AEP’s Latest Fossil Fuel Rant

By Paul Homewood


AEP is off on one of his usual rants again:


We know what a stranded fossil state looks like. It took five years for the halving of oil prices to defund Venezuela’s rentier petro-regime and reduce what used to be Latin America’s richest country to a humanitarian basket case.

Once the downward spiral began, it became self-feeding and unstoppable. The economy has contracted by two thirds. Nearly five million people have left the country since 2018. It is the world’s largest refugee crisis after Syria.

Brent oil prices today far exceed Venezuela’s extraction costs, but that is irrelevant. What matters is the ‘fiscal break-even cost’ needed to sustain the socialist Chavista machine. The International Monetary Fund thinks this is over $200 a barrel.

The Orinoco tar sands – the world’s largest crude reserves on paper – produce high-cost dirty crude that will never be viable in the post-Paris era of decarbonisation. They are worthless.

Venezuela is the first to go of RBC Capital’s ‘fragile five’, but several others are heading towards social collapse and sovereign insolvency.

Behind them in this grim parade come the big beasts of the Persian Gulf, and arguably Russia since it depends on fossil revenues to cover 60pc of its budget.

The timing of this massive geopolitical upset is subject to hot dispute. Yet there can no longer be any doubt that the twin-pincers of draconian carbon curbs and plummeting renewable costs will sweep away much of the old energy order, and that markets will bring this forward demolition job soon enough with Schumpeterian ferocity. 


I think you can guess the rest!


Back in the real world fossil fuel consumption has been rising in leaps and bounds:



BP Energy Review

Despite the rapid rise of renewable energy 49 to 561 Mtoe a year, it has been dwarfed by an increase of 3620 Mtoe in fossil fuel consumption.

It has nothing to do with cost or carbon tax, nothing else has been found to replace fossil fuels, and is highly unlikely to in the next couple of decades.

Beyond that, who knows what the world will look like?

AEP still clings to the belief that citizens will demand an end to fossil fuels. But he is evidently confusing a handful of eco rag, tag and bobtails with real people, who need to travel to work, heat their homes and even have a job to go to. They certainly won’t be happy when the reality of the green agenda hits home.

Indeed, we only have to look at the gilets jaune to see that.


As with all of his fossil fuel rants, AEP fails to explain just how modern economies can run on highly intermittent and unreliable wind and solar power. He has ths child like belief that we can get all of the energy we need from batteries!

But perhaps he might believe what the Committee on Climate Change had to say in its Net Zero Plan a few months ago:


Exhibit 1


Even the CCC accept that we will still need a large amount of gas fired power in 2050. Indeed actually more than now, as it is currently running at 119 TWh.

It can only be classified as “Carbon Free” because it is assumed to be be fitted with carbon capture technology. Regardless of whether that can work or not, we will still need lots of natural gas.

Exhibit 2


We will also still need large amounts of natural to convert to hydrogen, for heating our homes and industrial use. Again this will require CCS technology. The CCC recognise that the power grid simply would not be able to cope with the winter peak demands for heating, if all heating was electrified.

Other countries also recognise the realities. That is why Germany is so desperate for the new Nordstream 2 gas pipeline, which will enable it to double volumes of imported gas from Russia.

What I find strangest in AEP’s rants is his confusion. At one level he is claiming that renewables will become so wonderfully cheap that the bottom will fall out of the oil market. But then he will go on to talk about the need for draconian carbon taxes, politically enforced divestments and St Greta.

Well, which is it?


February 13, 2020 at 08:25AM

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