It was the worst of times, it was the best of times. For the people working in the corner offices of Calgary’s corporate towers, that’s been the story of 2022 so far, especially when it comes to the war in Ukraine. After years of watching their industry get beaten down, first by a price war and then by growing concerns about climate change, it’s suddenly a very good time to be an oil and gas company executive. After briefly trading in negative territory less than two years ago, Canadian oil is poised to set a new all-time high.
But the joy being felt in those Calgary towers is misplaced because the renewed surge in commodity prices is a long-term defeat disguised as a short-term victory.
Russia’s invasion of Ukraine will almost certainly prove to be the tipping point in the global energy transition as entire continents move to make their economies and societies less dependent on oil-exporting countries like Russia and Saudi Arabia. Yes, those executives in Calgary will see their stock options increase in value, and the Alberta government will collect billions more in royalty revenue.
But this is the death rattle of the fossil-fuelled global economy, not its latest renaissance.
That’s because unlike the last time oil prices traded above $100 a barrel, consumers and companies alike have options for reducing their exposure to high fuel prices. Those options will only continue to grow in number in the year to come, as every major automaker on the planet rolls out its own range of electric vehicles.
“Oil staying above or near $100 a barrel for a protracted period of time just makes renewable investment look better,” Sarah Ladislaw, managing director at the think tank RMI, told the Los Angeles Times. “If the price environment and the strategic conflict lasts a bit longer, I think it drives people to find alternatives.”
Investors have already twigged to this. Case in point: When the markets opened on Feb. 24 in the wake of Russia’s invasion of Ukraine, it seemed likely that a huge increase in oil prices would be the story of the day. But by the time it was over, a much different one had emerged. Yes, global energy stocks were up, with the largest energy ETF in the world gaining 1.7 per cent on the day. But that was nothing compared to the iShares Global Clean Energy ETF, which was up 7.6 per cent — and on a day when the overall market fell.
High oil prices, and the impact they’re already having on household budgets, aren’t a good thing for the vast majority of people. But when it comes to driving down global emissions and increasing the sense of urgency people feel about climate change, they might just do the trick. The longer prices stay at these nosebleed levels, the more likely it is that consumers, businesses, industry and even entire countries will look to find alternatives. Once they do, it’s unlikely they’ll ever look back again.
That’s particularly true in Europe, where the combination of high energy costs and Russia’s reckless invasion of Ukraine could prove transformative.
Opinion: The longer prices stay at these nosebleed levels, the more likely it is that consumers, businesses, industry and even entire countries will look to find alternatives, writes columnist @maxfawcett. #Ukraine #FossilFuels #Renewables
“The stuff coming out of the mouths of European leaders has never come out of their leaders’ mouths before,” said Nikos Tsafos, the James R. Schlesinger Chair for Energy and Geopolitics with the Centre for Strategic & International Studies, in an interview with Scientific American. “There is a different strategic resolve coming out of Europe, and if you’re not factoring that into your model, I think you’re missing something.”
That’s why the federal government needs to hold its nerve when it comes to its promised plan to regulate and restrict oilsands emissions. Premiers like Jason Kenney and Scott Moe will renew their demands for more pipelines and production, and industry advocates will repeat their tired arguments about ethical oil. Let them. What they can’t see, or won’t, is that the transition away from fossil fuels has shifted into a higher gear.
If Canada can’t keep up with that, it risks getting left behind in years and decades to come — especially as global demand for oil starts to roll over and fall off.
Most fossil fuel enthusiasts, including the well-paid ones in those Calgary corporate towers, refuse to believe that’s even a possibility. Mick Dilger, the former CEO of Pembina Pipeline, told the Calgary Herald’s Chris Varcoe in November: “The key question right now is: What is the tenure of hydrocarbon production? And I think it looks a lot like it’s four to five decades, rather than one to two decades.”
But if the pace of the energy transition starts to really pick up in the years ahead, we’ll almost certainly look back to early 2022 as a key influence on that.
It’s long been said that the cure for high oil prices is high oil prices. This time, it might be a permanent one.