Status quo danger

In recent years, a number of high-net-worth investors, mostly innovative disruptors, joined Bill Gates in funding Breakthrough Energy. The objective was to diversify and accelerate efforts to make zero-carbon energy available and affordable. Gates noted that the private sector and governments have historically under-invested in technologies to replace fossil fuels.

While the U.S. pharmaceutical and IT industries in 2010 spent 20 percent and 15 percent of their total revenue on research and development, the energy industry spent less than one-third of 1 percent.

…The U.S. government spends 22 times more on research and development for the military than it does on energy...

Investment in Clean Energy

Many executives are disinterested in material changes to the ways they do business. An example, as written elsewhere on this site, is BC Hydro pursuing technology of the 20th century instead of lower-cost power generating and distribution technologies now available.

Stasis is dangerous for any enterprise that aims to survive long-term. Roger Martin, Professor Emeritus of Strategic Management and former business school Dean at the University of Toronto, argues that businesses often underestimate the risks of the status quo:

A rampant underestimation of the perils of the status quo is something I have observed consistently over a career of attempting to foster change and innovation as a strategist.

…having spent an intense amount of effort on understanding and ‘marinating’ in the risks of the proposed new initiatives, the management team would come to view all of the options for change as “too risky.” They would choose to stick with the status quo..

The corporate greed of fossil fuel producers daily impacting every citizen may alter that industry’s status quo in a stunningly rapid manner. I don’t expect that taxpayers crippled by fuel costs will continue to tolerate multi-billion dollar subsidies and deregulation to benefit an industry that is gouging each and every person in the land while banking record level profits.

Coal, oil, and natural gas received $5.9 trillion in subsidies in 2020 — or roughly $11 million every minute — according to a new analysis from the International Monetary Fund.

Explicit subsidies accounted for only 8 percent of the total. The remaining 92 percent were implicit subsidies, which took the form of tax breaks or, to a much larger degree, health and environmental damages that were not priced into the cost of fossil fuels, according to the analysis...

Economic and environmental benefits set to make renewables in tandem with EVs irresistible…

Fossil Fuels Received $5.9 Trillion In Subsidies in 2020

Personal rewards encourage managers to sacrifice longer term value creation for shorter term gratification. Executives in the oil and gas business will be pocketing unprecedented remuneration but their celebrations may be part of the death throes of a doomed industry.

Fossil Fuel producers turn to seemingly independent accomplices to promote the status quo. Six months ago, the Fraser Institute — partly funded by fossil fuel interests — used University of Victoria economist Cornelis van Kooten to make the claim that “‘Renewable’ energy can’t replace fossil fuels.”

But in 2019, BNP Paribas, a French banking group with assets of C$3.5 trillion, circulated a paper that examined energy use by the transportation sector. The author, Global Head of Sustainability Research Mark Lewis, asserted that fossil fuel use cannot be sustained in the sector that is currently the largest consumer of these products:

Oil needs long-term break-evens of $10-$20/bbl to remain competitive in mobility…

We calculate that to get the same amount of mobility from gasoline as from new renewables in tandem with EVs over the next 25 years would cost 6.2x-7x more. Indeed, even if we add in the cost of building new network infrastructure to cope with all the new wind and/or solar capacity implied by replacing gasoline with renewables and EVs, the economics of renewables still crush those of oil.

Note that current oil prices are six times the upper range of what Mark Lewis said was necessary for oil to compete in transportation. Greed of the fossil fuel industry in 2022 will drive conversion to alternatives faster than anyone imagined was possible.

Categories: Energy

4 replies »

  1. One thing that I can’t understand is: We have huge Government subsides and tax breaks for the O&G industry. Now we have a Carbon Tax which we the consumer pays for. Wouldn’t it be a good idea if the Governments got rid of all the O&G subsidies and tax breaks and then we could get rid of the Carbon tax too? Just an observation. I was down on the lower mainland, earlier this week for an overnight family get together. I was mainly in the east Vancouver/Burnaby area. I was amazed on how many Tesla cars were on the road. This was the 1st time in 3 years I have been down to that part of the world. Now, just imagine how many more EV’s will be on the road in the next 3 years.


  2. I took the 351 bus into Vancouver from White Rock yesterday. Four observations:

    1. The Park and Ride at King George and Hwy 99 was 80% empty at 10 a.m. on a Wednesday morning. Pre pandemic, you were lucky to find a parking space after 8:00 a.m. Gas was half the price it is today.

    2. The traffic coming back along Hwy 99 at 4:00 p.m. slowed to a crawl at numerous places along the highway. There were no “accidents” it was just volume of vehicles all costing at least 2.29 cents per litre for the gasoline being consumed. It took over 1 hour to get from Bridgeport to White Rock Centre a bus ride that is scheduled for 40 minutes – the bus was only half full!

    3. There must be a whole lot more Tesla’s and EV’s on the road already. If we all eventually drive electric, what will happen to “rapid transit”? There will be no “gas tax” to pay for the public transportation system.

    4. I paid $10.00 to get into and out of Vancouver yesterday. Had I taken my car the cost would have been over $30.00 including parking not to mention the driving stress. I purchased a great special roll at my favourite Sushi place with my savings!!


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