#048 - Renewable Energy Collapse - Part I

On today's episode, we are talking with our guest, speaker and author, Steve Gorham.  Steve is the Executive Director of the Climate Science Coalition of America, and an advisor to the Heartland Institute.  This is Part I of our podcast chat with Steve discussing how energy crisis and net zero affects us daily.

On this episode we will talk about:

• What’s the cause of the energy crisis?
• What’s happening in Europe right now.
• The origins of the world’s energy crisis.
• What’s going on with air and water around the world.
• What happened to the ozone layer?
• Global warming is dominated by natural factors, not manmade emissions.
• The three misconception about running out of oil and gas: “We need to switch to renewables”.

To listen to this episode check it out on iTunes + Stitcher or on the website. 

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About Steve Gorham:
Steve Gorham is the author of three books, including his latest Outside the Green Box, Rethinking Sustainable Development.  He has more than 100,000 copies of his books are now in print. Steve holds a BS and an MS in Electrical Engineering from the University of Illinois, and an MBA from the University of Chicago. And 30 years of experience in Fortune 100 and private companies in engineering and executive roles.

To learn more about Steve Gorham or to connect with him:

www.stevegorham.org

Transcript

Tom Wireman: 0:01

Hi and welcome to the Oil and Gas Accounting Podcast. I'm your co host Tom Wireman executive director of COPAS, the Council of Petroleum Accountants Societies. I'm here with my co host Phil Sherwood, owner and founder of Sheware the provides software for oil and gas operators and accountants. If you're a CPA, an accountant, a bookkeeper, and office manager. Or if you're an oil and gas operator during your own accounting, this podcast is for you.

Phil Sherwood: 0:24

We're here talking with the experts in their respective accounting areas to keep you up to speed on the latest accounting news rules and data. There is so much happening in the world today, especially in oil and gas that affects the accounting function of a business. Our job on this podcast is to keep you up to date and help you see more, no more and do more as an accounting professional in our field. Let's get started.

Tom Wireman: 0:50

Well, hello, everyone. It's time again for another episode of the Oil and Gas Accounting podcast. We're glad that you're here today. I'm Tom Wireman. And I'm the co host with Phil Sherwood. Phil, how are you today?

Phil Sherwood: 1:00

Hey, Tom, I'm happy to be here today with you for another oil and gas accounting podcast season. I hope all as well with you. And we've got a great episode today and I'm happy to introduce our guests. Our guest is Steve Gorham. He's a speaker and author researcher on environmental issues. And he's an independent columnist. He's Executive Director of the Climate Science Coalition of America, and an advisor to the Heartland Institute. He's the author of three books, including his latest outside the green box, rethinking sustainable development, more than 100,000 copies of his books are now in print. Steve holds a BS and an MS in Electrical Engineering from the University of Illinois, and an MBA from the University of Chicago. And it's good 30 Or actually more than 30 years of experience in Fortune 100 and private companies in engineering and executive roles. Steve, welcome to the podcast.

Steve Gorham: 1:56

Great to join you today. Guys. Thanks for inviting me.

Tom Wireman: 1:59

We're glad that you're here as well. Steve, your topic today is energy crisis and net zero, the possible futures. So we have a lot to cover, you will have a lot to say I'm sure. So let's get right to it. First question I have is green energy is a big discussion topic today. With that in mind, we seem to be in the midst of an in a world energy crisis, would you? Would you care to share with us what the cause of those crisis is?

