Why am I waking up feeling like it’s the 1970s?

Russian aggression, superpower confrontations, inflation, spiking energy prices and fears of disruption — it’s all déjà vu for Cold War veterans like me.

Society feels good when our energy is predicated on four basic features: cheap, clean, safe and secure. But history tells us it’s hard to achieve all four at the same time.

Along with cheap, safe and secure, the ’70s knocked clean off the table, putting environmental degradation top of mind. Acid rain, Three Mile Island, smog and leaded gasoline were among the many earthly problems that furrowed our brows and debased our planet. Climate change has dogged the clean dimension since, but we’re working on it.

For much of the past 10 years, we in the industrialized world felt like we had the other three features pretty well in hand. However, with Russia’s invasion of Ukraine, we’re losing our grip on the entire cheap-clean-safe-secure paradigm of energy, yet again.

Energy is no longer cheap — rising oil and natural gas prices are putting an end to affordability. Achieving net-zero carbon emissions remains a massive undertaking. And choking off the Russian energy economy is removing any feelings of safe and secure.

Russia is an über-producer of oil and natural gas. By volume, the vast, resource-rich country is a top exporter alongside Saudi Arabia, and a dominant supplier of hydrocarbons to Europe. Military action, financial sanctions and other uncertainties in the fog of the Ukrainian war mean the usual flow of global energy will be disrupted — it’s not a question of if harm will be done in the weeks to come, but how much.

Naturally, there are many questions about what will happen and what can be done to preserve the cheap-clean-safe-secure paradigm. Here are some:

To what extent can Canada help Europeans be more energy secure?

Although Canada is the fourth-largest producer of oil and gas in the world, there isn’t much we can do for our European friends in the near term.

The majority of Canada’s oil production comes from Alberta and Saskatchewan. Our export pipelines dominantly point south to the United States. Years of pipeline squabbling have led to stagnation in our ability to access export markets.

The contentious Trans Mountain Expansion (TMX) pipeline isn’t likely to be finished until late 2023. Some people wonder if it will take even longer, given the resistance to the project. Regardless, the geography is wrong: a Pacific export terminal is on the wrong coastline to serve Europe efficiently. The expanded TMX terminal won’t even have the capacity required to load these large tankers and make the long journey to the other side of the world cost-efficient.

Oil from offshore Newfoundland is available, but it’s spoken for and only about 5% of Canadian production.

What about liquefied natural gas (LNG)?

I dug up some of my presentations from 2014. Back then, there was much talk about Canadian LNG export terminals. At the peak, I counted 18 live proposals on the BC coast. In the end, only one project, LNG Canada, made it through the arduous approval mill. Today, the Kitimat-based facility is under construction, but not likely to be in service until 2025 — and that’s assuming the Coastal GasLink pipeline makes it there in time without further incidents.

The proposed Saguenay LNG project in Quebec made much more sense for serving Europe, but it was rejected by the province in 2021 and by Ottawa only three weeks ago, encountering regulatory and political resistance familiar to natural gas projects. So, unless there’s an unexpected policy U-turn, nobody should hold their breath for more made-in-Canada LNG.

Are there other ways to serve Europe with Canadian oil and natural gas?

Canadian production can transit through American pipes and ports to get to Europe. However, over the past five years, Canadian hydrocarbon output has leveled off in response to climate policies, the supply chain ravages of the pandemic, limited pipeline export capacity and investor directives to return cash to shareholders in lieu of drilling. So, for now, Canada doesn’t have any extra capacity to fill Russian supply gaps, even if it had the ways and means to deliver more.

Won’t high prices accelerate the transition off oil and gas?

Yes, high oil and gas prices are a force for transition.

In fact, energy price spikes and security concerns have historically been more powerful forces for change than environmental pressures. However, what happens is not straightforward. Energy price shocks usually spark a dual track of transition: near-term and long-term.

First, there is an immediate response to get off the high-priced commodity by substituting with the next cheapest alternative. Because the world is still 80%+ on a combustion paradigm, the fastest switching is within the carbon complex. When oil and gas prices spike, there’s usually a regressive transition back to burning coal in industrial plants and power generators.

When residential natural gas prices rise, people are known to switch to wood fireplaces. Of course, that only works if wood is cheaper in giving off the same heat.

Historically, there are many instances of switching between fossil fuels as prices fluctuate. For example, the 2007 run-up in oil prices to $100+ per barrel triggered an almost 1-million-barrel-a-day equivalent consumption switch to natural gas in US industrial facilities. That worked then because natural gas was far cheaper than oil during the shale revolution.

In the current crisis, switching within the fossil fuel complex to make energy cheaper and more secure is challenging. All commodities have run up in price, and in Western jurisdictions there are various levels of carbon levies that make the decision to switch between fossil fuels less obvious.

Finally, the need to “get off oil” has been amplified every time it’s become geopolitically too hot to handle. A call goes out for more public spending to encourage long-term alternatives. In the 1970s, atomic power was heavily subsidized, recognizing that it was a technology-in-waiting to displace oil in power plants. A transition occurred, but it took years to build out a fleet of nuclear plants.

I expect we’ll hear increased calls for oil alternatives soon. The narratives will build on climate change policies that have already been encouraging transition for several years, so the process won’t be off to a cold start. The challenge will be price inflation for the raw materials that go into cleantech products like batteries. Russia is a major source in the global trade for metals, minerals and other natural resources — sanctioning it creates shortages and drives up prices.