When Kim and I reworked our textbook for the second edition, the energy chapter perhaps underwent the greatest change. In 2011 the peak oil movement was receiving a lot of media attention, and websites such as the Oil Drum were a powerful force. Matthew Simmons, Twilight in the Desert, received a great deal of media attention, with its warning that the Saudi oil fields were entering into an irrevocable decline.
In 2013 the Oil Drum closed, North Dakota was booming, and the United States was moving towards energy self-sufficiency. Fracking had changed the global energy landscape. By 2016 oil prices were in a steep decline, that they have only recently begun to recover from. Coal was waning because of the low cost of gas,
In 2017 Toshiba’s Westinghouse has entered bankruptcy because of the high cost of building new nuclear reactors in the American South. It’s not at all clear that it is technically possible to stop the radioactive contamination of water in Fukushima, at any cost or within any timeframe. There are grave doubts that the Japanese government is being forthright about this challenge. With the exception of China and France (and to a much lesser extent, Great Britain) the nuclear industry is in decline.
Tesla is now worth more than GM (although critics say that its valuation is a bubble), and the company is diversifying into batteries. The price of wind power is now competitive with many other sources, and the offshore wind industry has finally begun to produce power in the United States. Perhaps even more important, the price of solar energy is falling at a staggering rate. In the long term, technology breakthroughs are promising to create solar panels that are far more efficient than the current technology, which is approaching its theoretical limit. If solar follows the same economic trajectory as wind power, the changes within our energy infrastructure will be profound.
All of these factors have put immense pressures on fossil fuel producers, which has contributed to Venezuela’s deep crisis, Russia’s recent decision to cut its military spending, and the decline in Canada’s key oil producing province, Alberta. Things aren’t likely to improve in the future, as Jillian Ambrose has discussed in an April 19, 2016 article in The Telegraph titled “Down forever, no last hoorah: Why the market for fossil fuels is all burnt out.” If Anderson is correct, high cost oil producers -such as the Canadian oil sands- will not see a price recovery in the future, and its oil will become a stranded asset. While Alberta has alternatives, the future will be much more difficult for some nations, particularly Venezuela, at least in the short to midterm.
What is driving this trend is less government policy than technological change, of which one part will be the rise of electric and self-driving vehicles. What is interesting to me is that some of the loudest voices proclaiming that there will be a profound societal and economic change are coming from the political right. For example, the blog Mish Talk has had a host of articles recently about the impact that self-driving vehicles will have upon the transportation industry. In a recent post, Study Says by 2030 1/4th of Miles Driven will be Driverless, Mish argued that many people will move from having a private vehicle to use instead some ride sharing arrangement. In other posts he has made the argument that the long-haul trucking industry will be transformed by self-driving vehicles. What I like about his posts -even though we are not on the same end of the ideological spectrum- is that he has a vision of the breadth of the changes that are coming, and the logical implications that changes in one industry will have upon others.
These changes are coming in the nick of time. John Schwartz has an excellent article in the New York Times, which is titled “Climate Change Reroutes a Yukon River in a Geological Instant.” In a few days a river that had drained north to the Arctic Ocean suddenly found a new path, and drained to the Pacific because of a glacier’s retreat. Let us all hope that technological and economic changes can outpace climate disaster. I am looking forward to entirely rewriting the energy chapter again for our 3rd edition. For more posts on energy, click here. You can also see more posts on nuclear energy in particular here.