Steve Gorham: 2:24

We are Yeah, it's a remarkable time. Right now, we have a crisis around the world that is based on a number of things. First, we had the COVID disruptions in 2020 and 2021. And we've come out of those now impacting the supply chain, and goods all over the world. We've also had a rice, a recovery and a rise in the price of oil. Oil in April of 2020, dropped to about $20 a barrel. And that was at that time, it was amazing. In April, we had us miles driven, dropped to levels that were lower than 1950. People just stopped driving in the middle of the crisis. But anyway, we've recovered from that and the price of oil has gone up to about 100. I think it's about$80 a barrel right now. And that was prior to the invasion of Ukraine. We had the Russia invading Ukraine on February 24 of 2022, which is really a knock energy markets around the world. And then we have green energy policies that have been going on for a number of years, not often mentioned, but a major factor in what's going on. And for example, back in 2010. If you look at oil and gas exploration and drilling investment, the front end of the oil and gas industry, about $500 billion were spent in 2010. And that rose to almost 800 billion in 2014. But the investment in in exploration and drilling has been following it fell all the way down to a little over $300 billion in 2020. And part of this is the green impact. Faith Bureau X, Executive Director of the International Energy Agency in 2021. said if governments are serious about the climate crisis, there can be no new investments in oil, gas and coal from now from this year. And so the world is is sort of put pressure on financial institutions are not lending to oil and gas in many locations. And then we get this recovery from COVID. And over the last two decades, we got to talk a little bit. Well, let me let's anyway, that's that's sort of the basis we have. We've had a recovery from COVID recovery and demand, prices are rising for oil and gas and under investment over the last at least seven or eight years in the oil and gas industry.

Phil Sherwood: 4:48

Okay, you mentioned that the investment side, you know, going from 20 billion to 800 billion down to 300 billion in 2020. Has it gone down even further since 2020.

Steve Gorham: 4:59

I think it's fair on picking up the US drilling, Well, the number of rigs out drilling in the US, for example, had been declining for a number of years. And then in early 2020, they just dropped precipitously, I think it was down to about 300 Drilling teams now it's they've doubled again, and they're climbing up. So the world is, you know, part of this is a low prices, a problem that we've had over a number of years, price of oil price of gas, the price of gas was under $2 per million Btus. But those have been recovering. And now we've got, we've got this crisis, this Europe centered energy crisis, that's, that's a partial cause for these high prices. And let me march into that, if I if I can a little bit. Europe has become very dependent on what I call weather driven energy sources, wind and solar. And also natural gas over the last two decades or so 23 nations in Europe announced that they would phase out coal by varying dates 2025 2030 2035. and Europe also has closed 100 nuclear plants, nuclear power plants, 30 of those in Germany and 34 in the United Kingdom. And so the continent has been very dependent has become very dependent on wind, solar natural gas. Another portion of that is it's not, it's not only dependent on gas, but it's a dependence on imported gas. In 2017, European community identified about 40 shale fields in Europe, all over Europe. As a matter of fact, there's one that stretches all the way from the the Baltic states on the east side of the Baltic Sea, all the way to England, the whole top part of of Europe is one fail shale field. But Europe has decided not to fracture any of those fields. And so they instead have been importing gas. And by 2021 63% of their gas was imported, and 27% from Russia. Then in the summer of 2021, we had a very low wind year in Europe, the wind output in France, Germany in the United Kingdom, was down about 20 or 30%, all year long. And so what Europe did was they burn natural gas to produce electricity. And by the end of the year, the storage levels were very, very low and gas. And so the price went way up. Typically the price of natural gas, they measured in euros per megawatt hour, has been about 15 to 18 euros per megawatt hour, that's what it was running 2020 2021 First part of 2021. And then when they burned all this gas in the summer to replace the wind that they weren't getting from their wind turbine, wind, wind systems, the price of gas went up by December of 2021 to 80 euros per megawatt hour. So from about under 20, up to at about a about a five times rise. And that was three months before the invasion of the Ukraine. And then when Russia invaded Ukraine, the prices when higher prices doubled, again, they're down about I think about 175 euros per megawatt hour now. But they have been over 200 for several months. And so this is a factor of 10 natural gas has gone up by a factor of 10. It's basically exploded. And along with that, electricity prices have also gone up by a big amount. The price of electricity in Europe, throughout 2020 ran about 35 about 15 to 35 euros per megawatt hour, or pounds per megawatt hour, roughly the same British pounds that went up by a factor of six by the end of 2021. And then with f the invasion of Ukraine. It's now right the average in in August in Germany and France was over 400 euros per megawatt hour. So that's also a by a factor of 10. Just a huge problem that they have in Europe. So gas and electricity prices are up by a factor of 10. And this is really injuring European industry. Just in September unit PIR in Germany was nationalized by the German government. It was the biggest importer of natural gas in because Juniper had all these long term contracts with Russia and they lost them. And they were paying prices that they couldn't recoup in the market for this on the spot market. In England, they had 30 firms who were buying gas who went out of business because the price they consolidate, which was controlled was was lower than what they could buy it. We have ammonia production and Europe down 50% nitrogen fertilizer production on 33% those industries are very dependent on natural gas. And then the metal smelting groups are very, very much in trouble as well. More than half of the aluminum and zinc production in Europe has has shut down. So any of these firms that don't have long term contracts at fixed prices are having to close down. And so really a terrible situation in Europe right now. And it's also it has spread around the world as well, because in the US what our natural gas folks have been doing as they they shifted their first they're shipping everything they can to Europe, because the prices are so high. And they stopped shipping it to Asian and diverted some of it to Europe. So the price has been rising in Asia as well, almost as fast as in Europe.

