Disruptions In Energy Security And Climate Security Part 1: Recent Events.

Energy security in the now.

The Covid pandemic stifled industrial activity. When business roared back to life, demand for oil and natural gas shot up. Oil rose to over $100/barrel.

In Europe and Asia gas prices rose in lockstep from $5/MMBtu (or MCF) in June 2020 to unheard of highs of $30/MMBtu in November 2021. Then $58/MMBtu in early August and $94/MMBtu on August 26, 2022 before heading down to $70/MMBtu at end of August 2022. In August 2022 the gas price was 11.6 – 18.8 times that in June 2020.

In contrast, natural gas prices in the US remained subdued, rising from $4/MMBtu in June 2020 to $10/MMBtu in August 2022 – an increase of 2.5 times.

In its foray into Ukraine, Russia has realized that cutting natural gas doesn’t affect their export revenue (like oil does) but it affects the economies of EU countries a lot more. Russia supplied the EU with 40% of its gas last year, with Germany, Italy, and Netherlands the top three importers in actual volumes of gas.

Germany had imported more than 50% of its gas from Russia via the Nord Stream 1 pipeline. By the end of June 2022, this had fallen to 25%, and last week Russia stopped the flow completely.

President Putin on Tuesday proclaimed that Europe’s energy problems are a result of the sanctions imposed by the West on Russia. Its easier to blame the West than admit that what started this energy war was the illegal invasion by Russia of Ukraine.

What can be done about the massive disruption in gas supply and price in Europe? The answer lies in understanding why the gas disruption is more muted in the US – the shale revolution. After 2003, the US became the seat of power for the shale revolution, which led to the US being self-sufficient in gas and oil production – for the first time since 1947.

The US wasn’t permitted to export natural gas before 2016, but the shale gas revolution changed that. Within the past six years, the US has reached the top of LNG exporting countries just ahead of Australia and Qatar. And the majority (68%) of LNG exports carried by those huge tankers goes where? To Europe, to help reduce their gas disruption.

The new UK British Prime Minister, Liz Truss who was installed this week, stated she will strive to constrain the inflation of energy prices. Inflation is presently 10.1% and is mostly due to surging energy prices. She promised to cap household energy bills to £2,500 for two years.

Some in Britain wish that she had been around before the search for shale gas was abandoned in 2019, after strong environmentalist opposition and a few small earthquakes that were recorded while fracking a shale well.

Similar quakes were measured in Oklahoma and Texas, ignored until some of the population protested, and then mitigated successfully by regulators. Understandably, attitudes toward oil and gas production in Oklahoma and Texas, two big oil states, are quite different from those in Britain.

Now Prime Minister Truss, after eyeing the shale revolution which led the US to energy independence, wants the UK to become self-sufficient in energy. It’s a worthy goal, probably a necessary goal, for energy security.

Climate security in the now.

The other side of the security coin is climate. One commentator said he was disappointed by Prime Minister Truss’ announcement that she would make the UK energy-independent by boosting fossil energies. He wanted to hear a clear differentiation between fossil energy and renewables, with a focus on renewable energies.

The world is warming steadily as confirmed by temperature measurements from satellite data. The world has warmed by close to 1.1C over the past 150 years of the industrial revolution.

All the predictions by climate scientists are for a worsening of extreme weather events such as droughts, wildfires, tropical storm floodings, and hurricanes. Let’s take a deeper dive into this.

Weather extremes have been documented for many decades. And some of these have been labeled as “unprecedented extremes or outliers.” These seem to be increasing since 2020, and if they are caused by global warming, then indeed they are a climate security warning cry.

Climate scientists claim to be able to assign a probability that an extreme weather event was caused by global warming. For example, a heat wave embroiled Oregon, Washington state, and Canada in the summer of 2021.

The maximum temperature in one town called Lytton, British Columbia, was 49.6C (121.3F) on June 29, 2021. This was almost 2C higher than all previous daily readings for the whole of Canada. The very next day 90% of the town burned down.

The measurement was so far outside the spread of temperatures over 96 years (see image above) that climate experts designated a high probability that it had to be caused by something else, namely global warming. Global warming influenced the “heat dome” that baked the West Coast in June 2021, and added about 2C to the already sweltering temperatures.

Other “unprecedented” climate disruptions that made big-time news included:

· Summer temperatures in Europe this year broke all records, rising by 0.4C (June, July and August), due to a series of heatwaves and a long-term drought. August was the hottest ever, by 0.8C, a large margin. In the UK, a new record daily high of 40.3C (104.5 F) jumped over the previous high of 38.7C that occurred in 2019.

· In 2020 there were 30 named tropical storms, the most ever, that began in the Atlantic and headed toward Florida and the Caribbean. 7 of these turned into major hurricanes.

· A heat wave and drought in Australia in 2019 was designated at least 30% probability of being caused by global warming. The drought set up conditions for terrible wildfires that killed more than one billion animals in southeast Australia. In 2021, the country also experienced not just one, but two vast flooding outliers on the east coast of Australia in 2021. These events qualify Australia as a poster-child of global warming.

· A massive flood in Belgium and Germany occurred in July 2021, with 243 deaths, and $12 billion in damages. Such an can be expected every 400 years. Climate change increased the intensity of the maximum 1-day rainfall event in the summer season in a larger region by 3 – 19% compared to a pre-industrial global climate 1.2C cooler.

· The immense flooding in Pakistan in the past week, where a third of the country was under water, was invoked by one angry spokesperson who said, while trudging through the water, that wealthy western countries should help the reparations because their carbon emissions caused a big part of the problem. $10 billion in damages.

· The southwest US is in a dreadful drought. The Colorado river and its reservoirs are at historic lows. In New Mexico the locals say the Rio Grande is at a 30-year low. And the biggest-ever wildfire emerged in spring of this year, the Calf Canyon/Hermits Peak fire. It was started, sadly, by prescribed burns initiated by the US Forest Service.

Takeaways.

Recent global events that can only be described as alarming have affected energy security and climate security. These events have made the challenge to shore up global security more difficult.

This is a special dilemma for oil and gas companies, because they contribute 50% of global carbon emissions even while they are needed to support global energy security.