Bill McKibben recently asked in the New Yorker, “Are we past the peak of Big Oil’s Power?” I hope we are. Indeed, I hope we’ll find that the pandemic was like a nail gun for the coffins of not only oil but also coal and fracked gas.
Mind you, these fossil fuels are not like the small-bore incidentals to life that I wrote about in this series’s earlier articles: junk mail and handshakes have become rarities in the pandemic and may stay that way after it’s done. No, the fossil fuel industry is a colossus astride the global economy. Throughout modern history, combustible hydrocarbons have been the quintessential strategic resources. They have made and unmade empires, and they will undoubtedly survive COVID-19. But they have suffered a knockdown blow, and the question is what will happen to the political influence of their purveyors. Has the pandemic kneecapped the power—the hegemony—of fossil fuels?
It’s too soon to tell, because economics change politics through complicated, delayed chain reactions. And in today’s polarized political context, the economic travails of fossil fuelers may only presage their political decline in the United States if the party they have aligned with loses November’s general election badly enough. In that case, fossil fuelers’ political influence may shrink down to match the stagnant, mid-size industry that fossil energy has become. In this hopeful, post-pandemic scenario, Big Oil would be no more powerful in state and national capitols than, for example, the restaurant industry is today: not irrelevant but no titan.
The onset of the pandemic drove a precipitous decline in demand for all fossil fuels. Oil consumption disappeared as airplanes, trains, trucks, and automobiles parked for much of the spring and have only partially returned to circulation. For example, US air passenger counts dropped to 4 percent of last year’s levels in mid-April and had only returned to 25 percent of last year’s level by early July, according to the Transportation Security Administration. Gasoline consumption in the United States fell by almost half in the Spring, and petroleum consumption overall by 25 percent. Both are bouncing back slowly. For 2020 overall, experts project an 8-10 percent decline in global oil consumption. Just so, electric utilities shut off or shut down coal plants: from New Years Day to late May, an additional 13 US closures were announced, adding to the more than 500 closed since 2010.
Prices for fossil fuels followed demand into the basement, even going negative briefly for Texas crude oil futures. Layoffs proliferated among US fossil fuel workers: one-fifth of coal jobs evaporated from January to April. Some 73 percent of US oil and gas drilling rigs—and 78 percent of Canada’s—were idle by July 17, compared with a year earlier. A score of US shale-oil and shale-gas companies, many of them already close to insolvency, have gone bankrupt this year, joining the cavalcade of business failures that’s characterized the fracking industry for half a decade. (Tragically—well, infuriatingly—the potent greenhouse gas methane is leaking in vast quantities from wells that have been closed but not sealed properly.) Oil industry insiders surveyed by the Federal Reserve Bank of Kansas City expect only 64 percent of US oil companies to survive the year, assuming the continuation of the $40-per-barrel oil price prevalent in mid-July. Oil and gas pipeline construction has taken repeated body blows too: the New York Times asked, “Is this the end of new pipelines?” Inevitably, oil-dependent states and provinces such as Alaska, Alberta, and North Dakota have watched their public budgets plunge into red ink, as needs for relief grow at the exact moment revenues have vanished.
For those fossil fuelers still solvent—mostly, the big name-brand companies—stock values went into free fall. For the last five years, ExxonMobil traded on Wall Street at around $80 a share and Standard & Poors consistently ranked it one of the ten richest US companies, measured by its market capitalization. It had already slipped out of the top ten before the pandemic, and when the pandemic hit, the slippage turned into a fall off a bridge—a bungee jump, as it turned out. ExxonMobil, crown jewel of the old Rockefeller oil empire, fell to $30 a share and has since been bouncing up and down around $40.
Clean energy, meanwhile, has suffered much less. In relative terms, it’s come out ahead. Construction of wind and solar facilities paused and then resumed, and because wind and sunlight are free, existing facilities’ power output keeps cutting into coal and gas’s market shares on the grid. Renewables are on course to overtake coal in US power generation this year for the first time since Thomas Edison first commercialized electricity.
Meanwhile, in the transportation realm, Americans’ biggest rush to buy bicycles since the oil crunch of the 1970s made two-wheelers the toilet paper of April and May.
In the same months, sales of electric cars suffered much less than of internal-combustion cars, and the conventional car business was already in a moment of turbulence and change. By mid-July, investors had bid up the stock price of Tesla to the astounding point where the premier electric carmaker was worth more than the world’s largest carmakers Toyota and Volkswagen combined, though Tesla makes fewer than one-fiftieth as many vehicles. Indeed, Tesla had market cap greater than Exxon’s. (The 2020 stock market seems intent on decarbonizing its valuations: by May, the market value of the videoconferencing startup Zoom surpassed that of the world’s biggest seven airlines combined.)
