For over a century now, the coal and oil industries have held strategic importance to states. Global economic growth over this period has been made possible by the seemingly innocuous lumps of carbon and fossilised remains of organic matter. So vital are these assets, the lines between the state and the industry have often been blurred, with national energy companies acting as arms of various government. The fossil fuel industry has not only influenced international relations and industrial policies, they have also been a means of warfare as well as welfare, with energy subsidies forming a significant share of the GDP in several nations.
Consequentially, the coal and oil industry has been able to exert significant influence over public policy. Make no mistake, this influence does not necessarily emanate from a nefarious agenda: states do realise the importance energy plays in development goals. Without the ready availability of coal and oil over the past several decades, vast strides in the fight against infectious diseases, the flow of knowledge and scientific advances, the movement of people and poverty reduction would not have been possible.
As a result of being the engines of the world economy, fossil fuel projects have been given utmost importance by states. When needed, laws have been changed to foster the activities of the industry and foreign policies have been aligned to ensure energy security.
However, we are now witnessing a chipping away of influence, as concerns over the environment have caught steam, and importantly, policymakers have begun to visualise the possibility of renewable sources of energy becoming viable replacements of fossil fuels.
The “war on coal” in the United States (and the EU), in particular, has eroded the influence of the coal industry, with politicians more likely to speak out against coal than they ever did. Natural gas has proven to be a viable replacement to coal, being a far cleaner fuel without the intermittency issues of renewables. As coal is primarily used to generate electricity, viable replacements will but naturally corrode the industry’s sway over policy.
Oil, on the other hand, continues and will continue to remain strategic because it does not yet have a viable alternative. Much of the world’s transport, as well as commonly found products around you – make use of petroleum products. This is unlikely to change anytime soon, as for instance, the electric vehicle industry has decades to go before reaching maturity.
However, the changing politics over oil has already begun to play out. One such politicised event emerged in the form of President Obama vetoing the Keystone XL pipeline in November 2015, which would have transported crude oil from Canada to Texas in the United States. The pipeline had captured political imaginations and become a heavily debated political issue in the United States – even figuring in the recent presidential debates. The points of contention were the transport of crude oil which were to be extracted from an energy intensive process from tar sand deposits (instead of conventional reserves) and the oil itself would lead to greater emissions over its lifecycle. Further, there is a risk of environmental degradation in areas where oil from tar sands is extracted.
However, in this case, the presidential veto may not have the desired impact – and may go on to do more damage. The veto has dealt a blow to only one mode of transportation of the crude oil that would have otherwise been transported in. Oil production from Canadian tar sands itself, however, will continue, and the oil will now be transported by alternate means – most of it via railroads. The move may prove to be counterproductive, as rail- and road-based transport emits four times and fifteen times more CO2 than pipelines do, respectively.
In fact, a report by the US Department of State claimed that the lack of the Keystone XL pipeline would have no noticeable impact on oil production from tar sands, except in the short run. Other studies have countered the claim, stating that there would be marginally lower production. However, even these studies add the disclaimer that the marginally lower production does not imply lower supply, as that would continue from other regions in North America and the world. On the net, there may be no slowdown in the supply of crude oil to the American market at all.
What the veto has done, however, is brought to the forefront a marginal (and perhaps token) power shift away from the oil industry. Activists protesting the pipeline have argued that automatic approvals for oil projects in the United States was in question, and the veto has succeeded in taking that away in this one case. Activists hope that this proves to be a template for other oil projects to follow.
Through the veto, President Obama postured well before the COP21 in Paris, even as his negotiators take tough stances at the summit. With the global community signalling strong intent to arrive at a climate change deal in Paris, the need for a cleaner environment and strong action to mitigate climate change has not been lost on the industry. In a move that is a far cry from the promotion of climate change denialism by the oil industry, BP’s Chief Executive, who was voicing the opinion of an oil industry body, recently threw his weight behind carbon taxes and a global agreement at Paris, saying, “we have the same hopes and fears for our children and grandchildren as anyone else”. This comes only years after President Obama claimed political capital for making BP create a $20 billion fund to compensate for the Deepwater Horizon oil spill. While $270 billion in global renewable energy investments in 2014 may be a pittance compared to fossil fuel investments, as these investments rise, the renewable industry will see its strategic importance rise. The times they are a (marginally) changin’.
Siddharth Singh is the Area Convenor of the Centre for Research on Energy Security at The Energy and Resources Institute, Delhi. Views are personal.
He writes about Energy Security & Energy Economics on his blog, The Energy Factor, a part of Business Standard’s platform, Punditry.
He tweets as @siddharth3
Email: s_singh@outlook.com
