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The Dark Side of the Energy Crisis - Barış Sanlı

During big events, like a crisis, experts and their narratives are amplified to educate the public. Then an informed discussion starts and results in good policies. This is the theory. Reality can not be more different. This is the dark side of the energy crisis.

Generally, an energy crisis creates a very polarized political discussion. Nixon's price controls didn't end up in favor of the free market for the 73-74 crisis. The interventions due to public pressure created a much worse environment until the 79-80 crisis. During that time, environmental movements called for ending the growth, material growth, and population growth. The presidents mostly paved the way for these ideas in a controlled manner. But election winners were not the ones listening to the popular voices, but they were neoliberals.

This is fascinating since the politicians have tried to do whatever the public(or the dominant voices in public), press, and opposition asked them to do. On the other hand, their visions stemmed from the informed-scientific discussions that most electors have not bought. Electors reveal a more realistic side of the polls.

One very important parameter is the loss of purchasing power for all consumers. Inflation is taxation in a hidden way. In the 70s, traders earned a lot, so did the companies. The environmental push then and net-zero push now has helped fossil guys earn "embarrassingly high" profits, in Tellurian Chief Charif Souki’s words. In the 70s, we see the rise of trading houses and Marc Rich. They earned excessive profits and financed an interesting third-world vision.

Mining companies are no different. Due to ESG limitations, mining became ever more profitable. Since there are not too many spots, you can dig for particular materials. If some of them are limited due to host countries' ESG concerns, the rest will be more profitable. This week we will see the mining companies in far-flung parts of the world posting record profits.

So what is happening? The theory is written in good faith. But the loss of purchasing power due to energy and material inflation and foods creates more short-sighted political discussion than informed discussion. Energy and mining are complex subjects. Journalists can not get the big picture easily, so they switch to political narratives with cherry-picked numbers. This is why during the timber famine, instead of switching to new materials public pressed rail companies for more tree planting. And it didn’t work.

The other issue is about how sudden and deep policies change. The loss of purchasing power increases the workers’ movement. They have a point, and they are right. The lowest income level is the worst affected income group. They rise with concern. But just like the green-statist agenda strengthened the neoliberal-fossil agenda, the rise of workers increases the anti-unionist policies. Such an example is Thatcher's dealing with coal workers.

This time there is a twist. Employers' have automation and artificial intelligence at their disposal. This may be extended with drones or automated driving. The workers' strikes may increase the innovation speed. According to Daron Acemoglu, automation has replaced lots of jobs already. Why not more?

The worst thing to happen to an energy transition is a messy transition, just like Jason Bordoff from Columbia SIPA mentions in an interview. You can lose public support. Automation is another one. The unhealthiest is the pseudo-informed discussion leading to many inferior equilibria. In the past, not the wisdom but the madness of the crowds headed the energy discussion. But this generation is different.