For the first time in history, the first half of 2020 was marked by Europe receiving more of its electricity from renewables (40%) than fossil fuels (34%). In his interview for HBR Russia, European University Institute professor Aleksandr Etkind has shared his view on fossil fuel dependency and the prospects of breaking it:
• By mid-XX century, oil had become the dominant market commodity. Today, over half of the global trade relates to energy, be it oil, gas, or coal. Oil trade is ten times bigger than the entire gold market. The contemporary financial system should be considered a symbolic form of energy turnover.
• The share of logistics and security expenses in oil price is higher than that of the extraction. That’s why security apparatus in petrocracies plays such an important role.
• There are several ways to end commodity dependency, e.g. running out of it (like cod in North Atlantic, or Siberian sable). Forecasts were predicting the end of coal which didn’t happen. At the end of the 20th century, we were promised the end of oil resources and price hikes, but we will run out of air before we run out of oil.
• There are sizable examples of another path: instead of ending, commodity prices fall thanks to the alternatives that do the job better and cheaper. When in the 19th century, humanity bred sugar beet it brought down the price of sugar cane significantly.
• This is exactly what’s going to happen to fossil fuel. New regulations and competing products, coupled with the spread of renewables, will drive down the oil demand, albeit not eliminating it completely.
• New materials will emerge, replacing plastic. For instance, thanks to new chemistries and technologies, wood will replace several different types of plastic. • People, corporations, and governments that live off oil are bracing for the impact. They understand that now is the final time they can pump their coffers with petrodollars.