John Wolthuis recently tweeted an interesting question: One of the things I've struggled with is whether it's more important to reduce the supply of fossil fuels or to reduce the demand for them. “Reducing supply” might mean lobbying against new pipelines, filing lawsuits to block drilling permits, etc.
I've been enjoying reading your thoughts – thanks for putting them down! One of the things I think about a lot on the supply side is the impact that building new fossil fuel infrastructure to meet even existing supply will have on future demand. The crux of it is I think in this statement -- "The best way to shut down existing facilities is to make them uneconomical – by making it easier to build green energy projects" -- and how much new, soon-to-be-uneconomical fossil fuel infrastructure will incentivize companies who built that infrastructure to fight against, e.g., making green energy projects easier to build.
For instance: Enbridge spent over $9B on a pipeline that just opened, and I would guess they'll be fighting like hell for decades against policies that would make it harder to recoup that cost, including, likely, policies that incentivize a reduction in demand -- by building competing energy projects or otherwise. The way supply impacts policies that shape demand means that stopping new fossil fuel infrastructure can impact both sides of that equation.
I've been enjoying reading your thoughts – thanks for putting them down! One of the things I think about a lot on the supply side is the impact that building new fossil fuel infrastructure to meet even existing supply will have on future demand. The crux of it is I think in this statement -- "The best way to shut down existing facilities is to make them uneconomical – by making it easier to build green energy projects" -- and how much new, soon-to-be-uneconomical fossil fuel infrastructure will incentivize companies who built that infrastructure to fight against, e.g., making green energy projects easier to build.
For instance: Enbridge spent over $9B on a pipeline that just opened, and I would guess they'll be fighting like hell for decades against policies that would make it harder to recoup that cost, including, likely, policies that incentivize a reduction in demand -- by building competing energy projects or otherwise. The way supply impacts policies that shape demand means that stopping new fossil fuel infrastructure can impact both sides of that equation.
"Build it and they will come" is not something energy suppliers are going to want to take a risk on if they can be undercut by cheaper alternatives.
For example, natural gas suppliers build up their supplies in the summer for the following winter. They will buy less if they are worried about bring undercut by cheap alternatives, resulting in selling at a loss.. In Europe, the cheap alternative to worry about is Russian gas. Will the war be over by then? Uncertainty about this will reduce investment in alternative supply.
Similarly, demand for more fuel efficient cars depends on what consumers expect gas prices to do. There was a big, sudden shift to fuel efficient vehicles in 2008 due to higher gas prices that helped drive some car companies to bankruptcy. Car companies base their investments on what they think consumers will want years from now, and guessing wrong is bad.
Prices matter and it can take months or years for both buyers and sellers to adjust. High prices *now* are painful and don't accomplish as much for infrastructure building as perceptions about what prices will be in coming years.
Governments could set a floor on future prices using commitments to future tariffs on Russian oil and gas.
I've been enjoying reading your thoughts – thanks for putting them down! One of the things I think about a lot on the supply side is the impact that building new fossil fuel infrastructure to meet even existing supply will have on future demand. The crux of it is I think in this statement -- "The best way to shut down existing facilities is to make them uneconomical – by making it easier to build green energy projects" -- and how much new, soon-to-be-uneconomical fossil fuel infrastructure will incentivize companies who built that infrastructure to fight against, e.g., making green energy projects easier to build.
For instance: Enbridge spent over $9B on a pipeline that just opened, and I would guess they'll be fighting like hell for decades against policies that would make it harder to recoup that cost, including, likely, policies that incentivize a reduction in demand -- by building competing energy projects or otherwise. The way supply impacts policies that shape demand means that stopping new fossil fuel infrastructure can impact both sides of that equation.
I've been enjoying reading your thoughts – thanks for putting them down! One of the things I think about a lot on the supply side is the impact that building new fossil fuel infrastructure to meet even existing supply will have on future demand. The crux of it is I think in this statement -- "The best way to shut down existing facilities is to make them uneconomical – by making it easier to build green energy projects" -- and how much new, soon-to-be-uneconomical fossil fuel infrastructure will incentivize companies who built that infrastructure to fight against, e.g., making green energy projects easier to build.
For instance: Enbridge spent over $9B on a pipeline that just opened, and I would guess they'll be fighting like hell for decades against policies that would make it harder to recoup that cost, including, likely, policies that incentivize a reduction in demand -- by building competing energy projects or otherwise. The way supply impacts policies that shape demand means that stopping new fossil fuel infrastructure can impact both sides of that equation.
"Build it and they will come" is not something energy suppliers are going to want to take a risk on if they can be undercut by cheaper alternatives.
For example, natural gas suppliers build up their supplies in the summer for the following winter. They will buy less if they are worried about bring undercut by cheap alternatives, resulting in selling at a loss.. In Europe, the cheap alternative to worry about is Russian gas. Will the war be over by then? Uncertainty about this will reduce investment in alternative supply.
Similarly, demand for more fuel efficient cars depends on what consumers expect gas prices to do. There was a big, sudden shift to fuel efficient vehicles in 2008 due to higher gas prices that helped drive some car companies to bankruptcy. Car companies base their investments on what they think consumers will want years from now, and guessing wrong is bad.
Prices matter and it can take months or years for both buyers and sellers to adjust. High prices *now* are painful and don't accomplish as much for infrastructure building as perceptions about what prices will be in coming years.
Governments could set a floor on future prices using commitments to future tariffs on Russian oil and gas.