Liberty Energy Chief Executive: Oil Is Far From Dead

“Three decades from now the vast majority of energy will come from hydrocarbons.” This prediction was made earlier this week by Chris Wright, chief executive of Liberty Energy, the second-largest fracking services provider in the U.S.

Speaking to Bloomberg, Wright went a lot further, too. He dismissed the idea that there was an energy transition in progress and said that subsidizing wind and solar would not only not help reduce emissions but would end up increasing electricity prices and rendering the grid more vulnerable. In the current media environment, such statements sound nothing short of outrageous. And yet the chief executive of Liberty Energy is neither the first nor the only one saying these things.

A couple of days earlier none other than Tesla’s Elon Musk said that the world needs oil and gas because without them civilization would crumble. In fairness, Musk did not go as far as to say we’ll still be dependent on fossil fuels in the distant future but did allow that additional exploration for fossil fuels was “warranted at this time”.

“One of the biggest challenges the world has ever faced is the transition to sustainable energy and to a sustainable economy,” the Tesla chief executive said on the sidelines of an energy conference in Stavanger, Norway. “That will take some decades to complete.”

It will very likely take many more decades than government planners expect: the transition as it is being envisioned now, will require huge amounts of metals and minerals that are already in short supply, with new mines few and far between, as well as slow to come online.

Mining industry executives have been warning for a while now that there is not enough copper, lithium, cobalt, or nickel for all the EV batteries that the transition would require. Even so, the European Union in July went ahead and effectively banned the sale of cars with internal combustion engines from 2035. So did California, a month later.

These two bans alone would theoretically mean a surge in demand for EVs that would begin earlier than 2035. Yet the EV market is already in short supply because of the above shortages. Nissan recently decided to start renting out EVs to customers instead of selling them because there were too few of them available. Unfortunately, this is hardly a universally applicable or long-term solution to the problem.

The grid problem that renewables are causing, meanwhile, is becoming increasingly serious as the amount of wind and solar on the grid rises. This, however, is a problem no one wishes to discuss because it would compromise the brightest vision of the transition: carbon-free, abundant energy from the sun and the wind.

Wind and solar present a special sort of challenge for the grid because while their output is indeed abundant, it is abundant at certain times that do not coincide with electricity demand peaks

Solar’s peak output is when the sun shines the most, which tends to be around noon and the early afternoon. Both solar and wind are also seasonally constrained by weather patterns that affect their output.

Since electricity is a commodity that needs to be supplied the moment it is generated, the intermittency of wind and solar, as Liberty’s Wright told Bloomberg, increases the fragility of the grid. Indeed, the Midcontinent Independent System Operator, or MISO, warned this year that a shortage of generating capacity could cause blackouts. MISO operates the grid of some of the most wind- and solar-friendly states in the U.S. 

If this is not enough to ensure the long-term appeal of oil and gas, the latest report by the International Energy Agency (IEA) could help strengthen the argument made by Liberty’s Wright. Conducted in partnership with the OECD, the report concluded that support for fossil fuels almost doubled last year, despite transition efforts.

“Major economies sharply increased support for the production and consumption of coal, oil and natural gas, with many countries struggling to balance long standing pledges to phase out inefficient fossil fuel subsidies with efforts to protect households from surging energy prices,” the authors wrote. And that was before Russia invaded Ukraine.

“Fossil fuel subsidies are a roadblock to a more sustainable future, but the difficulty that governments face in removing them is underscored at times of high and volatile fuel prices. A surge in investment in clean energy technologies and infrastructure is the only lasting solution to today’s global energy crisis and the best way to reduce the exposure of consumers to high fuel costs.”

This is what the IEA’s Fatih Birol said in comments on the report. Yet, per transition skeptics, such a surge in investments in clean energy technologies and infrastructure will only lead to disaster and blackouts. Even worse, per miners, the surge will take a lot of time to unfold: the average lead time for a new mine is about a decade.