The Green New Deal

Feb. 19, 2019
For oil and gas companies, the Green New Deal, unveiled on Feb. 7, should raise concern for one overarching reason: It undermines the intellectual foundation of energy policy-making.

For oil and gas companies, the Green New Deal, unveiled on Feb. 7, should raise concern for one overarching reason: It undermines the intellectual foundation of energy policy-making. Proposed by Rep. Alexandria Ocasio-Cortez (D-NY) with endorsement from Sen. Ed Markey (D-Mass.), the GND explicitly aims to put oil and gas companies out of business in a decade or so. That’s no problem for oil and gas companies, however, because it won’t happen. The GND won’t happen.

The problem for the industry is the GND’s motivating assumption that the world can do without its work.

Why no laughter?

The clumsy GND resolution should have been laughed into immediate obscurity. Yet it received approving attention from much of the news media, from a veteran lawmaker who should know better, and from most of the Democrats running for their party’s presidential nomination. With energy, much of the political left has lapsed from ignorance into self-delusion.

The GND resolution at least betrays trouble spots. Its list of frequently asked questions notes that replacing fossil fuels with renewable energy would eliminate air travel. It also concedes that influencing planetary temperature requires the country not only to slash its use of hydrocarbon energy but also to “fully get rid” of methane-emitting cattle. Ocasio-Cortez tried, after her resolution entered circulation, to explain away these indiscretions as products of a staff in a hurry—or something. She mainly wants to make the US socialist and can’t be distracted by details.

Why, indeed, quibble about details when the GND’s founding assumption is fatally misguided? It’s a reformulation of the mistake liberals have been making about energy for years: failure to account for the competitive difficulty with which renewable energy always must struggle against form advantages of fossil and nuclear energy—prime among them density and scale. Any forced shift in consumption from competitive to noncompetitive energy generates cost—the bigger the shift, the greater the hardship.

The GND treats these hurdles of physics and economics merely as tests of political will. And while the authoritarian government of its vision overhauled energy economics, the resolution also would have it guaranteeing jobs, health care, housing, and “economic security” to everyone. What about cost? Billionaires can be taxed, the document asserts. Carbon emissions might be taxed, too, and a cap-and-trade plan could become “a tiny part” of the colossal program. The Federal Reserve would make project loans. And if that were not enough, “new public banks” could supply credit. Such governmental splurges, to the GND, are “investments.”

The program will not approach the stage at which the Fed becomes a project lender. Long before then, it will die of political backlash generated by the ravaging of energy consumers, taxpayers, and governments with revenue from resource development.

How, though, did the GND survive even a week? Are the politicians who welcomed it so hysterical about climate change that they can’t think clearly about energy?

The country and the world will need oil and gas far beyond the phaseout advocated by the GND. In a scenario encompassing the aggressive, improbable regulation needed to hold observed warming within targets of the 2015 Paris Climate Agreement, the International Energy Agency’s World Energy Outlook 2018 projects global oil production in 2040 at 68 million b/d. While down 27% from the 2017 rate, that still would be about what crude production averaged as recently as 2000. And investment in production would remain necessary because the average rate of global depletion would exceed that of the induced demand decline—which politics will preclude because of the cost.

Imploding schemes

Irrational schemes such as the GND always implode. Yet their underlying radicalism creates a political disposition against oil and gas projects. “It would simply not make sense to build new fossil-fuel infrastructure because we will be creating a plan to reorient our entire economy to work off renewable energy,” argues the GND resolution.

This is delusional. This is the oil and gas industry’s biggest political problem.