Mood Music for 2023: Angst and Oil

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Storm Set to Hit Top 50 Oil Firms

Fear more than joy has been the public mood of the recent holiday season. The feeling seems to be that not only was 2022 a bad year, but 2023 could easily be worse. Not exactly a motivator for joyful celebration. At a conventional level, this sense of foreboding is easy enough to explain, what with war in Ukraine, a lingering pandemic that’s now raging again in China, recession looming in many places, and the 40-year globalization process seemingly in reverse, as economic and social structures fragment. That’s bad enough. But does even that fully explain the prevailing angst? Or is there something else disturbing in the air, above and beyond those solid, rationally explicable and enumerable threats? Something those in the fossil fuel business are well positioned to understand.

Change at a fundamental level is not something most people tolerate easily. Many call it fun to get on an airplane and go to some exotic spot where the weather, the scenery and sounds, the food and their own activities are all strikingly different from whatever is normal for them. But for most people seeking out the exotic in that way, enjoyment depends on knowledge that the familiar is there to go back home to if and when they want it.

What if the familiar is simply gone, never to return? Perhaps fear of that uprootedness is what is so haunting about this moment in human experience.

No More Normal for Oil

For the oil industry, it is increasingly clear that there is no going back to normality. Since broad swaths of the global economy closed down in 2020, taking oil consumption and oil industry profits down with it, it has been just as evident to many people inside oil companies as it is to industry critics that demand for their products has a limited duration — that the energy transition is undeniably real.

However, 2022 was arguably the year in which the full reality and likely rapidity of that transition hit home. The failure of oil industry investment rates to respond to high prices and supportive government rhetoric underscored that reality in a way that earlier low prices and profits had not. Nothing will bring back the good old boom days in the Texas oil and gas fields, in the broad expanses of Siberia, or even — despite all the boosterish talk — in the deserts of Arabia. The dancing hasn’t stopped yet, but everyone knows it’s winding down.

The uncertainty still lurking behind that realization is whether what’s happening to the oil industry is an isolated case, or a harbinger of something bigger. Could the demise of oil — along with coal and natural gas — be just a small, if vital symptom of even more fundamental economic and social change and uprootedness? It’s impossible to tell at this point, but there are ample channels of change disturbing most of our familiarly reassuring landscapes. Take the weather.

Weather: No Joking

Jokes about the unpredictability of the weather are commonplace in much of the world. “If you don’t like the weather, just wait five minutes.” But those weather changes should be within established parameters. Over the last couple of years, though, a realization has crept in that those established parameters no longer apply. That climate change isn’t coming in 2050 or 2100. That it’s here right now.

We saw people going out in shirt sleeves in Alaska and in Greenland in December. A couple of weeks later, pipes were freezing in Texas — as they had the February before. Major world rivers can be in extreme drought one week and disastrous flooding the next, to dramatic visual as well as economic and emotional effect.

This is not just expensive for insurance companies and a guarantee of bad days ahead for oil and gas producers, it’s unsettling for almost everyone. It means there’s one very big pillar of our solid, sensible world on which we can no longer depend.

No Rush Back to Work

Then there’s the nature of our work lives and economic activity. It’s perplexing enough to see so many people — or even to be one of those people — choosing to work from home and resisting pressure to get back to the office. What happened to our societal fixation on “getting ahead in the world?” To see “lying down” by young people in China no longer interested in the professional and personal rat race; or “quiet quitting” in the West, reflects a similar disaffection for clawing up the corporate ladder.

Or to see older people choosing early retirement instead of a few more years of work in order to feather the nest egg — or just because work seems like the natural thing to do. Has something uprooted the familiar, solid old work ethic? Can it be transplanted? Or is it gone forever? No one knows.

Nor does the uncertainty stop there. Within all our lifetimes, pretty much everyone has confidently accepted the premise that growth is both a good thing, and an inevitable thing. It seemed almost a law of nature. Growth may slow occasionally and, even more occasionally, briefly go into reverse. But after a recession comes economic recovery. Everybody knows that. “We cannot predict the market recovery, but we do know it will recover as it always has in the past after a down cycle,” was the way Intel put it in a recent statement regarding uncertainty over timing of its plan to build a new chip-manufacturing facility in Germany.

Did the Intel statement writers perhaps put it that way partly to reassure themselves? Are we all really that confident that recovery will come “as it always has in the past?” The now-widely expected 2023 recession won’t last forever, assuming it ever even officially arrives. The question is, what will come afterward? How confident can we be it will be a recovery of the type we all recognize? It won’t be for the oil industry, and maybe it won’t be for other industries either.

Get Growing … Or Not?

Degrowth, post-growth, steady-state economy — all these are ideas of the loony and powerless Left. Everybody knows that, too. It’s an obvious corollary of knowing that growth is inevitable. But is it? Discussion is starting to be heard outside radical environmentalist and left-wing circles that the planet may have belatedly reached those “Limits to Growth” touted in the 1972 Club of Rome report, only to be buried and largely forgotten over 30 years of global economic expansion and official poverty reduction that began in the 1980s.

But in the decade-plus between the 2008-09 financial crash and the Covid-19 pandemic there wasn’t a whole lot of global growth, and what there was didn’t trickle down to average family real incomes. Productivity gains slowed to a crawl in most of the world, and international trade ceased to outpace even tepid economic growth rates. Beginning in 2016, tariff barriers began to reappear instead of continuing their decades-long crumble.

There’s little in demographic trends, climate change, or multipolarizing relations between the US, Europe, China and Russia to suggest any of this will reverse in 2023. On the contrary, there’s much to suggest that the shift toward global stagnation and splintering will gain pace — perhaps dramatically.

As fossil fuel use moves toward its seemingly inevitable peak, is it perhaps worth contemplating the possibility that persistent economic growth of the type seen over the last 250 years — but not notably before that — was a property inherent in fossil fuel development and not feasible without that input of energy extracted from long storage deep in the Earth. Is it conceivable that the combination of growth and increasing globalization is a way of being that will not last beyond the oil age? It seems worth at least some thought at the trepidatious opening of 2023.

Sarah Miller is a former editor of Petroleum Intelligence Weekly, World Gas Intelligence and Energy Compass.

Macroeconomics , Trade
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