[Choi Ji-woong's Oil Hegemony War] How to Coexist with Climate Change and Oil Consumption

Reduced Oil Consumption After COVID-19... But Production and Employment Suffer
How Should We Address Climate Change While Maintaining Daily Life?

Asia Economy Newspaper publishes a biweekly Friday column titled 'Choi Ji-woong's Oil Hegemony War,' which analyzes changes in the international oil order and the future of the energy industry. The author joined Korea National Oil Corporation in 2008, working in the Europe & Africa Business Division and the Stockpile Business Division before completing an Oil & Gas MBA program at Coventry University in London in 2015. Last year, he published the bestseller 'How Oil Rules the World,' which chronicles the modern history of oil.

In modern civilization, all daily activities consume oil or coal energy. Whether commuting by public transportation, watching TV at home, or buying a single bar of soap at the supermarket, fossil fuels are consumed. Electricity and daily necessities consume energy during their production processes. The only activities likely not consuming fossil fuels are probably barehanded exercise and sleep.

What would happen if oil could no longer be used routinely? Christopher Steiner, an American engineer-turned-journalist, depicted a society where oil is depleted and unavailable to the public in his book 'The Oil Endgame.' He described the changes step-by-step as oil prices rise from $170 per barrel to $340, and eventually to an unaffordable $840 per barrel.

In a society where oil is not a common fuel, less than 30% of the population owns passenger cars, and most vehicles are electric. Globally, high-speed trains and subways increase significantly because they run on electricity, not oil. However, airplanes cannot be powered by electricity, so most people would never board a plane in their lifetime. Suburban Walmart stores, which require car access, disappear, while shops near train stations thrive. All goods become scarce, and prices of plastics, wood, metals, and other materials rise. The author advises selling airline and automobile company stocks and buying shares in electric railway companies in preparation for rising oil prices.

Prediction of the 'Oil Endgame' Partially Realized After COVID-19
We Must Find Ways to Use Oil While Preventing Climate Change
Renewable Energy Cannot Be the Sole Alternative

Since the book's publication in 2009, the shale revolution in the United States led to a surge in crude oil production, and his prediction of the end of the oil era failed to gain widespread public support. However, unexpectedly, the COVID-19 pandemic has partially realized the changes he predicted. Although not due to oil depletion, oil use has decreased due to restricted movement and reduced production activities caused by COVID-19. Recently, as air travel disappeared, airline stocks fell, and electric vehicle-related stocks like Tesla surged, just as he predicted.

As depicted in the book, reducing consumption and movement leads to decreased oil and coal consumption. Therefore, the most certain way to reduce greenhouse gas emissions is to reduce consumption and movement. There is no need to selectively reduce anything in particular because fossil fuels are used in all stages of production, transportation, and sales of goods. But can we really give up our daily lives by reducing consumption and movement? Even setting aside the decline in quality of life, this would cause problems for growth and employment. So, if we want to address climate change while maintaining daily life as much as possible, what should we do? The answer is clear. Unless everyone retreats to the mountains to become naturalists, we cannot stop using oil altogether. However, efforts to suppress and substitute its use are urgently needed.

In July, the Korean government announced the Korean New Deal policy. One pillar of this policy is the 'Green New Deal,' which expands solar and wind power generation. Reducing carbon emissions and expanding renewable energy through this is essential. However, expanding renewable energy is only a small part of climate change measures. Since renewable energy is mostly limited to electricity generation, it cannot serve as a comprehensive solution for energy use in transportation, industry, and other sectors.

Revolutionary Improvement in Internal Combustion Engine Fuel Efficiency and Carbon Tax Imposition Are Short-Term Responses

As important as renewable energy for reducing greenhouse gases is improving energy efficiency. Although internal combustion engines have steadily improved fuel efficiency over decades, there remains significant room for enhancing driving efficiency. The International Energy Agency (IEA) estimates that by 2040, improving vehicle fuel efficiency could reduce oil consumption by 9 million barrels per day (about 9% of total usage), which is twice the reduction expected from the spread of electric vehicles. This indicates considerable potential for improving internal combustion engine efficiency. Improving energy efficiency?that is, developing technologies that achieve the same productivity with less energy?is a realistic climate change response that can be implemented while preserving our daily lives.

▲Choi Ji-woong, author of 'How Oil Rules the World,' working at the Korea National Oil Corporation Oil Information Center

In the short term, policy is more important than technology. Technological progress takes time, but policies, especially taxes, have immediate effects. The most powerful means to reduce fossil fuel use is a 'carbon tax.' This imposes taxes proportional to the carbon emissions from oil, coal, and other fuels to suppress usage.

However, imposing a carbon tax is a serious and sensitive issue. Leading U.S. presidential candidate Joe Biden holds a very different view from President Donald Trump, who announced withdrawal from the Paris Climate Agreement. If elected, Biden is expected to implement much more progressive environmental policies. In July, he already announced a low-carbon energy policy package worth about $2 trillion. However, he did not put the carbon tax front and center due to the severe economic impact. Imposing a carbon tax would raise prices of nearly all goods and could bankrupt many energy companies. Nevertheless, if a carbon tax is implemented in the U.S., it could be a major shock and a significant turning point for energy transition.

The Most Important Factor Is Public Awareness and Habits
We Must Consider Whether We Are Ready to Embrace Saving Over Consumption and Contraction Over Growth

More important than policies or technology is public awareness and habits. What ordinary people can do to reduce greenhouse gases is clear: reduce consumption and movement. But we must consider whether we are ready to pursue saving over consumption and regard contraction over growth, decrease over increase, as virtues. Furthermore, we may have to confront the provocative and fundamental question: 'Is abundance happiness?' Energy experts like the IEA do not expect oil demand to decline at least until 2040. To overturn this outlook, a culture may be needed where people who consume excessively are viewed as one would view someone not wearing a mask in public, and where non-possession and frugality are standards of character.

Reducing habitual movement in daily life is also important. Fortunately, this can be realized more easily than reducing consumption. We are already attempting this. COVID-19 has previewed the future of daily life, like a supermarket tasting corner. The rise of contactless culture, telecommuting, and remote learning due to COVID-19 will become more common as climate change issues grow.

We live in an industrialized society powered by fossil fuels and are very accustomed to urbanized life. Coal, oil, and gas have been the foundation for all the conveniences of modern civilization. Therefore, we cannot simply distance ourselves from oil. Doing so would cause further confusion and sacrifice. Transitioning to new energy requires not only technological progress but also changes encompassing systems, awareness, and culture. This cannot be achieved amid chaos and conflict. Moreover, this also demands enormous energy from humanity. The world has experienced two oil shocks while using oil. Such shocks can hinder change because they cause costs, conflicts, and confusion in various international communities. This is why efforts to consume oil at an appropriate level while ensuring stable supply are simultaneously necessary.