Phil Sherwood: 10:34

Okay, can we go back to Europe screen energy policies? That's where we started the conversation here. And could you break that down for us a little bit? When did that start? How long ago did they start on this path?

Steve Gorham: 10:49

Well, it's it's been several decades. You know, a lot of this came out of the original out of the oil, several factors in the 20th century. One were the oil shocks of 73 and 79. And a lot of groups that affected the US that caused inflation in the US it called cause recessions or gasoline prices used to be about 20 cents a gallon. And they they skyrocketed. With with the oil shocks there, we had an environmental movement during the 1950s 60s and 70s. And rightly so there were air and water pollution issues that needed to be solved. And so there was there was a drive to a shift from oil and natural gas. Matter of fact, the US government was promoting coal to be burned in power plants for for a number of decades. And that and still there was a shift there to take us away from dependence on natural gas or oil. And then we had this this rising theory of manmade global warming, which we'll get into a little bit that sprang up in the 80s. And all of these factors, aimed Europe and other locations toward trying to substitute wind and solar. And in some case, biomass is for oil and gas. And so matter of fact, around the world we've had, the the green energy shift that many people are proposing is that first you switch from coal to natural gas. And then you substitute natural gas with wind and solar and storage as you get farther and farther along. And so we've had a shift away from coal in many locations. And right now we have a situation where natural gases has become the crude oil of today, if you will. This is the first world energy crisis. It's based on natural gas that we've had, and the price of natural gas, but it's similar to the two past world crises based on petroleum. There just isn't enough natural gas around right now. As I mentioned, a lot of countries have been shifting to shifting out of coal shifting to natural gas. And so we're really short of it right now. And with this resurgence in global demand, and the the Russia, gas cut off to Europe, it has come full force and forced prices up by a factor of 10.

Phil Sherwood: 13:10

You'd mentioned over 100 nuclear energy plants had been shut down. Over in Europe.

Steve Gorham: 13:18

I was in that's in Europe. Yes. Yeah. In Europe,

Phil Sherwood: 13:21

that doesn't seem to go along with the green energy movements. Can you talk on that a little bit?

Steve Gorham: 13:28

Well, it is kind of interesting. Yeah. Matter of fact, during the 70s, during the the environmental movement of the 50s 60s and 70s. A big portion of that movement was was anti atomic weapons. Greenpeace was founded and went out and looked at testing in the Pacific testing in the Aleutians and protested. And so there are many, many efforts, and many of the Green parties in Europe, oppose nuclear power and opposed atomic energy. And then we had a number of things go on, we had the three mile near problem in Pennsylvania. We had the Chernobyl disaster in Ukraine, which was a partial meltdown of a plant. We had the Fukushima event in 2011, where they had a eight on the Richter scale, a level of earthquake and a huge tidal wave, which stopped the cooling systems in the planet Fukushima and caused some radiation there and some problems there. Chancellor Angela Merkel in Germany said well, we you know, we're this we're now going to embark on shutting down the nuclear plants as part of their energy Wendy program. And so Germany has killed 30 of them The United Kingdom has been closing plants as well. But you're right. From a greenhouse gas point of view nuclear plants emit close to zero greenhouse gases and, and so should be in line with the supporting the theory of manmade warming and the reader and emissions. But they've been a little bit on the blacklist of many environmental, environmental movements and governments for a number of years. And nuclear has been fairly flat since World Nuclear, it's been declining as a percentage of world electricity. But the total output has been fairly flat since just before 2000. In the US, we get about, I think, just about 20% of our electricity from nuclear, and that's been flat for many years as well.

