Sunday, June 19, 2022

Review of Fossil Future: Why Global Human Flourishing Requires More Oil, Coal, and Natural Gas--Not Less

Mark Mills (previously) recommended that we read Alex Epstein's new book Fossil Future. The subtitle mentions human "flourishing," an adjective that is funny because it reminds our set of Bronze Age Pervert's Twitter meme about "needing to live a certain way" in order to "flourish". (Examples: 1, 2. Enjoy them before the authors are banned.)

Epstein calls the combination of big media, universities, nonprofits, the government, and Bill Gates "our knowledge system," a clunky phrase that I will replace with "regime" below. (His phrase is perfectly unnecessary, just like Curtis Yarvin's ridiculous term "Cathedral.") Some highlights from the book:

  • Fossil fuels are still the dominant source of energy around the world, providing four times more energy than all alternatives combined. And fossil fuel use is still growing. "Renewable" solar and wind are just 3 percent of the world's energy, a 3 percent that is dependent on mandates, subsidies, and reliable fossil fuel power plants - a 3 percent that is leading to increasing costs and/or major reliability problems everywhere solar and wind are used in nontrivial quantities.
  • Whereas in 2014 the policy of rapid elimination of fossil fuels was a rather extreme position, now it is almost ubiquitously viewed as the mainstream, "expert" view, with institutions from every part of the culture declaring their support for fossil fuel elimination by pledging to be "net zero" or "carbon neutral" by 2050 at the latest.
  • Given that I regard continuing, expanding fossil fuel use as essential to global human flourishing, I regard "net-zero" proposals as apocalyptically as others regard fossil-fueled climate change. Net-zero policy, if actually implemented, would certainly be the most significant act of mass murder since the killings of one hundred million people by communist regimes in the twentieth century - and it would likely be far greater. Because net-zero policies are so apocalyptic, I believe they will never be implemented consistently. In particular, China, Russia, and India have given every indication that they will not adopt such policies.
  • As Daniel Yergin documented in The Prize, war requires mobility, and wars are often won by those with the best mobile energy - above all, oil. A world in which free countries are killing their economies and, by extension, their militaries, while China leverages low-cost, reliable fossil fuel energy to become the largest economy with the most formidable military is not a world I want to live in.
  • One cause for suspicion is the insistence not just on rapidly eliminating fossil fuels but on replacing them with exclusively "green" or "renewable" energy. These two terms refer primarily to intermittent solar and wind energy, always excluding nuclear energy and usually excluding large-scale hydroelectric energy - even though nuclear and hydro are the world's largest sources of non-carbon energy. A pro-human approach to reducing or eliminating CO2 emissions would eagerly embrace all forms of cost-effective non-carbon energy so as to produce as much non-carbon energy as possible - not limit itself to "green" or "renewable" energy...
  • A second cause for suspicion that an anti-human standard is at work in "expert" calls for fossil fuel elimination is the use of the term "climate change," meaning "man-made climate change" as an unequivocal negative. From a human flourishing perspective, climate change is not inherently bad - and climate change that involves more warming and more CO2 (plant food) in the atmosphere will surely have many positives even if they are significantly outweighed by negatives. On a human flourishing standard, we want to avoid not "climate change" but "climate danger" - and we want to increase "climate livability" by adapting to and mastering climate, not simply refrain from impacting climate.
  • The fact that [the regime] also supports policies to eliminate non-CO2 emitting, cost-effective nuclear and hydro energy, while ignoring their massive benefits, and is unconcerned about widespread opposition to solar and wind energy, reflects a systemic hostility towards cost-effective energy as such.
  • Our [regime] definitely has some kind of hostility to cost-effective energy as such: nothing else can explain the consistency with which it (a) supports energy elimination policies while ignoring the massive benefits of cost-effective energy and (b) catastrophizes the side-effects of cost-effective energy. Our [regime's] capacity to catastrophize is so egregious that it is capable of catastrophizing the safest energy technology ever invented... What does this mean for our [regime's] current predictions of climate catastrophe? It does not mean that they are totally false; just because we have [catastrophizing regime propaganda] doesn't mean that rising CO2 levels are not catastrophic. What our [regime's] consistent, anti-science catastrophizing of cost-effective energy does mean, though, is that its current predictions of climate catastrophe could be totally false.
  • The greater the value we can produce in a given amount of time, the greater our ability to survive and flourish on this naturally deficient and dangerous planet. For example, modern farmers who can produce hundreds or thousands of times their family's food needs are in a position to trade their surplus food production for abundant food, water, shelter, heating, and other life-enhancing values. To such people the world is abundant - not because it is naturally so but because their productive ability, along with the productive ability of countless others, makes it unnaturally abundant. 
  • Clearly there is something special about fossil fuels' conduciveness to cost-effective energy production that makes them the dominant source of energy - and particularly dominant in the realms of mobility and industrial hear. Our [regime] expresses zero interest in explaining fossil fuels' "secret sauce," preferring instead to deny the reality of fossil fuels' current dominance. On the rare occasions our [regime] does acknowledge fossil fuels' dominance, it offers two hollow refrains to dismiss any possibility that there is something special about fossil fuel: inertia and political favoritism.
  • Sunlight and wind struggle with low energy density. Because they come to us, not only as intermittent flows, but dilute flows, they require enormous amounts of land as well as materials to harness the same amount of energy as fossil fuels (or nuclear) can provide using a small amount of land.
  • We're told that [wind and solar] prices will keep falling, leaving conventional electricity sources in the dust. Such claims often involve impressive-sounding terminology such as "grid parity" and "lower levelized cost of electricity". But they fly in the face of two hard facts. One is that solar and wind exist in large quantities exclusively in places where they are given massive government preferences. When you look at where solar and wind are used, you will invariably find subsidies... This is suspicious. Why do solar and wind always seem to need subsidies and mandates if the costs are so low? This leads us to the second fact: contrary to claims of lower costs, the places that use the most solar and wind on their grid tend to have the highest electricity costs.
  • One popular form of "partial cost accounting" is to just focus on the declining prices of solar panels, ignoring the massive [costs] of making the intermittent electricity from solar panels part of a reliable, on-demand electricity system. Additionally, claims involving the declining cost of solar panels engage in extremely dubious projections that these costs will rapidly decline indefinitely - projections that are already starting to come false as it is revealed that much of declining solar panel prices involved the use of Chinese slave labor and destructive environmental practices, and strategic "dumping" of solar panels at a loss...

