A Hard Habit to Kick

For decades, governments and businesses have discussed the need to ditch fossil fuels such as crude oil and natural gas. It’s been a long slog. However, COP 26, the United Nations event in 2021, seemed to help accelerate things: Following a damning speech by then-teenage activist Greta Thunberg, a slew of mainly European countries agreed to phase out the manufacturing of gasoline- and diesel-fueled cars by 2035. Since then, electric vehicle sales have surged.

Has it reduced fossil-fuel demand? So far, not so much. Collectively, consumption of oil and other liquid fuels is projected to grow every year through 2028, according to the International Energy Agency.

Beyond 2030 is where forecasting gets contentious. The IEA sees surplus oil production relative to demand starting that year. However, oil cartel OPEC contests that conclusion. Other parties are somewhere in between. “We are more of the opinion that there will be increased demand from Asia and Africa,” says Max Pyziur, director of downstream, transportation fuels, natural gas, and electricity projects at the Energy Policy Research Foundation. “Some sub-Saharan countries are energy poor,” he says.

The world has been slow to kick the fossil-fuel habit for multiple reasons. First, developed countries’ desire to scrap fossil-fuel use is at odds with the view of developing countries that are trying to grow their economies. “We built the Western world on cheap, efficient energy. I don’t know what we would expect developing nations to do differently,” says Phillip Knight, a partner at Houston-based wealth advisory firm Americana Partners.

Even the adoption of EVs isn’t likely to have a swift impact, because they represent a small minority of cars on the road. “At the curb, there are no CO2 emissions from an EV,” Pyziur says. What’s more, the electricity they need is produced by burning fossil fuels, he notes. And much EV manufacturing involves the use of fossil fuel-powered mining equipment. That means your EV must drive 15,000 to 20,000 miles before it’s cleaner than a gasoline-powered vehicle, experts say.

Other unseen uses of fossil fuels in the economy also make switching hard. Oil and related products are sometimes the only energy sources that can be used to create certain materials, says Stewart Glickman, an equity research analyst at CFRA. There’s a lot of confusion about this in the general public. Glickman tells the story of an apparel retailer who wasn’t aware that synthetic-fleece jackets were made from oil derivatives; only after sending a snarky letter to an oil-company executive did he find out the truth.

Plastic soda bottles are typically made from oil products, as are some golf balls, eyeglasses, and umbrellas, among many other items. “The way in which crude-oil products make their way into our economy is not widely understood,” Glickman says. “Reducing oil use isn’t just about filling up at the gas station.”

Switching from fossil fuel to renewable energy can be problematic. Renewables can provide power, but they are notoriously intermittent, Glickman says: Sometimes the wind doesn’t blow, and sometimes it blows too much. “There’s a sweet spot for wind power,” he says. “And the sun doesn’t always shine.” Even on days of perfect renewable-energy weather, current technology won’t let us take full advantage: There aren’t enough efficient mega-sized batteries to store surplus power for long periods.

In the long term, there is some hope for the green-energy industry. Rapidly improving battery technology could change the game, Glickman says. The energy business excels at innovation. “The industry often comes up with new tech, such as horizontal hydraulic fracturing from shale, which resulted in tremendously efficient production,” he says. Given such problem-solving prowess, better batteries may happen. “Longer-term battery storage is the Holy Grail.”