Tom Wireman: 15:29

Steve, you're a little bit critical, maybe as world efforts to transition to renewable energy is

Steve Gorham: 15:35

sort of a minority report, if you will.

Tom Wireman: 15:39

But But to some degree, don't we need to make this transition? Well,

Steve Gorham: 15:43

let's talk about energy a little bit. So from my point of view, there are three big misconceptions about energy. The first is that by using an increasing amount of energy, we are increasingly polluting the world. Second is that by using more and more energy, we're and particularly hydrocarbon based energy, we are destroying the climate. And the third is that we are running out of traditional energy, are running out of oil and gas, the theory of peak oil, so called resource depletion, and therefore we must force a switch to renewables. Those three ideas are taught in our universities. They've been adopted by the news media, and many, many companies have picked those up as well. But if you look a little more closely at these, you see that these really aren't the case. And maybe we should get into a discussion on those.

Phil Sherwood: 16:37

Yeah, let's take these one at a time. You know, it's said that only gas production is causing rising global pollution. That is

Steve Gorham: 16:45

actually a pretty big misconception, what in the United States, for example, and all developed nations. So we have, we have cleaner air, we have declining air, declining air pollution. My grandfather had a coal bin in his basement, and he would, he does house with coal truck would come up, dump it down in the bill and go into the furnace. And he lived in Chicago, this was in the 1950s or so. In Chicago, it would snow and about five days later, you would see a little bit of a black film on all the snow. And people used to do spring cleaning, most of the young folks don't know what that is. But with spring cleaning, literally in April, and May, they would actually wash the walls every year to wash the coal dust off the walls. But natural gas came in and replaced that and made all of our heating systems very much cleaner. And if you look at US Air Quality trends, data from the EPA shows that our combined pollutants, and those are LED carbon monoxide, military, nitrogen dioxide, sulfur dioxide, particulates, and ozone, are down at combined about 80%. Now, relative to what they were in 1980. So our air is very, very clean. If you look around the world, in all wealthy nations, you still see a similar thing you see, Europe has a similar curve, where their pollution has been declining recently. And actually, every nation goes through a sort of a process where when they start to when they're poor, and they don't have food and clothing, and housing, they're interested in increasing wealth, and they're not too interested in what's going on with the water and the air. And so as they get wealthier, they pollute the air and they pollute the water. And so environmental damage and pollution goes up. But then at some point, they reach a thing called a turning point income. And they're, they look around and say, Well, hey, we're wealthier than we were a couple of decades ago, but our air and water is not very good. And so then they start cleaning it up. And interesting curve at the University of Chicago shows what's happened to China in just the last few years with regard to particulate pollution that peaked in in China's air. And these are small particles that go into the air that peaked about 2012 or 13. And it's been declining since so you have kind of an an inverted U curve where pollution rises in every nation, but then after nations get wealthier declines. So the great news is that as nations get wealthy, they clean up their air in their water, and we're seeing that all over the world. Some people still think global pollution is rising, and it is in poor nations. But overall, the good news is that nations clean up their air and water and we put scrubbers on our on even our coal plants, and those, it's just a great thing. So pollution is not rising globally, and we're going to get all over the world where we will have event Initially improving air and water. You

Phil Sherwood: 20:03

mentioned a couple of things in there, I want to unpack those. You mentioned the word ozone, which we have not heard for a long time. I can remember that used to be the big buzzword. What happened there? What happened to the ozone? Are we not concerned about the ozone layer going away anymore.