Of course, stock traders are as prone to over-enthusiasm as anyone, and market cap is just one of many measures of an industry’s economic standing anyway. The achingly urgent question for the global climate, healthy human lungs, and the millions of people fighting to protect both is when fossil fuelers’ hard times will translate into their fall from political dominance. Fossil fuel interests—and the families they made rich, such as the Koch Brothers—have been the chief brakes on climate action in North America for a generation. They have fought tooth and nail against every proposal to stem or put a price on carbon pollution, accelerate the clean-energy transition, clean the air, or undo the web of subsidies that sustain their own fortunes. They are the main funders of anti-science political movements around the world, so the decline of fossil fuels’ economic dominance should ultimately shrink the political power of climate-science deniers generally.
But politics lags economics. Political change lags because beliefs solidify early in politicians’ careers. It lags because enduring relationships among power players outlast the realities in which they form. It lags because institutional advantages persist in law, policy, and custom. And it lags because, early in its economic decline, an industry may pour extra resources into politics, bolstering its slipping position.
Case in point: Alaskan oil output is down 75 percent from its late-eighties peak, and oil jobs—almost two-fifths of which are held by nonresidents, who fly in for their half-month shift and then leave again—are down as well. But Alaska’s Senators Dan Sullivan and Lisa Murkowski are still reliably pro-oil on relevant Senate votes. Alaska’s oil industry, though much diminished, still commands a dominant position in the state’s tables of workforce, personal income, and tax revenue. It will need to be eclipsed by other forces before it recedes in Alaskan politics.
Find this article interesting? Please consider making a gift to support our work.
In contrast, across the United States, the closure of more than 550 coal-fired power plants since 2010, plus the mines that supplied them and the ancillary businesses that supported them, plus the decline in coal mining jobs from almost 180,000 in 1986 to—after a sudden 20 percent drop in the pandemic—under 44,000 in June, appear to have been enough to end coal’s hegemony. Outside of states such as Wyoming, which has the economy of a resource colony, leaders continue to support coal in word only. In deeds, they are simply managing its decline. Even in coal-bucket states like Kentucky and Pennsylvania, it’s hard nowadays to remember why the industry used to be known as King Coal. It’s a shadow of its former self.
The oil and gas industry, in contrast, retains 152,000 US workers, fewer than at the peak of the fracking boom in 2015 but still more than in the early 2000s. It also commands financial resources far in excess of what remains to the coal industry. Oil and gas have yet to be dethroned, though their power is slipping.
Fossil fuelers’ political power has largely been a function of their ability to bankroll politics through their profits. That ability diminishes when they’re in deep decline, like coal, or an economic tailspin, like oil and gas. But the historical origins of their power do not predict its dissipation, because of the confounding effects of the hyperpartisan, two-camp polarization of the United States, the principal political reality of this decade. Politics is a coalition sport. Which of the giant US coalitions—red or blue, Republican or Democrat, conservative or progressive—you’re part of has become a defining identity for most Americans, and fossil fuelers long ago made themselves indispensable to the conservative coalition. They faithfully funded conservative political candidates, campaigns, and organizations, including the anti-science ideology that underlies opposition to climate action. Now, in their own straitened circumstances, they can count on a certain amount of intra-coalition solidarity from their co-partisans, at least for a few years.
That fact will slow the loss of political hegemony of fossil fuels. On the other hand, in the event of a near-death experience for a political party, a new configuration can emerge quickly: Ronald Reagan, Bill Clinton, and Donald Trump each revived and redefined his party in a new image, with different policy positions and different coalition members, after it suffered a major defeat.
If current polling trends continue, a blue wave election in 2020 could first put US fossil fuelers in exile for a period. Then, if the wave is big enough and a chastened and defeated conservative coalition reconstitutes itself to fit the new realities of the 2020s, fuelers might find themselves no longer at the head table but relegated to the cheap seats of American conservatism. No longer able to pick up the tab as generously as before, they might hold less sway in the politics of the right. They might also lose their cultural capital: young conservatives in the United States have little patience for the climate science-denialism that Big Oil has insisted upon as the cost of its movement patronage. I’m far from certain of this outcome, and Sightline takes no position on partisan political campaigns. But it’s a scenario that warrants attention.
Whatever November’s outcome, I’m hoping that fossil fuelers will no longer hold disproportionate political power when the pandemic is behind us. They ought to hold exactly as much political influence as do industries that are similar in their contribution to the economy. Fossil fuels are a shrinking, mid-sized business: they’re has beens. Quantitatively, their influence should be similar to that of the restaurant industry, which like fuel extraction and refining, contributed about 1.8 percent of US gross domestic product in 2019. Or they ought to be influential on the level of Safeway stores, which single handedly employ almost as many people in the United States as do coal mining, oil and gas drilling, and petroleum refining combined. Or, if you prefer, like the movie and music-recording businesses, which together employ more Americans than do fossil fuelers. Or like furniture makers, who do the same. If Big Oil had no more political power than Big Sofa, I’d sleep a lot better.
Already before the pandemic, fossil fuels were past their political peak, coal was no longer king, and oil and gas’s crowns were slipping. During the pandemic, a maelstrom of economic forces is sucking them down, and their team in US politics, if it loses decisively this year, may not be able to pull them out again. It may not even want to. And that would be a fitting end for the hegemony of fossil fuels.