Publications: Notes at the Margin

Petroanura: Successful Demand Destruction by Environmental Regulation (May 31, 2022)

 

The title of this Notes at the Margin may baffle some readers. What, they will ask, is a “petroanura.” The translation to English is “petrofrog.”

 

We chose the title purposely. Most readers will know the often-told cautionary tale of the frog in hot water. As it goes, if you put a frog into a pot of boiling hot water, it jumps right out. If you put it into a pot filled with cold water and gradually increase the temperature to the boiling point, the frog will stay put and die.

 

The oil industry is our petroanura. Last week, it got dumped into boiling water when the UK’s finance minister announced the imposition of a windfall tax on oil production. The British “petronephropidae” jumped immediately, threatening to cut their investments in the North Sea. They will also move quickly to derail or reverse the UK tax decision. Consequently, the measure will likely not last long or have a significant price impact.

 

Environmentalists—the oil industry’s sworn enemy bent on exterminating fossil fuels—understand the frog-in-water game. Thus, rather than directly attacking the industry as the British government just did, they have designed and implemented programs over several decades that are slowly raising the heat to where the “petrogastopdoda” will expire. They are now close to achieving that goal.

 

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