How the dawning era of declining fossil fuel consumption will reshape geopolitics

After a century defined by a global rush to control oil, we may soon see a scramble to dominate decarbonisation.

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It was 1912, European tensions were rising and Winston Churchill, then the First Lord of the Admiralty, was concerned about power. The proposed shift from coal-fuelled ships to more efficient oil-fuelled ones would redraw Britain’s geopolitical map. Oil was not widely available in the British Isles, Churchill would later recall observing. So the country would have to “carry it by sea in peace or war from distant countries”. Doing so would not be easy, but it would grant Britain what he called “the prize of the venture”.

Churchill was prescient. To understand the global history of the 20th century, it helps to see it as a struggle to control the extraction and transport of fossil fuels, particularly oil and gas – and to harness them for political ends. Such was the world history told by Daniel Yergin, the American author, in his 1990 book The Prize. The turning point of the Second World War? The Battle of Stalingrad, and Hitler’s race for the Caucasus oil fields. The end of the West's postwar economic golden age? The 1970s oil crisis, in which Arab states cut production and unleashed inflation on the global financial system. Saddam Hussein did his bit for Yergin’s thesis by invading oil-rich Kuwait four months before the book’s publication. The Prize arrived in bookshops as American warships were sailing for the Gulf. Yergin’s own prize would be a Pulitzer.

Three decades on, Yergin has a new book out. The New Map updates his fossil fuel narrative for 2020. In it, China’s preoccupation with the South China Sea is motivated by the fact that 15 million oil barrels a day, half of all global shipments, pass through those waters. The US’s neuralgia about Iran is linked to Tehran’s control of the similarly crucial Strait of Hormuz. Russia’s belligerence under Vladimir Putin was first paid for by the 2000s oil boom and today is expressed in Moscow’s efforts to control gas pipelines. The New Map is a competent series of essays on new realities, including electric cars and the rise of US shale gas. But it is disjointed, not the narrative masterpiece that The Prize was before it. Yergin’s timing this year may have been as unfortunate as his timing in 1990 was propitious. Much has changed in the past few months. Last year, the oil giant BP predicted that global oil demand would peak in the 2030s. But a new report issued by the firm recently argues that consumption following the pandemic might never again reach the heights of 2019. Even BP’s “business as usual” scenario (a post-pandemic return to old habits and political preferences) involves the peak occurring before 2030.

The report comes amid a series of new downward revisions to oil demand estimates. The Organization of the Petroleum Exporting Countries, the International Energy Agency and Trafigura Group, a major energy trader, have all recently cut their consumption forecasts for this year. Trafigura is even renting oil tankers to store the next wave of excess supply.

Meanwhile, the politics of energy is also changing. This summer, Joe Biden issued his plan for US carbon neutrality by 2050. On 16 September, a spokesman for the Chinese government suggested Beijing might soon adopt the same goal. On the same day, the EU increased its target for cutting greenhouse gas emissions by 2030 from 40 per cent to 55 per cent. It is still possible that 2021 will be the first year in which the world’s three biggest polluters are pledged to reach net-zero by mid-century. From a global rush to control the rise of fossil fuels, geopolitics may soon become a global rush to dominate the transition away from them.

Old, mutually dependent relationships will fall away. The shale gas boom in the US does little for decarbonisation, but it offers a glimpse at what an America disentangled from the Middle East might look like. Trump may be wedded to the oil-rich Gulf states, but a Biden administration committed to carbon neutrality would likely reboot the Iran nuclear deal, distance itself from Saudi Arabia and its allies, and leave Europe (including Britain) to take greater responsibility for the Middle East and North Africa.

Some markets will decarbonise sooner than others. That means old consumer battles over the supply of oil will give way to supplier battles over its consumers. Europe, for example, is shifting to cleaner energy faster than China, so Russia is performing a povorot na vostok, a “pivot to the East”, turning away from Europe to realign itself with a still more gas- and oil-thirsty China. Meanwhile, Beijing’s energy transition might see it focus less on the South China Sea and yet more on central Asia, as it rolls out its smart-grid for the hydro-electric dams in the mountains and the solar farms on the plains that it is building under its Belt and Road initiative.

The 21st-century equivalent of striking oil may involve striking lithium – the basis of the battery technology that will replace oil as an energy store. Already, battles are intensifying over lithium deposits in Latin America – in February 2019, Bolivia opted for Chinese investors over German ones for projects in the lithium mines on the Andean salt flats. Solar panels, which some estimates suggest will contribute about a quarter of total renewable energy production in a net-zero world, require aluminium, copper, indium and selenium. Power will accrue to countries with those new forms of mineral wealth, or to those who can co-opt them.

People will continue to need ways to move around, stay warm or cool, and power the machines and devices on which civilisation depends. The quest to control the production and provision of the energy that allows people to do these things will continue to drive global geopolitics. Churchill’s “prize of the venture” will change. It will not go away. 

Jeremy Cliffe is International Editor of the New Statesman.

This article appears in the 25 September 2020 issue of the New Statesman, The autumn of discontent

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