Oil Remains the Epicenter of Commerce, Geopolitics, and Energy

After a half-century of trying to make it otherwise, oil remains a driving force behind America’s domestic and geopolitical energy policy. In fact, during the Arab oil embargo of 1973/74 the terms “energy policy” and “energy crisis” came to dominate the political and popular lexicon. Google’s Ngram Viewer, which tracks the frequency of (nearly) all published idioms and locutions since 1800, shows these particular phrases virtually non-existent until an explosive increase in their use circa 1974.

For those who’ve forgotten their generation-ago history, during the 1973 Arab–Israeli War, Saudi Arabia embargoed oil shipments to America in retaliation for U.S. support of Israel’s military. Because the Soviets were supplying the Arab armies, that conflict “brought the United States closer to a nuclear confrontation with the Soviet Union than at any point since the Cuban missile crisis,” according to the State Department’s Office of the Historian.

The embargo caused oil prices to triple in mere months, wreaking economic havoc and triggering a recession and Congressional panic; the result was the passage of the epoch-setting 1975 Energy Policy and Conservation Act. That legislation — and every renewal or modification of it since, including the more recent climate-inspired policies that constitute a distinction with no difference in terms of anti-oil animus — had three core objectives, nearly all directed at replacing or reducing oil use: promote or subsidize conservation, efficiency, or alternative fuels; mandate automotive fuel-efficiency, and fund research to find new replacements from biofuels to batteries. In short, U.S. energy policy for the past half-century has been predominantly focused on reducing oil consumption.

The result? U.S. oil use is 20 percent higher today, and oil still powers over 95 percent of all transportation. Of course, other energy sources are needed, and their use has increased. But oil remains the single largest source of energy and the world’s largest traded commodity, with total trade more than double that of the second-place commodity, agricultural products. Moreover, oil-fueled machines are what makes the world’s economies run, not only the movement of all goods (including those materials needed to replace oil) but also virtually all forms of commerce, including the trillion-dollar global tourism industry.

Oil may supply ‘only’ 30 percent of overall global energy (its hydrocarbon cousins, coal and natural gas, together supply 56 percent), but the fact is that all products and services use oil somewhere, somehow. That oil remains at the epicenter of commerce, geopolitics, and energy policy itself should be unsurprising.

That oil remains central to economies, and geopolitics arises from a simple fact: at scale, it is an irreplaceable feature of modern civilization. Yet today, an industry of well-funded experts claims that policymakers should continue pursuing 50 years of failed anti-oil policies because, well, this time will be different.

True, the motivations have evolved. The thesis of running out, i.e., peak oil supply, has been replaced by a thesis that we’re using too much and can’t afford to burn it all because, obviously, “climate.” But the motives don’t change the underlying physics and engineering realities of the energy systems available to society. The question for framing next generation energy policies distills to knowing whether there are any truly new means for meeting society’s energy needs. One way to address that framing question is to look to history again. Are there any new energy ideas today compared to those found in the energy roadmaps of the last generation? Spoiler alert: there are none.

For proof, consider three seminal books published just after World War II.

First, there’s Energy Sources: The Wealth of the World by Eugene Ayres and Charles Scarlott, published originally in 1948 as a book-length working paper and later in 1952 as a book. That paper resulted from the 1948 meeting of the American Petroleum Institute, when “members were in unanimous agreement that with an energy-costly war behind us a reevaluation of the world’s and the nation’s energy resources was timely.” The book’s table of contents lists the same familiar technologies and topics as those in every major energy treatment since. Today’s solar advocates will find familiar language in that book: “We seem destined to become more and more dependent upon the sun for all energy.” And their view of the prospects for the peaceful atom: “One can hardly escape the conclusion that, even when the engineering problem are solved — and, for all their magnitude, they most surely will be — power from uranium-fueled plants will not be cheap power.” That 1948 analysis contained the same array of energy options and technical, social, and political challenges as we see today, and no magic bullets.

Next, the 1950 book Economic Aspects of Atomic Power by Sam Schurr and Jacob Marschak is one of the first comprehensive treatments of what was then a new phenomenon. The apocryphal “too cheap to meter” is nowhere to be found in its pages. Instead, a sober analysis led the authors to caution that achieving cost parity with conventional power “might be invalidated if the [atomic] power plant considered were of considerably smaller size.” That book explored the same nuclear issues we’re familiar with today, including the still-to-achieve reactors suitable for high-temperature industrial processes to replace hydrocarbons (e.g., in steel fabrication).

The third book, expansive and imaginative, is physicist Hans Thirring’s Energy for Man: From Windmills to Nuclear Power, published in 1958. Like others of his time, he saw great promise in solar and may have been the first to explore the specific technical and economic challenges of associated needs for energy storage. He appears to be the first to identify the potential of the photovoltaic cell (only recently invented) and, on the demand side, the first to presciently document telecommunications energy demand. (He can be excused for not anticipating, in 1958, energy demands that would come from computers.) Nearly every energy treatise since has at best identified the same array of options and constraints.

In short, there’s nothing new under today’s sun. The future energy landscape will look much like the past. Overall demand will continue to rise. The fundamental energy options will remain unchanged even as the relative shares of sources will continue to change. It is not only counterfactual and silly but also dangerous to embrace the notion that foundational materials are somehow, inevitably destined to be abandoned because of progress. We still use, for example, and at far greater quantities than ever, the ancient materials of stone, wood, and iron to build civilization’s structures. There are improvements in their use, and additional, remarkable materials are now in the mix, but these fundamentally useful materials remain critically important.  

It’s on the demand, not the supply side, where rapid and significant changes happen in energy markets. Humans are far more productive at inventing new ways to use energy than in discovering new physics for its production. The most recent example concerns computing, particularly artificial intelligence. As is invariably the case, many of the ancient materials —stone (silica to produce silicon), iron (as steel), wood, etc. — are used to build data centers and fabricate AI chips. And the entire digital ecosystem — from the mine sites to the massive data centers — is powered with the same fuels that have been used for generations.

All this points to a key principle for generational policymaking. The focus cannot be on chimerical energy solutions that “change everything,” a favored clickbait phrase, but on ensuring markets can meet the core goal for powering society, which is the enduring challenge of simultaneously ensuring availability, reliability, and affordability.‍

Mark P. Mills is the executive director of the National Center for Energy Analytics, and author of The Cloud Revolution.