In a traditionally slow news month such as August, any event of relative significance gets abundant coverage. Yet the latest report by the Intergovernmental Panel on Climate Change was not just an event of relative significance. It was, based on media coverage, an event of huge significance. This significance lay in a stark warning: quit fossil fuels or ruin the planet. The report basically said that if we don’t act immediately, we would never be able to limit global warming to 2 degrees Celsius from pre-industrial times. It also noted that some of the changes human activity has inflicted on the planet are already irreversible.
In comments on the report, UN secretary-general Antonio Guterres said, “This report must sound a death knell for coal and fossil fuels, before they destroy our planet,” adding “Countries should also end all new fossil fuel exploration and production, and shift fossil fuel subsidies into renewable energy.”
The world must urgently wind down fossil fuel supply in an orderly and transparent way and halt high-risk high-cost oil and gas exploration today,” said the founder and executive chair of Carbon Tracker.
These reactions—especially the UN’s Guterres’ call to end all oil and gas exploration—sound quite familiar. The reason is that they echo a call by the International Energy Agency for an end to all new oil and gas exploration before the end of 2021. The IEA made the call in its Net-Zero Roadmap, which saw demand for oil and gas decline fast because of the availability of alternative energy sources.
Soon after the report was released, however, the same International Energy Agency that called for the end of all oil and gas exploration made another call, this time to OPEC. The agency asked the cartel to start pumping more oil as demand for fuels was rebounding faster than expected, pushing prices higher.
U.S. President Joe Biden, who has set a goal to make the U.S. economy net-zero by 2050 and slash emissions by 50 percent by 2030, this week also called on OPEC to boost production. The reason: prices at the pump were too high for American drivers.
The messages coming from IEA and the White House might seem confusing, at best, and hypocritical, at worst. But let’s say it was possible for every oil company in the world to decide at the same time to stop the pumps. What would happen then?
The short answer is, of course, chaos. The longer answer covers pretty much every part of any and every economy on the planet and virtually every industry. It will be a while before the full effects begin to be felt because there are stockpiles of oil, gas, and petrochemicals, but even before these begin to dwindle, prices will skyrocket because of the impending supply outage. And this means prices of everything.
“If there was no oil, iPhones, technology, computers, plastics, all manufactured products, food and medicines would not be able to be produced,” says Jay R. Young, CEO of King Operating Corporation, an oil and gas investment firm. “So the people in the United States living the Amish lifestyle would be impacted the least.
“We as a society have lost the ability to survive without the food chain and delivery of products. Coal would continue to increase and the CO2 and pollution would increase at a dramatically increasing rate. Billions would die, societies would fail, and the migration to a clean future would be over,” Young says.
It would be difficult to argue with such a vision, regardless of whether it comes from the oil industry or not. Payal Rastogi, founder principal at CarbonFixers, an Indian company working with businesses to make them more environmentally sustainable, shares Young’s opinion.
“If we stop consumption and drilling for oil and gas; as of today all the global products and life will come to stand still,” she says.
Before this standstill, however, there is bound to be a lot of action, none of its friendly or peaceful. Right now, a price rise of about $1 per gallon of gasoline is prompting the President, who has made it clear he is not a supporter of the oil industry or gasoline, to call on the world’s oil-producing cartel to increase oil production as unhappy drivers make for unhappy voters. Now imagine what would happen if the price per gallon of gasoline rose by not $1 but $5 in a matter of days. You don’t even need to imagine it: we’ve seen what happens when fuel shortages hit in Venezuela, for example.
The U.S. has only a month’s worth of oil supply, says Dr. Jerry Bailey, chief executive of Utah-based oil company Petroteq Energy Corp. if production stops, the country would be plunged into an immediate depression because a vast amount of U.S. industries depend on the commodity.
Since this is true of all economies and not just the United States, multiplying the effect expected for it by the number of countries in the world should provide the full picture, which will not be pretty.
One might perhaps argue that these are the opinions of people from the oil industry but it would be difficult to counter these opinions in any rational way. The truth is that modern civilization is dependent on hydrocarbons. A transition away from this dependence cannot happen overnight and it cannot happen forcibly because of the fallout: quitting cold turkey is the hardest way to kick a bad habit and not always successful. Maybe we have a better chance of weaning ourselves off oil and gas if we approach the transition in a calmer, less alarmist manner.
N.B: Irina Slav, a journalist and writer with experience in the oil and gas sector originally published this article in the current edition of Oilprice.
