Why Green Energy Can’t Exist Without Fossil Fuels

How the Middle East Could Eclipse America.

“Wisely and slow; they stumble that run fast.”—William Shakespeare (Romeo and Juliet) 

In yesterday’s dispatch, we discussed the growing calls in the U.S. for President Biden to declare a “climate emergency.” 

As the U.S. bakes, Canada burns amid widespread wildfires, and Europe struggles with record heatwaves, the environmental lobby is haranguing the government to declare an emergency and take a series of dramatic steps to reshape our economy. 

To be clear, I am sympathetic to the climate concerns. I’m an investor in green technology, and genuinely believe that it will create a wonderful world for our grandchildren and perhaps even our children. 

But what I’m opposed to, however, is the Western world’s overzealous rush to rely on this technology before it’s realistically ready to take over from oil and gas.  

Put simply: You cannot replace a century’s worth of fossil fuel infrastructure within the next decade or two. It’s not economically or even physically possible. 

But that’s exactly the goal that climate activists have convinced governments to strive for… 

And as the government fails to meet this pie-in-the-sky deadline, and as extreme climatic events become more common, we face the growing danger that the government will listen to these calls to declare a “climate emergency” and take misguided steps that could propel the world toward an energy and economic disaster. 

So, what would a climate emergency agenda entail in America? Generally speaking, three things: 

• End crude oil exports and restrict natural gas exports. 
• End all offshore oil and gas leasing. 

• Dramatically accelerate a transition to clean energy. 

Yesterday, I dug into the first of these steps—ending U.S. crude oil exports and restricting U.S. natural gas exports—and explained why this policy would cause a massive spike in oil prices… entrenched global inflation… a worldwide recession… the end of Ukraine as a country… and dramatically higher food prices. (If you missed that dispatch, you can read it here.) 

Today, we explore elements two and three, beginning with… 

 
End offshore oil and gas leasing  

With this policy, you effectively limit America to the reserves that exist onshore, most of which have already been tapped. So, you create manufactured energy scarcity, which naturally leads to higher and higher prices for the oil and gas that remains. 

This situation would worsen over time since there are no big onshore discoveries to replace the existing oil and gas fields that are decaying every single day. 

As America’s reserves dwindle, we’d be forced to import more and more oil from countries like Saudi Arabia, the United Arab Emirates, Iraq… even Iran or Venezuela.  

Let’s face it: Those countries are not going to stop drilling… no matter what happens to the environment. So, the end result would be lots more wealth leaving America’s shores and flowing into countries that are predominantly anti-democratic. We’d literally be choosing to transfer our wealth and power to the Middle East. 

 
Dramatically accelerate the transition to clean energy 

Do not make the mistake of thinking, as the climate activists do, that the world can quickly replace all the lost fossil fuel energy with green energy. Lots of activists want that transition to happen by 2030. That’s laughably naïve. 

The costs are too extreme, and global demand for energy is growing faster than green energy can keep up. 

Moreover, it takes fossil fuels to make green energy—an inconvenient truth the greens ignore. 

Plastics and resins needed for wind-turbine blades, for instance, do not grow on plastic trees. They’re a byproduct of petroleum.  

Steel and aluminum necessary for support structures for wind and solar installations does not magically appear when you wish upon a sunbeam. It’s a byproduct of fossil fuel heat necessary for smelting. 

And don’t get me started on the climate impact of mining the extreme amounts of copper necessary to reach green energy’s wish-list goals.  

So, if the green energy industry is gobbling up much of the available petroleum inside the U.S. to make green energy components, where does that leave consumers and industries that require petroleum products as well for their needs? 

America would have to import even more oil from overseas, but you’re importing at elevated global prices because you’re competing with the rest of the world for a supply that you unnaturally limited by way of a climate emergency. 

In short: You get an energy crunch that sees oil prices inside non-exporting America climb higher and higher. Gasoline prices at the pump would hit levels that all but impoverish families. Filling the 23-gallon tank of a Ford F-150, the top selling vehicle in America, would very likely cost more than $225 a pop. The 15.8-gallon Toyota Camry, always a top-selling car, would top $150. 

Right now, those fill-up costs are $85 and $58, respectively. 

How many American families can suddenly afford a near-tripling of their monthly costs at the gas pump? 

The U.S. consumer economy would collapse into a recession/depression. Personal and business bankruptcies would shoot the moon. Unemployment would rise into the double digits. Wall Street would tank, yet again (though Treasury bond prices would surge higher because the Federal Reserve would slam interest rates to 0% in a blink). 

What I’m saying is that if Biden caves in to the increasingly vocal green lobby and declares a climate emergency, you’re going to want to already have oil and gas stocks in your portfolio. (Check out our Global Intelligence Portfolio for my latest recommendations.) 

Energy stocks are going to soar in price as underlying fossil fuel prices rapidly sprint higher.