Steve Gorham: 20:18

But the ozone layer is a little different. What I'm talking about here, this ozone is more ground level ozone. And it's produced by other things, particulates and nitrogen, sulfur dioxide, when they're emitted from from factories or power plants, they react and they produce ozone and ozone can be harmful like these other pollution pollutants. I mentioned. The ozone layers a little bit different. That's up high. And that's

Phil Sherwood: 20:44

the big, the big climate concern was the ozone layer did it?

Steve Gorham: 20:47

Well, yeah. Well, the Yeah, you're right. And so in the 70s, the number of scientists said that people were damaging the ozone layer, they found a hole over Antarctica, which was a reduced amount of ozone concentration in the high atmosphere. And they thought and they postulated that we were doing that. And then there was a treaty, the Montreal Protocol, which was signed, I think about 79 or so early 80s. Were all the nations in the world signed up to reducing. And they said basically, that the way we were killing it was chlorofluorocarbons compounds with with fluorine in them that we had with fluorine that we had in our aerosols. And so the the nations of the world agreed that we would get rid of those compounds. And during the 90s, in the early 2000s, those basically went to zero around the world. Funny thing, Oh, is that the, the ozone hole is still there over Antarctica? So I'm not sure whether the theory is correct. Now, scientists say well, it's going to take a few more decades before we see that change. But it may be that there are other factors in nature that are causing the ozone hole up there, and not necessarily our chlorofluorocarbons. But that's, that's a bit of an another topic. For ice ground level ozone.

Phil Sherwood: 22:05

Okay, sorry, I misunderstood you there. The other thing you mentioned was about nations, and when they become wealthy, they can clean up, can you speak a little bit to how nations become wealthy? Well, you know,

Steve Gorham: 22:20

you know, that's kind of an interesting thing, especially for the oil and gas industry, if you I have sometimes when I present I showed two curves together, one is increasing gross domestic product for the world. And this curve is about from 1950 to present day. And the other one I put there is global carbon dioxide emissions. And if you look at them, they are very highly correlated. And the carbon dioxide emissions, that that we produce, of course, come from primarily from burning natural gas and oil and coal and wood as well, anyway, but that that's a measure of the industrialization of our modern society. And our all of our transportation, our air flights, our shipping, the electricity we produce is still dominated globally, two thirds of it is produced by oil and gas. Matter of fact, about 80% of global energy comes from hydrocarbons, despite the fact that the world has spent $5 trillion over the last 15 years or so to promote wind and solar. And, and that 80% is about the same as it was 20 or 25 years ago really hasn't changed. So yeah, we have this. We have this issue about everybody wanting to get rid of oil and gas and suppress co2 emissions. But those things are an indication of the tremendous prosperity of modern modern day society.

Tom Wireman: 23:48

Steve, you mentioned seek your second, your second point, if I recall, was the UN, the United Nations rather, and others would say that we need to halt oil and gas production to stop the global warming. Right. Yeah. So let's get to that

