Over the last seven or eight years we have seen the oil price fall from over $100 a barrel to $25, rally to $75, then fall again.
This next decline, which lasted a couple of years or more, took it into negative territory. Minus $36 was the cost, by some counts, of a future barrel of oil at the height of the corona panic.
Minus! A barrel of oil became not an asset, but a liability, and an expensive one at that.
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Since then the price has rallied by over $100, to $85. Then, a fortnight or so ago, Omicron came along and the price fell by $20 in the blink of an eyelid.
All this volatility doesn’t make planning ahead very easy.
Being in the oil business is tough – and that’s before you consider the vilification
Even with all the money that has been printed, oil is still trading below where it was a decade ago. It’s now half the price it was when it peaked in 2008.
It’s very hard to do business, to plan and invest, when the price of the underlying commodity you trade in is so variable. And that’s before you get to those opposing what you are doing, some of whom are considerably more powerful than you.
Fossil fuels have been the target of endless legislation, the ultimate goal of which is to stop human beings from using fossil fuels. From cancelled pipelines and permits, to higher taxes and problematic regulation.
While the fossil fuel industry is attacked and scapegoated, green energy, which in many cases is environmentally damaging – rendering the moniker “green energy” oxymoronic – is the recipient of enormous subsidies and grants, beneficial regulation and legislation and general good favour.
And then there’s the vilification.
Just this week campaigners gathered outside the Bank of England today to demand restrictions on UK banks’ investments in fossil fuels. To read some of the propaganda in the anti-fossil-fuel narrative, you would think that oil, coal and gas cause all of the woe in the world. In fact, the Extinction Rebellion narrative is that fossil fuels’ use will cause the end of the world.
Why would anyone want to go and work in such a difficult industry?
I suppose there’s the compensation. But while I don’t doubt that many in the fossil fuel industry can make a lot of money, it pales next to what can be made in finance or tech these days, especially the latter.
Gone are the days when the likes of J Paul Getty, JD Rockefeller or T Boone Pickens dominated rich lists. Today, scanning through the Forbes rich list, I could find just one actual fuel tycoon in the top 50 – India’s Mukesh Ambani.
ExxonMobil is the largest non-government-owned company in the energy industry. It supplies about 2% of the world's energy. Its market cap is around $250bn. A lot of money. But the likes of Amazon, Apple, Alphabet and Microsoft are eight to ten times more valuable.
Even the money isn’t as good as it once was.
And yet look at what fossil fuels have made possible. Billions of lives have improved because of them. So many people have been able to escape poverty thanks to the burning of hydrocarbons.
I love to look at photos and pictures of days gone by. I follow many social media accounts that share them. It’s easy to look at old pictures and go: “Oh, the world was better then.” We might have lost a great deal in terms of family and community – but even so, for the large majority of the population, life has got longer, easier and better.
Pretty much everybody, except in the most war-blighted nations, enjoys a higher standard of living than they ever have. Even in the grimmest council estates here in the UK there is a standard of living that Marie Antoinette could not have imagined. We can all have cake! Not only that, it is often ready-made.
A hundred years ago people in the UK were cold all through winter. They were hungry. Even my dad talked about growing up in the ‘30s and ‘40s and being cold and hungry. For the most part in the UK, both of those exhausting and relentless difficulties have gone.
From heating the cold to cooling the hot; from machines removing the need for drudgery once taken for granted; to plentiful food and boundless information; from clothing to travel. Fossil fuels have made lives better – and they can continue to do so, if allowed.
In many ways we are less free than we were a hundred years ago, what with ever-increasing regulation, taxation and state control. But at the same we are more liberated than ever because of the possibilities travel and technology have given to us.
Let us give thanks for fossil fuels
We have fossil fuels and the cheap, reliable and abundant energy they have provided to thank for all of this.
It is important to practice gratitude. Pretty much every belief system worth its salt is agreed on this. So let us show gratitude to fossil fuels.
What’s more, as we have evolved, humans have found better and better ways to consume fossil fuels, to produce and consume them more cleanly and efficiently. Our cities are a far cry from the smog of coal smoke and the dust of diesel that once made the air so unbreathable.
For all that has happened, 84% of the world’s energy still comes from burning fossil fuels. Of the three main elements to energy consumption – heating, transport and electricity – the latter relies least on fossil fuels, but even there, fossil fuels account for 63% of worldwide electricity consumption.
In 1990, the number was 62%, so, on a proportional basis, green initiatives have had little effect (on actual numbers they have, of course, as we are consuming much more electricity than we did then).
The world needs more energy, not less. Lots of it. Part of progress is that we consume more energy and we consume it better. Imagine if we were still dependent on whale blubber. As developing economies grow, they will require vast amounts of low-cost reliable energy too.
The bottom line is that we are still hugely dependent on fossil fuels. You may not see the fossil fuel being consumed, because you are in an electric vehicle or in your house, but the ultimate source more often than not is that fossil fuel gets burned somewhere.
Rather than attack and hamstring the industry, surely the approach is to nurture this precious gift of nature. Let us produce it better and in a less damaging way. Better to do this ourselves while we have it, than to outsource our dependency to other, less environmentally-conscious parts of the world.
But if we continue as we are, the price of fossil fuels – oil especially – is only going to go one way. It is going to make the world a far more difficult and expensive place, especially for the poor. As ever it is they that get hit hardest by misguided government policy, no matter well intended.
I’ve been banging the drum for higher oil prices for many years. I see no reason to change that tune – with a three or five-year perspective in mind. Shorter term, you never know.
Cheaper oil would mean economic stagnation or recession – not a good thing. But it could also mean that we had become better at producing it. That would surely be a good thing, no? For everyone. Especially those less well off than ourselves.
Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookshops, with the audiobook, read by Dominic, on Audible and elsewhere.
Dominic Frisby (“mercurially witty” – the Spectator) is the world’s only financial writer and comedian. He is MoneyWeek’s main commentator on gold, commodities, currencies and cryptocurrencies. He is the author of the books Bitcoin: the Future of Money? and Life After The State. He also co-wrote the documentary Four Horsemen, and presents the chat show, Stuff That Interests Me.
His show 2016 Let’s Talk About Tax was a huge hit at the Edinburgh Festival and Penguin Random House have since commissioned him to write a book on the subject – Daylight Robbery – the past, present and future of tax will be published later this year. His 2018 Edinburgh Festival show, Dominic Frisby's Financial Gameshow, won rave reviews. Dominic was educated at St Paul's School, Manchester University and the Webber-Douglas Academy Of Dramatic Art.
You can follow him on Twitter @dominicfrisby
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