THP-E144: Do Different Viewpoints Cloud The Current Energy Transition?

September 01, 2022 • Paul Rodden • Season: 2022 • Episode: 144

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Welcome to The Hydrogen Podcast!

In episode 144, The Manhattan Institute has a new report out on the energy transition. I'll discuss the introduction and give my thoughts on today's hydrogen podcast.

Thank you for listening and I hope you enjoy the podcast. Please feel free to email me at with any questions. Also, if you wouldn't mind subscribing to my podcast using your preferred platform… I would greatly appreciate it.

Paul Rodden



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The Manhattan Institute has a new report out on the energy transition. I'll discuss the introduction and give my thoughts on today's hydrogen podcast.

So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions that will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden, and welcome to the hydrogen podcast.

In a report from the Manhattan, Mark Mills writes the energy transition delusion a reality reset, despite ever escalating rhetoric and energy transition away from society's dependence on hydrocarbons is not feasible in any meaningful timeframe. And it is a dangerous delusion to base policies on the idea that such a transition is possible data not aspirations so just how critical hydrocarbons are. And in the wake of the Ukraine invasion, the consequences of failing to realize what reality permits, a different understanding of transition is required. When that recognizes that new energy sources should be considered additives, not outright replacements for oil, natural gas and coal demands that hydrocarbons no longer be used to generate electricity, heat homes, power factories, or transport people and goods from one place to another emerged from climate focused objectives. observations that they aren't being replaced and can't be in any meaningful timeframe evokes specious claims of climate denialism or the equivalent, but the realities of the physics, engineering and economics of energy systems that are not dependent on any facts or beliefs about climate change.

Meanwhile, current policies and two decades of mandates and spending on a transition have led to escalating energy prices that helped fuel the destructive effects of inflation. The price of oil which powers nearly 97% of all transportation is on track to reach or exceed half century highs and gasoline prices have climbed the price of natural gas accounting for 40% of all industrial energy use, and 1/4 of global electricity has soared past a decade ago high. coal prices are also at a decadal high coal fuels 40% of global electricity, and it is also used to make 70% of all steel and accounts for half of its cost of production. It bears noting that energy prices started soaring and oil breached $100 A barrel well before Russia invaded Ukraine in late February. The fallout from that invasion has hardened not resolved the battle lines between those advocating for and those skeptical of governmental policies directed at accelerating an energy transition epitomizing that divide a tweet from Elon Musk in the immediate weeks of following the invasion acknowledged that, quote, We need to increase oil and gas output immediately. By contrast, the President of the European Commission had announced quote, we are doubling down on renewables. This will increase Europe's strategic independence on energy.

The International Energy Agency and the Biden administration are on board with this approach. Indeed, Congress has recently enacted legislation to expand subsidies and spend hundreds of billions of dollars more in that pursuit. Yet as the Ukraine war dragged on, a policy bifurcation emerged. On one hand, Europe is expanding commitments to SW B technologies, even including bans on conventional car sales within the next decade or so. On the other hand, the European Union's simultaneously reanimated access to conventional energy supplies from Saudi Arabia to Egypt, Germany, both its first ever liquefied natural gas import terminals, France and Germany refired coal power plants behind these contradictory responses is the fact that Russia is one of the world's three largest producers and exporters of petroleum and natural gas. EU nations depend on Russia for about 25% of their oil and 40% of their natural gas. The loss of a major share nevermind all of Russia's energy supplies will trigger the third and greatest global energy shock since the invention of the computer. Given that hydrocarbons are essential for their contemporary society, the consequences of shortfalls or bands would be severe, the first two global energy shocks in the modern world, the 1973 Arab oil embargo and the 1979 Iranian Revolution triggered oil price increases of 200 400% respectively, and touched off global recessions. Each one had long lasting impacts on policies, government spending, and geopolitics. This time there's potential for even greater harm. Because unlike the previous two oil centric shocks, the Russia Ukraine crisis also involves natural gas at a scale comparable to the oil at risk. When oil keeps everything moving natural gas keeps the lights on and is an irreplaceable chemical feedstock that keeps manufacturing supply chains humming. Russian gas provides both the heat and feedstock for one of the world's largest chemical hubs, Germany, loss of more than half the supply there it would lead to shutdowns and thus shortages and price spikes and key global materials, not to mention massive layoffs.