Steve Gorham: 24:02

a little bit for us. Yeah, this is this. I mean, we could do a whole nother session on this. So I'll try and be brief. But there's a couple things people should understand. The one is, you know, I have had a couple of young ladies from UCLA call me up and start asking me questions about manmade warming. So I asked them some questions. And one of the questions I asked was, well, how much you think global temperatures have warmed in the last century or century and a half, and one said five degrees and other 10. The actual number is since 1880, global temperatures have risen one degree Celsius in 140 years, about 1.8 degrees Fahrenheit, that's very, very small. We get that change every day between nine and 10 o'clock in the morning. So the temperature rise has been very, very small. The second thing is that we've had warmer temperatures in the past. There's a lot of geologic evidence that that says that for Centuries at a time. We had temperatures 1000 years ago, 2000 years ago, 3000 years ago, six to 8000 years ago that were warmer than Today's temperatures. And those were due to natural factors. Those were due to cycles of the sun. Other factors that are going on in our universe tilt to the Earth's axis, a lot of other things. And so if you look at today's modern, warm period, there's nothing abnormal about it. We it has warmed a degree, but we've been coming out of a period called the Little Ice Age, when the Thames River froze solid in London every year and used to have a festival called the frost fest, during the Little Ice Age where you haven't been able to do that for more than a century because the Thames River hasn't frozen solid at London. But these factors are natural variations in Earth's climate and temperatures. And again, 10,000 years ago, we had at the end of the ice age we had, or maybe 15 20,000 years ago, we had a mile of ice on Chicago sitting on the surface of the earth. These cycles happen normally. The first point is we have a very little temperature rise for many, many years. Second is it's been naturally warm in the past. And the third is when you break down the greenhouse effect, which is a natural effect of greenhouse gases in the atmosphere like carbon dioxide or methane do tend to trap energy coming out causes their molecules vibrate, they reradiated it does tend to warm surface of the earth. But most of the greenhouse effect is a natural effect. Earth's dominant greenhouse gas in our atmosphere is not carbon dioxide, it's not methane, it's water vapor. Somewhere between 75 and 90%, of Earth's greenhouse effect is caused by water vapor and clouds. And then if you look at all the natural carbon dioxide that that is exchanged between the oceans and the atmosphere, every year, it's huge. We have 50 times as much carbon dioxide dissolved in the oceans as we do in in in the atmosphere. And every day, nature puts about 20 times as much co2 in the atmosphere as all of Earth's industries, and removes about the same amount. So human contributions, if you look at the the factors is a very small part of everything. Probably we're producing one or 2%, we have one or 2% effect on Earth's greenhouse effect very, very small. There'll be on that, you know, I could go into a lot of different things about storms. If you look at history, we do not have more and stronger storms than we had in past years. oceans have been rising about eight inches per century. But they've been doing that oceans have been rising for the last 20,000 years. There are many, many things that the bottom line is that global warming is dominated by natural factors, not manmade emissions. And again, this is a Minority Report. There are a lot of people that disagree with this. And but I'm happy to debate any of those folks anytime they would like to. And I think within a few decades, we might even have a little bit of gold global cooling, we could have a period of time when the temperatures are declining, despite what we're doing with our industry. So that's a real encapsulation of of a complicated topic, global warming and human effects on it.

Phil Sherwood: 28:27

Okay, well, let's switch to your third misconception about running out of oil and gas. You know, some people say that we need to switch to renewables, because we're not going to have enough oil and gas, you know, to supply the world.

Steve Gorham: 28:40

I love to I love to play a clip from a presentation Jimmy Carter made that President Jimmy Carter made to the nation about but 78 or so. And he said, basically, if we keep using oil at the same rate we are we could run out of oil by the next decade. And he all of his advisers told him this. I mean, it wasn't necessarily his his sort of thing. And many global petroleum supply was going to peak about 2005. But we introduced the frack the hydraulic fracking revolution in the United States and, and US oil production, which had fallen to 5 million barrels a day in 2008. Went back up to 12 million barrels a day. In 2019. It's a little bit less now but it's rising again. And if you look at world oil production and reserves in 1980, we had about 28 years of supply. The reason the oil reserves are 28 years of supply 2019 they were 45 years of supply. So we've been finding reserves faster than the world has been consuming, even though production of oil has been going up. So the idea of peak oil and gas has been proven incorrect at least in our lifetime. I'm here. And so there's, there's no real reason to switch out of that because it's going to be disappearing. Now on the other hand, as I mentioned earlier, if the world doesn't invest in exploration and drilling, then we're gonna get price rises. And that's what we're seeing now, particularly natural gas in the US and sub only a factor about two and a half or three. In Europe and the rest of the world, it's up by a price factor of 10 times what it was two years ago. And oil is at a healthy price about $80 a barrel but makes our gasoline expensive. So we need to get back to producing oil and gas for for the prosperity of people. And oh, by the way, we have a big portion of the world that still needs still needs oil and gas. In Nigeria, for example, there's about three cars per every 100 people. In Europe, it's 50 or 60 cars, per 100 people in the US, it's just about, I think it's about 100 cars per every 100 people. So as these nations develop, they're gonna need the prosperity we've enjoyed, they're gonna need more oil and gas. And so the industry needs to push back a little bit against the, against the global warming narrative.

Mallory Schlabach: 31:19

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