ENERGY WATCH #3 - October 9, 2018
Three more reasons to reduce oil and gas use: Russia, Saudi Arabia and petrochemicals
by Karel Beckman
The climate is not the only argument against fossil fuels.
The apparent brutal murder of the prominent Saudi journalist Jamal Kashoggi in Istanbul and the Russian poison attack on ex-spy Sergei Skripal in England provide two excellent warnings – if any more were needed – that Europe should do all it can to make itself less dependent on imported oil and gas.
The fact that Russia is the largest gas supplier to Europe is well known, but Russia is also Europe’s biggest oil supplier. Europe imported 489.7 million tons of crude oil in 2016 (according to the BP Statistical Review of Energy 2018), of which Russia supplied 170 million tons and Saudi Arabia 37 million tons. Most of the rest came from Iraq, Kuwait, North Africa and West Africa.
The dangers of relying on Russia for our energy supply are clear enough. But Saudi Arabia is also becoming a growing risk under the increasingly despotic and aggressive leadership of Crown Prince Mohammed Bin Salman.
Bin Salman (known as MBS) in 2016 presented an ambitious Vision 2030, which was widely hailed as positive plan to diversify the Saudi Arabian economy and reducing the grip of the religious establishment on Saudi society. True, women are now allowed to drive, but at the same time MBS is cracking down hard on dissent and engaged in a brutal war in Yemen.
According to some reports, some 800,000 foreign workers have left the country since last November’s arrest of hundreds of princes and businessmen and capital is fleeing the country. Foreign direct investment in Saudi Arabia has plunged and the partial privatization (5%) of Saudi Aramco has been cancelled. Some commentators worry that Saudi Arabia might become “the next failed state in the Middle East”.
While opponents of renewables always harp on the cost of renewables subsidies for ratepayers, the costs of securing oil supplies from Saudi Arabia and the Middle East are seldom discussed. According to a recent report from Securing America’s Future Energy (SAFE), a clean-energy advocacy group of retired military and business leaders, the US military spends a minimum of $81 billion a year protecting oil supplies.
However, as David Roberts writes on the website Vox, that number (which represents a value of $11.25 per barrel of oil), is certainly far too low, as it excludes many indirect costs and excludes the costs of wars, e.g. in Iraq and Afghanistan, which are also partly related to oil.
In addition, as Roberts points out, costs are about more than money. As a result of our consumption of oil and gas, he writes, “the world’s countries have long been trapped in a corrupt struggle for finite resources that has carried untold colonialist oppression and ecological ruin in its wake. Oil has sullied everything it touches, very much including the US government. It has led us to ally with evil regimes, to empower autocrats, to bully vulnerable populations, to start unjust and pointless wars, to foul our land, water, and air, and to bloat the size of our military beyond all reason — all while we neglect the needs of US citizens at home.”
Note that Saudi Arabia is spending a fortune on political lobbying in Washington DC. In a recent article for the website Tomdispatch.com, a project of the well-known liberal magazine The Nation, Ben Freeman, director of the Foreign Influence Transparency Initiative at the Center for International Policy, details the stunning amounts of money the Saudis are spending in the American Capital.
The recent growth of Saudi lobbying operations is “extraordinary”, writes Freeman. “In 2016, according to FARA records, they reported spending just under $10 million on lobbying firms; in 2017, that number had nearly tripled to $27.3 million. And that’s just a baseline figure for a far larger operation to buy influence in Washington, since it doesn’t include considerable sums given to elite universities or think tanks like the Arab Gulf States Institute, the Middle East Institute, and the Center for Strategic and International Studies (to mention just a few of them).” (FARA = Foreign Agents Registration Act)
More than a third of the Members of Congress, writes Freeman, “received a campaign contribution by firms representing Saudi interests”. The “flow of money is best exemplified by the 11 separate occasions we uncovered in which a firm reported contacting a congressional representative on behalf of Saudi clients on the same day someone at the same firm made a campaign contribution to the same senator or House member. In other words, there are 10 other cases just like Marc Lampkin’s, involving foreign agents at Squire Patton Boggs, DLA Piper, and Hogan Lovells. For instance, Hogan Lovells reported meeting with Senator Bob Corker (R-TN) on behalf of the Royal Embassy of Saudi Arabia on April 26, 2017, and that day an agent at the firm made a $2,700 contribution to Bob Corker for Senate 2018.”
This kind of corruption is another hidden cost of our use of oil which is too often ignored in debates around the energy transition. Many European organisations also take money from Saudi Arabia, despite its dubious reputation as sponsor of terrorism.
“Perhaps at one time it could have been argued that the benefits [of oil use] outweigh the costs”, writes Roberts. “But climate change has settled that argument, as has the plunging cost of energy alternatives. We now understand that the costs of oil dependence are potentially existential and that the costs of freeing ourselves from oil are manageable.”
Not that reducing our dependence on oil will be easy. It involves more than turning to electric cars: oil is also a mainstay of the global petrochemicals industry.
According to a new report from the International Energy Agency (IEA), The Future of Petrochemicals, petrochemicals “are becoming the largest drivers of global oil demand, in front of cars, planes and trucks”.
Petrochemicals – components derived from oil and gas that are used in all sorts of daily products such as plastics, fertilisers, packaging, clothing, digital devices, medical equipment, detergents and tyres – are set to account for more than a third of the growth in world oil demand to 2030, and nearly half the growth to 2050, adding nearly 7 million barrels of oil a day by then, writes the IEA.
They are also poised to consume an additional 56 billion cubic metres (bcm) of natural gas by 2030, and 83 bcm by 2050.
The IEA calls the petrochemical sector one of the “blind spots” of the global energy system. Other such areas that “receive less attention than they deserve” are “the impact of air conditioners on electricity demand, the impact of trucking on oil demand, or the role of modern bioenergy in the renewables sector.”
Petrochemicals, notes the IEA, “are also required to manufacture many parts of the modern energy system, including solar panels, wind turbines, batteries, thermal insulation and electric vehicles.”
The IEA report notes that “demand for plastics – the key driver for petrochemicals from an energy perspective – has outpaced all other bulk materials (such as steel, aluminium, or cement), nearly doubling since 2000. Advanced economies currently use up to 20 times more plastic and up to 10 times more fertiliser than developing economies on a per capita basis, underscoring the huge potential for global growth.”
“The dynamism of the petrochemical industry is also driving new trends around the world. After decades of stagnation and decline, the United States has re-emerged as a low-cost location for chemicals production thanks to the shale gas revolution, and is now home to around 40% of the global ethane-based petrochemical production capacity. Meanwhile, the Middle East remains the lowest‑cost centre for many key petrochemicals, with a host of new projects announced across the region.”
To address climate and environmental challenges of petrochemicals, the IEA report outlines a Clean Technology Scenario (CTS), which provides an alternative future in line with key UN Sustainable Development Goals, such as climate action, responsible consumption and life below water, among others.
“The scenario provides an ambitious but achievable pathway to reduce the environmental impacts of petrochemicals: air pollutants from primary chemicals production decline by almost 90% by 2050; direct CO2 emissions reduce by nearly 60%; and water demand is nearly 30% lower than in the base scenario. It also emphasises waste management improvements to rapidly increase recycling, thereby laying the groundwork to more than halve cumulative, ocean-bound, plastic waste by 2050.”
In the Clean Technology Scenario, “petrochemicals become the only growing segment of global oil demand. Despite near-tripling in plastic waste collection by 2050, the limited availability of cost-effective substitutes for oil feedstock means that oil demand for petrochemicals remains resilient.”