Oil and gas. Natural resources. OPEC. Russia vs. the US vs. Iran. Ceasefire. Sanctions. Blah, blah, blah, the list goes on. You’ve heard the jargon. You know what people are talking about when you hear it. Yet, what you probably don’t fully understand is why people are talking about it. Why, after what seems like a million agreements, cease fires, price changes, and global catastrophes, people are still talking about oil and gas. You might be wondering, after all this time, what is there really left to talk about and why, in the midst of the global climate crisis, are people still so worried about this ancient energy source?
It might shock you (although probably not considering the state of news today), but there’s actually quite a lot of information regarding fossil fuels that isn’t discussed in the mainstream media. Furthermore, there is a plethora of relevant history (especially with regard to climate change) that also isn’t talked about when natural gas is brought up in conversation. Some will say the real reason that we depend on natural gas so heavily is the global market for it, but that’s only part of the story. Another part of the truth, at least in this case, lies in ancient historical use dating all the way back to Antiquity. So let’s dive right in and unpack what exactly the oil and gas industry is, how it came to be, who the majors players are, and why it isn’t going anywhere, despite what many may hope.
As stated previously, according to the United States Library of Congress, “Petroleum has been used for waterproofing, construction, and lighting purposes spanning back to ancient civilizations.” Having historically been found in areas of the world such as the Far East and China, natural gas deposits were recorded by early societies in this area as the primary source of household energy. Today, although much has changed from a technological standpoint, the same premise remains true. In fact, is it because of these technological improvements over the last two centuries that humans have begun to rely on fossil fuels much more. To elaborate, at the same time that crude oil began to be used for heating and electricity, extraction techniques were also improved so that the commodities could be mass produced. Subsequently, the market for crude oil expanded in a way that nobody had ever seen before and fossil fuels became a highly sought after natural resource.
Throughout the 19th and 20th centuries, the major players that continue to dominate the natural gas industry today came forward: The United States of America, Russia, and Iran. In search of a replacement for asphalt based kerosene, the first American oil company was formed in 1855 and named Pennsylvania Rock Oil Company. Edwin Drake of the same group completed the first drilled oil well on August 27th, 1859. This company and others like it, such as the Standard Oil Company, went onto control nearly 80% of the oil products market until the invention of electricity in 1882. However, this did not stop the train of oil extraction and production, it only merely changed its trajectory. Instead of fueling light, the young natural gas industry shifted to supplying fuel for cooking and heating products.
Following the introduction of the automobile to the general public at the turn of the century, the government split up Standard Oil into 34 different companies under the guise of antitrust concerns. However, by 1940 there were again only three major domestic players and four international companies that dominated the market: Standard Oil of New Jersey (now Exxon Mobil), Standard Oil of New York (now Exxon Mobil), Standard Oil of California (now Chevron), Royal Dutch Shell (now Shell), Texaco, Gulf Oil, and Anglo-Persian (now British Petroleum or “BP”). As with many other finite natural resources, once these companies — dubbed the Seven Sisters — began to profit from their endeavors, their mother countries became increasingly involved in regulating the extraction and exportation of these resources. Caught up in the absurd amounts of money they were making, the executives of these oil companies fell prey to nationalization after WWII and subsequently, global political relationships. As such, relations, prices, and supply chains between oil exporting countries and buyers have been tenous since the mid 1900s, a chain of events that unfortunately has resulted in many international crises and even some wars.
So, there you have it. You’re pretty much all caught up domestically speaking. Just kidding — I understand that that was not only probably the shortest history of literally anything you’ve ever read about, but that it cleared just about nothing up. To be candid with you, though, that is the point I want to illustrate: Even if we — being the general populace — take the time to at least become familiar with the cliff notes version of the history of oil and gas, we still do nothing. And here’s my hot take on why: we know on some subconscious level that the trajectory of this globalized industry is not going to change. Oil and gas, believe it or not, will be around for probably as long as we are, no matter what the experts say or how loud public opinion gets.
In other words, oil and gas are some of the world’s most precious commodities and because of that, they’re not going anywhere. People need to realize this and understand that despite our best intentions, taking oil and gas out of the picture doesn’t solve as many problems as we’d like to believe that it would. For one, getting rid of this market effectively takes out 8% of the American economy, 17.1% of the Iranian economy, and 18% of the Russian Economy, or a total of 33% of the global economy. For some context, consider the Great Recession of 2008, when American GDP (Gross Domestic Product) fell 4.3%. Now, imagine nearly doubling that number and thinking about all the jobs that would be lost on top of the jobs that were already lost then (here are those numbers: 9 million jobs lost and 15 million unemployed after 2008) — and that’s just in the United States. As you can see, getting rid of this industry would be effectively toppling countries with little to no regard for those who inhabit them, and that is something these executives just aren’t going to do.
