Publications: Notes at the Margin

Blowback (June 7, 2021)

The International Energy Agency’s Net Zero by 2050 report has provoked widespread protests from oil-producing nations and multinational oil company executives. The dismay suggests that those who immediately wrote off the IEA’s assertion that no new oil and gas development is needed, including this author, may have been mistaken. As suggested in this Notes at the Margin, the world might even be able to operate with little oil or other fossil fuels by 2050. The panicked dismissals of the IEA’s conclusions by key spokespeople for oil-exporting countries add credence to this conclusion.

 

Such a surprising outcome may occur for several reasons. First, consumer behavior has changed in a way that hurts oil producers. Second, major oil-importing nations can, if they choose, stop using fossil fuels for most purposes except perhaps aviation. Third, these countries can use their economic leverage to force other nations to follow suit, restricting trade with anyone that does not get on board the carbon-reduction express. Fourth, the major consuming countries also control most levers of international finance, and the central banks in these nations are moving to limit the credit available to the fossil fuel industry. Finally, policymakers worldwide have learned how to address major economic disruptions, making it possible to lessen the impacts of such events.

 

Our conclusion, then, is that oil no longer poses the economic threat it once did. Indeed, the oil weapon has been at least partially and possibly totally defused. Its removal or moderation will speed the energy transition.

 

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