Last night in the Strasbourg parliament I attended an energy industry briefing on the place of oil in our economy. Some interesting stuff emerged. The industry stressed that refining margins are narrow, that refined petroleum products are cheap to ship around the world, and that therefore costly EU regulations on the industry had the effect simply of driving the refining business to more industry-friendly jurisdictions. This is a bad thing, as the refining industry pays rather a lot of tax (sorry I didn’t make notes so I can’t quote the numbers) and employs many thousands of people in Europe.
I found this instructive, as I’d been uncertain why refineries in the UK are closing. I should have known that EU regulation would be implicated.
We also heard that the fashionable idea of “Peak Oil” has definitively gone away, with major new finds of both conventional and unconventional oil deposits. And the world is awash with gas. Fossil fuels may run out one day (unless replaced by new technologies before they run out), but not any time soon.
The industry estimates that oil will still represent 25% of EU energy by 2035, against 35% now, and they don’t believe that fully electric plug-in cars will be viable for a long time. I suspect that even their 25% figure (which will horrify the Greens) is on the low side.
The industry also made the point (something I have often thought) that the media are unhelpful in presenting oil industry profits in terms of “umpty-ump billions”, leading aggrieved consumers to ask why oil companies are raising prices or closing refineries when they make so much profit. But of course we are talking very large companies with correspondingly large asset bases. The question should not be “How many Billions?” but “What return on capital employed?”. We need the oil industry to prospect for oil, and to recover it, from increasingly challenging and hostile environments. We need utilities companies to invest massively in new generating capacity. They’re not going to be able to finance those activities unless they can anticipate realistic investment returns.
But as usual at these evening briefing events, the fun really started with the questions from the floor. I was struck by two. Romana Jordan, a very charming EPP MEP from Slovenia (I follow her on Twitter, although I don’t understand Slovenian) is a bit conflicted. On the one hand she has a realistic grasp of the energy market. On the other, she buys into the climate change scam — and has difficulty reconciling the two views. Vittorio Prodi (brother of the better-known Romano Prodi, former Commission President) is a very urbane and agreeable Italian socialist.
Romana worried about the impact on climate change of continued oil use, while Vittorio suggested that the current surge in natural gas was “a bubble”, and that we should plan to rely instead on renewables.
When I got to my turn, I sought to reassure them.
“Can I reassure Romana that she need not worry about climate change. According to the UK’s Met Office there has been no global warming now for fifteen years — despite the continuing rise in atmospheric CO2. And the slight rise in mean global temperatures in the previous hundred years is entirely consistent with similar rises ahead of the Minoan optimum, and the Roman Optimum, and the Mediaeval Warm Period. It is part of a well-established, long-term, natural climate cycle. There is nothing exceptional that we need to explain or to worry about.
“In any case, If you think we’re doomed by rising CO2, then we’re doomed. Globally there are over 1200 new coal-fired power plants in the pipeline, and CO2 emissions will continue to rise for decades, whatever we try to do about it.
“I have to disagree with Vittorio that we’re seeing a gas “bubble”. We have shale gas for probably 200 years, and methane hydrates could extend that to a thousand years.
“Turning to the industry, and your concerns that EU regulation is driving refining, and investment, and jobs out of the EU altogether, please don’t feel singled out for punitive treatment. I can assure you that across a range of industries, and especially energy-intensive businesses, we’re seeing the same thing. EU regulation is profoundly anti-business, and is driving business off-shore. Sometimes we speak of “carbon leakage”. On the one hand we note that the EU accounts for only around 13% of global emissions. But European consumption is responsible for around 25% of global emissions — with the difference made up by foreign emissions resulting from the production of goods to be exported to the EU. The Commission is presiding over the deindustrialisation of Europe”.