While the oil and gasoline prices continue to rise, we have yet to experience as of this writing, a loss of supply or rise in prices comparable to the two previous energy shocks. In such a case JP Morgan analysts recently noted, oil could hit $380 a barrel. The real possibility of an outcome such as that is what motivates political scrambling publicly and behind the scenes for alternative supplies of hydrocarbons. Against this backdrop, consider that years of hypertrophied rhetoric and trillions of dollars of spending and subsidies on a transition have not significantly changed the energy landscape, nor have they altered the long standing geopolitical tensions inherent in supplying fuels critical for survival. Civilization still depends on hydrocarbons for 84% of all energy, a mere two percentage points lower than two decades ago. Solar and wind technologies today supply barely 5% of global energy, electric vehicles still offset less than point 5% of world oil demand. naivete about energy realities has robbed the US and Europe of important soft power options to counter Russian ambitions, ie the kind of geopolitical leverage that Russia is currently wielding against Europe and the US regarding fears of the economic and social consequences of shortfalls in critical energy supplies, and near term options to Russian exports are limited. But doubling down on the energy policies of the past couple of decades won't significantly impact the need for hydrocarbons. Instead, it's a formula for more problems in the future, both geopolitical and economic. One of those problems is inflation.

The main trigger for inflation is a rising supply of money sloshing through the economy typically caused by a government's massive deficit spending or printing money. In the present circumstances. This spending was motivated by the economic destruction of the pandemic lockdown policies combined with the current US administration's ambitious expansion of social programs. Federal spending in both absolute and relative terms hasn't been this high since World War Two, but the amount of money circulating through the economy is not the whole story. In normal times, energy typically accounts for just under 10% of the cost of most products and services. Doubling the cost of energy would have an inflationary impact on the average final price tag for all products and services. impacts are obviously more severe for the more energy intensive activities, such as farming flying aircraft, or fabricating poly silicon for solar cells. The US inflation rates are past a 40 year high this past October. The last time the Federal Reserve under Paul Volcker push an aggressive increase in interest rates was in reaction to more than a decade of inflation inducing federal policies that combined with the 1979 oil price crisis triggered a severe recession. Today's episode of rising energy costs emerge from a combination of self inflicted wounds and unanticipated forces damaging Global Fuel infrastructures.

It started with government policies and political pressures that have been for decades hostile to expanding the production of conventional energy from the North Sea to America's offshore domains. And across most European nations and US states policymakers actively opposed, even banned the expansion of hydrocarbon infrastructures. Then pandemic lockdowns return havoc on the global economy and energy supply chains and the year 2020 saw the biggest annual decline in global energy demand in nearly a century. The combination of the decline in demand and uncertainty about how long this would last disrupted operations, exploration and expansion plans and the livelihoods of the energy sectors skilled workforce. Finally, when the world was already well on the way to $100 oil, the invasion of Ukraine rattled energy markets about possible supply interruptions from Russia, one of the world's three biggest producers. Economists ignore the current trends by assuming rising energy prices are necessarily only a short term episodic influence on broader inflation. As far as supplies of commodities, including energy are concerned, the belief is that history has shown that generally the cure for high prices is high prices. But will the current price escalation be a brief episode or will we face a policy driven era of persistently high prices. If the latter occurs, then the world will enter another period similar to what Federal Reserve historians call the Great inflation that lasted from 1965 to 1982.

When the inflation being caused by the rising price of oil was largely beyond the control of monetary policy, policymakers ignore at their political peril, the importance of energy costs, gallops long running tracking poll about what people volunteer, as the most important problem finds that the economy and inflation topped the list by a huge margin. The number two issue was government and poor leadership, the Russian situation was halfway down the top 10. Climate change didn't make it into the top 10. Now, that doesn't mean that citizens deny the idea of climate change. Indeed, most citizens say yes, if prompted with a specific question about whether they believe anthropogenic climate change is happening, given the destructive reminders about the importance of low cost energy. And the brutal lessons now visible again, about the geopolitics of energy supplies, it is past time to reset energy policies based on reality, not wishful thinking.

Okay, so a little bit of a different topic for today's podcast. But one that is not only timely, but also critical for those of us in the energy transition to listen to, especially those of us who are big proponents of the hydrogen economy, and the importance of hydrogen proponents to work alongside both new technological developments in renewable energy, as well as legacy operators in oil and gas. The global energy demand isn't going anywhere. And we all know that it's just going to get bigger. Now, there is one thing that I'm not entirely sure Mark Mills is taking into account. And that is the logarithmic increase and technological developments over the last 20 years, especially when it comes to advances in energy technology. But regardless, he has a point, and that is that oil and gas isn't going anywhere in the near future. And new technologies need to be brought to market to help ease that growing energy demand.

All right. That's it for me, everyone. If you have a second, I would really appreciate it. If you could leave a good review on whatever platform it is that you listen to Apple podcasts, Spotify, Google, whatever it is, that will be a tremendous help to the show. And as always, if you have any feedback, you're welcome to email me directly at And as always, take care. Stay safe. I'll talk to you later.

Hey, this is Paul. I hope you liked this podcast. If you did and want to hear more. I'd appreciate it if you would either subscribe to this channel on YouTube, or connect with your favorite platform through my website at Thanks for listening. I very much appreciate it. Have a great day.


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