, where the population is growing the fastest, will require more energy as a function of economic and social progress. Renewable energy alone cannot quench this thirst.
A world without fossil fuels would be a world without renewables. Materials derived from petrochemicals are critical to the production of solar panels, wind turbines, and batteries.
A world with fossil fuels and renewables will win the battle over climate change. A balanced approach is required. The aspirational goal of a zero-carbon future is sensible but not attainable today. Ernest Moniz, former U.S. Secretary of Energy under President Barack Obama, is quoted as saying, “We don’t have the technologies for the energy transition to net zero carbon.” It will require new advances in technology such as energy efficiency, longer battery lives, hydrogen fuel, carbon capture and things we have not yet even thought of. According to a World Bank study, significantly greater amounts of minerals such as rare earths, lithium, cobalt, copper, nickel, and palladium would be required to meet the Paris Agreement targets by 2050. The harmful impact of all this mining on the environment needs to be taken into consideration as well.
Natural gas needs to be part of the solution. It is the least carbon-intensive of the fossil fuels used in electricity generation and industrial process heat. In the U.S. from 2005 through 2019, carbon emissions declined by 33% while electricity generation increased by almost 2%. Natural gas accounted for more than 60% of the reduction according to the US Energy Information Administration as its share of electricity generation increased from 19% in 2005 to 38% in 2019. The balance of the improvement was due to the increase in renewables in the power mix. Natural gas and renewables displaced coal that produced more than 50% of electricity in 2005 and just 23% in 2019.
It will cost trillions of dollars in infrastructure spending over the next several decades to transition to a zero-carbon future and meet the Paris Agreement targets. Rather than pick the winners and losers, a sensible strategy should include investments in various technologies that can utilize existing infrastructure and abundant natural resources. An open mind will be required.
Yves C. Siegel, CFA Principal | Siegel Asset Management Partners