Is oil the new tobacco?
Some have suggested that oil is the new tobacco – the comparison is understandable: the world is addicted to both and they are damaging in their own ways. However, the comparison is flawed.
Tobacco as a product is in effect useless – except perhaps for the excuse of ‘fag breaks’! Oil, meanwhile, is essential to our current way of life.
The path to a world of green energy is a long and winding road. A journey that we are merely starting on. This fact is often forgotten amid the excitement of technological change, particularly in the investment world. That’s why we believe that reports of the demise of oil may be premature.
The electrification of the world’s vehicle fleet through the widespread adoption of EVs could have certain benefits but it still requires the generation of electricity to become reality. From where does this originate? For the vast majority, it is generated from fossil fuels (and some nuclear) – not quite so clean in reality.
So perhaps the energy required for the electrification of cars needs to come from renewable sources? Well yes, but alas, renewable energy requires government subsidies to be economical at the current price of energy. According to Centrica, renewables add around 20% to the average UK energy bill. Some fantastic and well-intended, but disastrous, subsidies have and do exist. For example, in Northern Ireland in 2016 – people were perversely incentivised to heat empty sheds with wood chips shipped across the Atlantic. Renewables might be viable if energy prices were higher but that would be good news for the oil industry too.
Renewables are also, unfortunately, not as reliable as you’d like them to be – the wind will not always blow when we need it to. A backup, usually in the form of fossil fuels, has to be kept in a state of readiness – which is not particularly cost efficient. Policymakers face a daunting proposition when weighing the balance between affordability and green energy ideals. The prospect of ‘freezing grannies’ is difficult to stomach for politicians who must eventually seek re-election.
Oil has played a critical role in the world’s development and the time may eventually come to say goodbye (and perhaps good riddance) to that source of energy production. But that is unlikely to be in our lifetime. For humans to thrive physically and economically, affordable energy is vital. Whether we like it or not, it seems as if we are going to use fossil fuels for the foreseeable future.
With oil investments coming back into favour and demand continuing to grow, oil would appear to be the new black… but not the new tobacco. Perhaps, we should be looking elsewhere for the answer as to what might be the new tobacco. Maybe it’s obesity? Though that is a story for another day…
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