Until recently, the idea of a Fortune 500 company boss criticizing the energy transition would have been considered eccentric, to put it mildly. Now, two Fortune 500 bosses have slammed the transition inside a single week. JP Morgan’s Jamie Dimon was first. On Monday, he told CNBC in an interview that the Biden administration had basically messed up the country’s—and the world’s—energy security by doubling down on the energy transition instead of motivating growth in oil production.
Calling the current energy crunch “predictable,” Dimon said that “In my view, America should have been pumping more oil and gas, and it should have been supported.”
He then went on to add that the United States had to step up and become a leader in dealing with the crisis because “America is the swing producer, not Saudi Arabia. We should have gotten that right starting in March.”
In fairness, the Biden administration did try appealing to the U.S. oil industry to increase production, but the industry did not respond to the calls for a variety of reasons ranging from understandable disgruntlement with federal energy policies to materials and equipment inflation and labor shortages.
The situation seems to have inspired certain bluntness among executives—earlier this year, several oil independents said they would not increase oil production regardless of where prices were. Now, Chevron’s Michael Wirth has openly accused Western governments of causing the energy crunch because of their preoccupation with the transition to renewables.
In an interview with the Financial Times, Wirth said this week that “The conversation [about energy] in the developed world for sure has skewed towards climate, taking affordability and security for granted,” adding that “The reality is, [fossil fuel] is what runs the world today. It’s going to run the world tomorrow and five years from now, 10 years from now, 20 years from now.”
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It is difficult to argue with these remarks, especially when one looks at Europe and the European Union, which has turned into a textbook example of how not to do the transition. The EU’s top diplomat Josep Borrell again this week said in an unusually candid speech that the bloc’s prosperity was built on cheap Russian gas and with that gas gone, so was prosperity.
It’s worth noting that after making that remark, Borrell went on to argue that the best energy was the energy one produced at home, possibly suggesting more wind and solar generation, but the fact he did not specifically mention these types of energy says a lot. And it says we may have seen the beginning of a potential reconsideration of transition plans.
Such a reconsideration would be, if not exactly timely, then better coming late than never. As Chevron’s Wirth noted in his interview, the world still gets 80 percent of its energy from fossil fuels, despite the massive investments made in renewable energy over the past two decades.
Indeed, according to BP’s Statistical Review of World Energy for 2021, fossil fuels actually accounted for 82 percent of the world’s energy mix. This was down by one percentage point from 2019 and by three percentage points from 2016. Not only that, but the use of coal rose in 2021 from the previous year as economies roared back into growth after the first and biggest wave of pandemic lockdowns.
Speaking of coal, JP Morgan’s Dimon had something critical to say about that, too. He said in his interview with CNBC that if the world produced more oil and gas, we wouldn’t have to use so much coal and produce so many emissions.
The problem with coal consumption, he said, was critical, and “this should be treated almost as a matter of war at this point, nothing short of that.”
Indeed, it is worth noting that both Dimon and Wirth did not directly attack the transition as such. Instead, they targeted the approach to this transition primarily. While Dimon focused on removing coal from the global energy mix, Wirth made sure to note Chevron has a generous low-carbon energy investment program for the medium term and a net-zero plan for the period to 2050.
“We have a longer-term problem now, which is the world is not producing enough oil and gas to reduce coal, make the transition [to green energy], produce security for people,” Dimon told CNBC.
This chimes in with Wirth’s prediction that oil and gas will still be powering the world in 20 years, although he also noted that investment in alternatives to oil and gas was “woefully short.” And that’s despite the trillions already poured into those alternatives.
Both interviews will probably draw fire from the environmentalist camp, which as a rule, does not distinguish between different fossil fuels and wants them all gone. Yet the fact that business executives are beginning to speak openly about the shortcomings of the transition as it is being pursued by decision-makers in the West is a positive sign.
It is a sign that we might begin to have a more honest conversation about how energy actually works and which alternatives to oil and gas are, in fact, viable over the long term with regard to energy security. That would be a good start to a smarter, less risky transition.
