G7 Living In Fantasy Land. They Shut Down Oil While Begging OPEC For More.

After months of talking, the EU and the G7 developed economies are finally taking some concrete action on energy policy. The difficulty is that the policy decisions make no sense and are doomed to fail.

As reported in this article, the G7 climate and environmental ministers met in Berlin and agreed to phase out the use of coal. That sounds like a worthy goal from the perspective of climate alarmists. The problem is that most of the EU (with the exception of France) has already phased out their use of nuclear power.

At the same time, steps are being taken to ban exports of oil and natural gas from Russia to Europe because of the War in Ukraine. If you eliminate nuclear and coal, and curtail oil and natural gas, what’s left to power the homes and factories of Europe?

The ministers claim that they will arrange substitutes for the Russian oil and gas. But, there aren’t any.

Qatari natural gas is mostly pre-sold to China. U.S. natural gas output has been knee-capped by the Biden administration limitations on leasing and fracking.

U.S. oil output is also declining for the same reasons. The U.S. has moved from being a net exporter to a net importer of oil and natural gas in the past two years, so it cannot practically be a source for Europe. None of this does any harm to Russia, which will simply sell its oil and gas output to China at world prices.

The G7 and EU have a fantasy that they can substitute wind and solar power for the oil, gas, and coal that they are scaling back. The problem is that wind turbines and solar panels are expensive and not scalable. They depend on enormous battery farms to store power and those batteries make the entire plan even more expensive.

It’s also impossible to run a modern power grid on wind and solar alone because those sources are intermittent. There’s no solar power at night or on cloudy days, and there’s no wind power when the wind’s not blowing.

Wind and solar can supplement other energy sources on the grid, but they cannot power the grid on their own. This leads back to oil and natural gas (or coal), which the G7 has just agreed to do without. None of this makes sense.

There are no ready substitute supplies of oil and natural gas. Wind and solar cannot power the grid. Europe’s choices will be rationing and blackouts, not a green new deal.

The best that can be hoped for is that this high-profile virtue signaling by John Kerry and his peers will be quietly ignored. The delegates can fly home on their private jets (with huge CO₂ emissions) while the world considers more practical solutions.

The worst case is that the EU and G7 actually move forward with these nonsensical and unnecessary plans in which case Europe will freeze in the dark next winter. Investors should get out of the way of this train wreck by avoiding European industrial and manufacturing stocks.

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