There is NO Climate Emergency - 1,600 Scientists, page-8

Australia’s Energy (Not Climate) Emergency Greg Canavan Wednesday, 13 September 2023 Wollongong, Australia Greg Canavan [4 min read] ‘Climate science should be less political, while climate policies should be more scientific. Scientists should openly address uncertainties and exaggerations in their predictions of global warming, while politicians should dispassionately count the real costs as well as the imagined benefits of their policy measures.’ This is the introductory statement to the ‘World Climate Declaration’, a short document signed by 1,609 scientists and professionals around the world. This gist of the document is that there are many shortcomings to the climate models that tell us we are in a climate emergency and must spend trillions in mitigating it. It’s more about emotions and agendas than actual science. It states: ‘To believe the outcome of a climate model is to believe what the model makers have put in. This is precisely the problem of today’s climate discussion to which climate models are central. Climate science has degenerated into a discussion based on beliefs, not on sound self-critical science. Should not we free ourselves from the I belief in immature climate models?’ I use a valuation model to estimate a company’s intrinsic value. The model can give me whatever answer I want. I just need to change the inputs to arrive at that answer. When your career and funding depends on you ‘getting the right answer’, can we really trust these models? Many people think the climate discussion is a political or ideological debate. For some, it is. But for me — and this is why I’ve been writing to you about it and conducting interviews on the subject — it’s an economic and investment debate. Transitioning from a dense and efficient energy source to a less dense and efficient energy source has never before been attempted in economic history. This is an energy transition built on government mandate, which is in turn built on fear from inaccurate climate modelling. If we invest more of our capital stock and human resources in delivering our basic energy needs, it will raise prices and lower our standard of living. It’s as simple as that. Energy is the most essential input into any economy, whether basic or advanced. High energy costs act as a restraint on economic growth and living standards. The explosion of growth that occurred in the Industrial Revolution was due to technological advancements that came from harnessing energy. Steam from burning coal transformed the world and brought millions out of poverty. It wasn’t all rainbows and lollipops. You can read Dickens’s Hard Times to get an idea of that. But it was immeasurably better for most than the serfdom and subsistence living that came before it. But here we are, nearly 250 years later, trying to go in reverse. Mark my words, if we let this continue, watch costs rise and your standard of living fall. Let me give you some examples of the absurdity that is Australia’s energy policy. The first is our refining capacity. Energy writer Doomberg raised this in a recent essay: ‘Although its [Australia’s] oil consumption has remained relatively flat at approximately 1 million barrels per day since the end of the global financial crisis, its refining capacity has been cut by two-thirds to just under 25% of its total needs, forcing the country to become increasingly reliant on imports. ‘In recent years, the closure of the Clyde Refinery in 2012, the Kurnell Refinery in 2014, the Bulwer Island Refinery in 2015, the Kwinana Refinery in 2021, and the Altona Refinery in 2022, have chipped away at the nation’s industrial resiliency. The sole remaining crude oil facilities in Australia are the Lytton Refinery in Brisbane, operated by Ampol, and the Geelong Refinery, operated by Viva Energy.’ As a result, we ship in the majority of our refined petroleum from South Korea and Singapore…not exactly next-door neighbours. Australia’s mining industry runs on diesel, and we have just a month of inventories. That means we are especially exposed to supply chain issues. As Doomberg’s article pointed out (quoting from Bloomberg): ‘An increasingly stretched global refining system means fuel-price volatility is set to become more common, according to top oil executives. A lack of spare crude-processing capacity due to under-investment, and shutdowns happening more frequently with refiners ramping up on better margins and deferring planned work were common themes at the APPEC by S&P Global Insights conference in Singapore this week. That’s left fuels like diesel and gasoline vulnerable to sudden swings when there are unplanned outages… ‘The market is overly sensitive to any unexpected supply disruption anywhere,’ [Frederic] Lasserre said. “Everyone knows there’s no plan B. We have no stocks, and we have no excess capacity anywhere.”’ But hey, who cares, we’re going electric! And it’s all going to be powered by intermittent wind farms and rooftop solar. Now there’s rainbows and lollipops for you. In the western world at least, and certainly in Australia, why would any company risk a multi-billion dollar investment in new refining capacity when the politically mandated path is to ‘go electric’? They wouldn’t. Which is why you shouldn’t expect any new refining capacity to come on line and increase supply. But the ageing global fleet of refiners will experience more outages and supply shocks in the years to come. In the same way our ageing coal fired generators are experiencing more outages and putting pressure on the grid (increasing prices) the same will happen with global refiners. And that means, over time, higher prices at the petrol pump. And it’s all thanks to an inept political class leading us down the path to energy poverty. Because fear is such a strong emotion, most of the electorate has swallowed this climate catastrophe line and believe that this transition must take place, no matter what the cost. That’s what fear does. It engages the emotional part of the brain and switches off the rational part. That’s why the political class engage in fear-based methods of coercion so often (and so successfully). A few years down the track, when energy prices keep rising and our standard of living keeps going backward, people may awake from their fear-induced slumber. But by then it may be too late. In the meantime, go long on traditional energy. It may be your only hedge and protection to what’s coming. In short, buy energy stocks on any dips the market gives you. That’s the obvious play. For some less obvious options, keep your eye out for a special presentation coming from me tomorrow. And finally, I’ve had a lot of positive feedback from the recent interviews I have done discussing the issues around the energy transition. Some have asked how they can share them beyond the Fat Tail community. If you go here on our YouTube channel we’ve made a playlist for all of the Net Zero interviews. Please share as much as you can! Cheers, Greg Canavan, Editor, The Insider All advice is general advice and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment. Latest Articles Monday Markets: ‘If I Wanted to Destroy an Economy… By Greg Canavan The sideways action of the benchark index, the ASX200, continues. 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