To continue playing the devil’s advocate for a minute, let me walk us through the basis for the previous argument. A large part of the logic against oil and gas (and what gets pushed into the mainstream media) is the cost-benefit analysis perception of the situation. “Don’t get trapped in the sunk cost fallacy,” activists will often say; “things don’t have to stay the same forever!” While on its face this claim may have some merit, especially knowing that sometimes humans do continue to do things only because they have been doing them for a long time, oil executives will hesitate to say that the argument works here. Obviously given the numbers above, there is a lot more at stake here than just “history” and a reliance on the “old way of doing things.” Over a third of the global economy relies on this market and displacing that money could mean the end of the global marketplace. Not to be dramatic, but I have to agree with the doomsayers that if not executed correctly, a market gap that size could make credit run dry, banks close, cities burn, regimes fall, and incite general chaos.
Furthermore, the oil executives believe it’s worth noting that the cost-benefit analysis can be looked at from both angles and still make sense. Sure, it makes sense to consider the fact that the planet is dying at a rapid rate that has been accelerated by the carbon byproduct of fossil fuel extraction. This is true and I am sure many of them don’t disagree with the activists or scientists on this point — climate change is real and an issue that needs to be dealt with accordingly. However, where I am sure the oil executives don’t agree, is in the activist’s thinking that the short term struggles won’t outweigh the long term benefits. To be blunt, from my personal point of view, what government officials and activists alike are dubbing the “short term struggles” is effectively the end of modern day life as we know it. There will be no “long term benefits” because society either won’t have the financial resources to continue or the standard of living will decrease so much that many, many people will die.
Now, I think there are some holes in the oil executive’s argument which I am all too happy to acknowledge: One, I will admit that it’s a little doom and gloom and doesn’t take into account the fortitude of the global economy. Two, it assumes that fossil fuels aren’t phased out, but kicked out, which is highly unrealistic. Three, according to The Guardian, The Paris Climate Accords, and many forward thinking companies, a green future (in regard to both money and zero carbon) is possible if we start now.
But, the truth is, we haven’t started phasing fossil fuels out, at least not in a way that is truly meaningful. I will note that the green future described above still could be possible if we started phasing out fossil fuels now, ushering in a new wave of climate conscious technology, but this is just as unlikely as oil executives shutting down all of their factories at once. Even though the International Energy Agency acknowledged that, “For every $1 of investment in cleaner technology that is avoided in the power sector before 2020, an additional $4.30 would need to be spent after 2023 to compensate for the increased emissions,” people haven’t rallied behind the cause. I believe there are many reasons why, but if I had to point to two I would say that many understand that first, the technology just isn’t there yet, and secondly, neither is public opinion. To truly come back to the heart of the issue, there is just too much debate around the idea of climate change in and of itself.
Not only has the idea become a geopolitical weapon (especially in the U.S.) over the last decade, but there appears to be little political consensus across the board. Let America be the perfect example of this when former President Donald Trump backed out of the Paris Climate Accords and then current President Joe Biden decided to jump back in. It is clear by this instance alone that some countries are far from stationed in one camp regarding the climate question. Furthermore, on the topic of governments, it seems safe to say that while many first world countries are aware of climate change, few have actually put it at the forefront of their policy. In fact, it would seem that more than ever oil and gas have become such precious resources that non-producing countries are now trying to hoard the substances instead of getting rid of them. Now, I don’t know about you, but it would seem to me that actions such as those are moving in the opposite direction of where these countries claim they would like to be headed.
And this trend doesn’t just track for larger countries either, but smaller municipalities as well. Many cities across the globe assert that they are “climate conscious,” but actively support projects that build energy inefficient infrastructure. Take Portland, Oregon for example: City officials claim that 50% of its workforce bikes to their jobs, but this isn’t exactly true. A more accurate number, according to a state census, is around 5.3%. Declines in the number of bikers and walkers such as Portland has less to do with technology and codes, and more to do with politics, but for many cities, it is just a lack of resources. Writing newer and more energy efficient codes is nice and all, writes Ben Evans of Governing.com, but it doesn’t exactly work out when states don’t hire new employees to enforce the codes. “Developing, implementing, and enforcing new codes takes time and staff that many states and local governments don’t have.” However, it isn’t as if states are actually trying to improve upon issues such as these. For the large majority of metropolises at home and abroad, the sad truth is that there are just more pressing matters than energy codes.
All of that being said, I would wager oil and gas is here to stay for the foreseeable future. I will admit that it isn’t the kind of future any of us want to see, but as I mentioned in a previous article, governance tends to look a lot less like it does in the movies and a lot more like compromise, compromise, and compromise again until it’s too late. Although, I would be remiss if I didn’t say that on a more positive note, nothing is impossible. There could still be a world in which, for lack of a better phrase, we get our sh*t together.
Nonetheless, as mentioned in this article several times, the oil and gas industry doesn’t seem to be going anywhere right now. But, that doesn’t mean we have to be resigned to “begrudging acceptance” when it comes to their current practices and procedures. A part of what makes being a person in this time and this society and in this generation so great is our ability to communicate like never before. Want my advice? Tell those oil executives how you feel and what’s more, give them your solutions! We are the future of this species and of this planet, but with great power also comes great responsibility. It is our job to ensure that we have a future here and the way we do our part is by communicating with those who currently control the reigns. We can fix this, friends, with one lesson at a time. Class dismissed.
Categories: Foreign Affairs
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