One of the oil industry’s most trusted advisors says that the “greatest risk to the global economy today” is not Brexit, the slowdown in China, or terrorism, but the potential collapse of the fossil fuels industry.
Speaking at the Financial Times’ Energy Transformation Strategies conference in London on Wednesday, Phillip Lambert of boutique advisory firm Lambert Energy, said that he believes that moving towards renewable energy sources while ignoring the fossil fuels sector could be disastrous for the world.
Here’s what he told the gathering of oil industry professionals, sustainable energy gurus and a handful of journalists earlier today:
The greatest risk to the global economy today is that the fossil fuel industry — if you want to lump it all together, which in itself is dangerous — becomes so battered that it doesn’t invest enough to keep the system going.
I think the world today, especially the young among the populace thinks that the renewable industry is taking over and that’s fine, it’s all going to be hunky dory. Paris met, two degrees, fossil fuel dies, renewable takes over. What we’ve tried to do at Lambert Energy is just point out the unbelievable risk of that position unless we’re very careful.
Today, June 1, we will consume the equivalent of 270 million of oil, and most people imagine that you can replace that pretty quickly and seamlessly with wind, solar, electric cars whatever. But of that 270 million, 75 million is coal, 65 million is gas, and 95 million is oil. Nine million of that is wind and solar, and biofuels. So before we delude the world that it is going to be easy to replace it we’ve got to have a realistic debate about the cost.
Lambert’s basic point is that simply turning off the taps on fossil fuels and moving all production of energy to renewables would be completely unaffordable, especially in developing nations, that in turn would stunt economic growth, and cause serious financial issues worldwide. Instead, he believes that slowly transitioning to renewables while using technology to make fossil fuels cleaner is the best way to proceed.
“Clearly there is nothing wrong with a renewable future. We passionately believe in the UK in a gas and offshore wind future,” Lambert said.
As its stands, the large majority of debate around the oil industry in particularly is where prices are going to settle. The cost of oil slumped from more than $100 per barrel in mid-2014, to less than $30 in January, as a huge supply and demand imbalance prices to crash downwards. It has since recovered to around $50 as markets begin to rebalance, thanks in part to a series of massive outages in key production areas.
However, Lambert argues that the price crash isn’t the biggest issue surrounding oil, and the wider fossil fuels industry, but is simply “
another punch to an already battered body” adding that the industry has to be “very, very careful” or it could face collapse.
“There’s an underlying, much greater drumbeat [than the oil price crash], which is the talk of the end of our industry as a whole. In a way, I’ve never seen so little confidence in our industry as today. I think the confidence, both in investment terms and support has been draining away.”
Energy industry defaults are already at their highest levels of all-time, and in the past year, several huge coal companies have gone bankrupt as a result of crashing commodity prices thanks to international efforts to ditch coal — traditionally the most polluting fossil fuel.
While he may not be a household name — Lambert Energy Advisory runs from an office on a single floor in Mayfair and the firm doesn’t have a website — Lambert is hugely well respected in the energy industry, and is probably best known for his instrumental role in driving the early stages of a collapsed $10 billion deal between Rosneft and BP in 2011, which fell through after BP missed a last minute deadline.