Epstein is a philosopher, and this book devotes great length to making developing a moral framework that puts human interests - "human flourishing" - ahead of what we might call "Patagonia catalog environmentalism." Most CBS readers do not care about that philosophical argument. 

As investors what we care about is: are there are more cost-effective ways to provide the energy that humanity needs - about 100 quadrillion BTUs annually in the U.S. - than the fossil fuels we own? Are alternative energy technologies capable of displacing (and leaving "stranded") our fossil fuels in the near term? Are battery electric vehicles going to be more economical than ICE powered vehicles? Are wind and solar going to be more economical than coal and natural gas? These are technological questions that depend on physics and chemistry, and they are better addressed by writers like Tom Murphy and Vaclav Smil.

Another concern about Epstein is that he is a "cornucopian" - he buys the shale myth. So he is focused on making the argument that even if CO2 ("plant food") is causing warming or climate change, we can use human ingenuity - powered by limitless fossil fuels - to overcome the negative effects of the change.

I agree with that, but I am not interested in arguing with communists about whether we should be allowed to use energy. I am interested in the fine details of which energy sources are the most economical, and whether we have enough of them.

Notice that Goodrich Petroleum was losing money and had sharply negative free cash flow, funded by debt and equity issuance, each year from 2012 through 2014. Oil was in the $90 to $100 per barrel range for most of that time period.

Biden's sales from the SPR are obviously unsustainable. Oil producers are working through a backlog of previously drilled but uncompleted wells (DUCs), which is also unsustainable. Once the SPR releases and DUC wells are exhausted, oil producers will need an incentive to invest in new production to replace this very low marginal cost supply. This will need to take the form of a higher oil price and also higher valuation multiples for producers, who would otherwise continue share buybacks instead of making capital expenditures on production.



Allan Folz said...

I am not interested in arguing with communists about whether we should be allowed to use energy.

Sorry, but that is the argument.

The science is settled and it's not even close. It is so not even close that anyone that doesn't see it is either a brainwashed NPC or a lying communist.

The argument is really about wrestling political control from the regime communists because if we do not they are quite willing to curtail everyone else's energy consumption to something approaching a 3rd world standard of living.

It is all sociopaths at the top, and they are convinced the planet's carrying capacity is somewhere between 2 to 5 billion people. Those are the stakes and that is what we are up against. The physics will not strand investors' energy assets, but regime communists will be plenty happy to strand them if it their political power allows it.

Anonymous said...


Because of this, the unfettered development of oil and gas and coal is a “moral” imperative; if you oppose this “irrefutable” fact, you’re a genocidal, racist, anti-human, and anti-science fool who would rather have billions of people slip into poverty and/or die for the benefit of “nature,” which, Epstein argues, kills more humans on its own than any climate effects do.

Allan Folz said...


Regime communists are the real enemy.

CP said...

United States is in talks with Canada and other allies globally to further restrict Moscow's energy revenue by imposing a price cap on Russian oil without causing spillover effects to low-income countries, Treasury Secretary Janet Yellen said on Monday.

Allan Folz said...

LOL. Oh, in that case, I take it all back. Though I'm dying to know WTF that means.

Presumably poor countries can buy Russian oil at some lower rate? Funny, because Russia is already selling it at a discount. They gonna force Russia to sell it at a more bigger discount? How?

PRCD said...

Russia is already selling it to India at a cut rate and India is re-selling to Europe. Presumably, they're going to give India permission to do something it is already doing, then claim credit.