Are we nearing an energy Trumpocalypse?
A global energy crisis is a lot less hypothetical than it was just a few weeks ago. Is your company ready?
The defining public events of my adolescence were Richard Nixon's Watergate Scandal and the two "Oil Shocks" of the 1970s: the 1973 Arab Oil Embargo and the Iranian Revolution-induced 1979 oil crisis.
Also noteworthy in my recollection of that era was moving into a house in the suburbs of Chicago, in 1973, with a fully equipped bomb shelter in the backyard.
Even though the shadow of nuclear annihilation still loomed pretty large on the collective conscious during the pre-detente mid-1970s, the hysteria of the Cuban Missile Crisis that had led to the bomb shelter-building craze a decade before by then seemed quaintly antiquated to me and slightly amusing in a morbid sort of way.
Just two weeks into the Trump administration, these childhood memories seem more real and relevant to me than they have in decades.
We know now that President Donald Trump is hellbent on fulfilling his campaign promises, no matter how illogical or ill-advised that they were when made — and remain now — and no matter how negative the fallout domestically and internationally. For those who hoped it was all just election season demagoguery, you now know that you were grievously wrong.
Even now, leaders of the renewable energy industry comfort themselves with statistics showing that the solar industry provides four times as many American jobs as the coal industry, but that could turn out to be cold comfort. Be mindful that Candidate Trump gave assurances to coal workers, not solar workers and, in return, the citizens of West Virginia gave him nearly 68 percent of their votes.
Going back to where I began, coal versus solar is not my foremost concern right now. What concerns me is Trump's bare-knuckled approach to foreign policy combined with his unique gift of being able to unite strange bedfellows in virulent opposition to him and to the true interests of the United States. This, I fear, may land us in a seriously compromised position within a relatively short period of time, and those of us in the energy business soon may find ourselves at the vortex of a geopolitical storm.
Trump already has pissed off Mexico and united all Mexicans — everyone from Carlos Slim and President Enrique Peña Nieto all the way down to the most unassuming campesino — in a common revulsion to his policies and statements.
But Mexico, to a considerable extent, has to turn the other cheek and play nice to its massive northern neighbor. China and the oil-rich countries of the Middle East, on the other hand, aren't quite so beholden.
Circumspect for now, it is hard to imagine the Chinese leadership tolerating Trump and his provocations for long. He already has trampled on what is sacred to them, the One-China Policy. Add to the mix his virtual promise of a trade war, his repeated accusations of currency manipulation and his chest-thumping vow to roll back China's island-creation strategy in the South China Sea. All of Beijing's buttons already are being pushed and Trump hasn't even really focused his Twitter missile on China yet.
And then there are the Middle East and America's relations with the Muslim world. With his words and anti-Muslim actions, Trump actually may achieve the heretofore unthinkable, uniting two mortal and implacable foes, Iran and Saudi Arabia, in common opposition to the United States. Iran needs no further encouragement. Saudi, for the time being, is still trying to accommodate its traditional ally and protector.
But what if the Trump administration adds Saudi Arabia to the Muslim nation travel ban (commentators already having pointed out that most of the 9/11 hijackers were, in fact, Saudis)? And what if, in short order, Trump peremptorily moves the United States embassy in Israel to Jerusalem? By so doing, he severely will undermine Saudi Arabia and the other moderate Sunni states and blow up their tacit regional alliance with Israel against ISIS, Iran and Tehran's other proxies in the region.
Might Saudi Arabia and Iran collaborate in leading a Middle East oil-producer boycott of the United States?
Could a second Middle East oil embargo happen, 44 years after the first one?
Not likely, you might say, because the oil producers depend on a constant stream of oil revenues to maintain their domestic security. But what if cash-rich but resource-poor China quietly steps in, looking to put Trump in his place, and offers to buy up all the oil that the embargo-ists want to sell?
If an oil embargo were launched against the United States, would it be effective?
It is true that the United States itself doesn't import that much oil from the Middle East — between 1 million and 2 million barrels a day out of roughly 5 million barrels a day of net imports. But keep in mind that the 1979 oil crisis was caused by only a 4 percent dip in global oil supply.
Certainly the effectiveness of an Middle East oil embargo would be amplified or mitigated by the willingness of oil producers from other regions to step up shipments to the United States, so let's look at what nations we buy oil from. Apart from Saudi, the four biggest oil exporters to the United States last year were Nigeria (Islamic), Venezuela (not our friend), Mexico (oops!) and Canada (one out of five is not bad!).
Under almost any circumstance, an oil embargo would cause sharp price increases and severe supply dislocations, affecting all Americans. Surely there would be some winners — domestic oil producers for instance; Trump may not "make American great again" but he certainly would "make North Dakota great again." Meanwhile, the American economy, American workers and American energy consumers would all be big-time losers.
Is this embargo scenario probable? Not yet, but it is possible and, indeed, far more likely today than the zero percent chance that existed just two weeks ago.
The sustainability movement, both morally and economically, has its roots in the innate scarcity of all natural resources. What sets environmentalists and sustainability advocates apart from others is our insistence on worrying about the circumstances of future generations tens and hundreds of years into the future, and the potential unavailability to these generations, our descendants, of those same resources that have so enriched our lives.
Living in a bubble
Since the Great Recession, now almost 10 years ago, we have been living in a bubble of resource abundance. This current abundance has masked the finite nature of Earth's natural resources. Absent a geopolitical disruption, the era of energy abundance seemed destined to continue into the foreseeable future, particularly in the United States.
Quite suddenly, the risk of geopolitical disruption looms large. It is now incumbent upon all of us, no matter whether we are on the supply or demand side of the natural resource equation, to scenario plan the possibility of sudden, severe and prolonged disruption.
And that is where the clean energy community looms large. The inexhaustible, non-disruptible and highly cost-competitive nature of our renewable energy resources suddenly may assume magnified importance, but only if these resources can be offered to consumers in a user-friendly way that enhances resilience and ensures reliability.
So whether you are in residential solar or electrified transportation, provide clean energy-related services to the commercial and industrial sector or do something else in the sustainability world, get ready: Your customers may be calling.