Commentary on Political Economy

Sunday 17 October 2021


 THERE ARE two big risks in the world’s impending transition to a low-carbon energy future. The first, of course, is that it may fail to achieve sufficient emissions reduc- tions to prevent a climate debacle. The second is that it unintentionally enriches and empowers the world’s autocratic regimes. Saving the planet must be thought of strategically, in the context of the Biden administration’s goal of dem- onstrating that democracy is the wave of the future.

The issue arises because of the tension between the long-run goal of relying less on fossil fuels and the short-run reality that the world still does depend on them — overwhelmingly. Demand for crude oil, in particular, is slated to rise along with population and economic growth well into the 2030s, according to the most likely scenario in the International Energy Agency’s World Energy Outlook 2021. And oil is a fungible commodity. When the United States and other West- ern countries discourage oil production on their territory, and by their private- sector companies, in favor of climate-

friendly alternatives, they create an op- portunity for state-owned oil companies in Russia, Saudi Arabia, Iran and Ven- ezuela to grab market share.

That is exactly what they are doing, according to an illuminating Oct. 14 New York Times story by Clifford Krauss. Saudi Aramco, the world’s leading oil producer, is spending billions of dollars to increase its capacity by at least 1 mil- lion barrels a day, to 13 million, by the 2030s, the Times reports. The article cited estimates that the global oil market share of the Organization of the Petro- leum Exporting Countries and allies (OPEC-plus nations), dominated by Sau- di Arabia and Russia, will grow from 55 percent now to 75 percent in 2040. Inevitably, this means more money — and more geopolitical influence — for Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin, as well as Venezuela’s Nicolás Maduro and the Iranian theocrats.

In recent months, President Biden has been obliged to ask foreign oil producers to up their output to ease rising U.S. gaso- line prices. (The White House has also

lobbied the domestic industry.) A similar dynamic is playing out across the Atlan- tic, where Mr. Putin is using Russia’s massive state-owned natural gas re- serves, soon to be linked to Germany via the Nord Stream 2 pipeline, as leverage in his dealings with energy-hungry Western European democracies.

The solution is not to give up on a greener future, but to pursue it in a balanced way, reducing not just supply but demand — in the short run, and in a way that affects all producers, foreign and domestic, private and state-owned, equally. That calls for a broad-based tax — preferably on all sources of carbon emissions but certainly on gas, diesel and jet fuel. Politicians of both parties, from Mr. Biden on down, oppose fuel taxes, because, they say, it will raise the cost of transportation for the poor and middle class. True enough. On the other hand, prices are already rising, but Saudi Ara- bia and Russia are getting the windfall. When you look at it that way, the question isn’t whether Americans are going to pay but whom: foreign dictatorial govern- ments or our own?

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