Elon Musk, CEO of Tesla, has shared some thoughts on Twitter about the current situation with oil and gas and Russia. He said on Friday that we need to increase our oil and gas output immediately while pointing out that extraordinary times demand extraordinary measures.
Obviously, this would negatively affect Tesla, but sustainable energy solutions simply cannot react instantaneously to make up for Russian oil & gas exports.
— Elon Musk (@elonmusk) March 5, 2022
He added that it would negatively affect Tesla but the reality is that right now, sustainable energy solutions can’t react fast enough to make up for Russian oil and gas exports.
However, it’s worth noting that he did not say let’s give up on sustainable energy solutions, not at all. Just that we need broad, quick solutions to the crisis. Elon Musk added in another tweet that the short-term increase of oil and gas production is critical. Without it, people around the world will struggle. It’s about having enough energy to power civilization.
A full energy transition takes a long time. In the meantime, short-term fuel supply issues affect the whole population and need to be managed responsibly.
If the world had started the transition to sustainable energy (solar, wind, hydro, tidal, etc.) earlier and accelerated its progress faster, the world would not be dependent on oil-producing nations for their energy.
But nothing can be done to change the past… so… Tesla.$TSLA
— James Stephenson (@ICannot_Enough) March 5, 2022
Many countries including the US have imposed sanctions on Russia after it wrongfully invaded Ukraine. These sanctions have targeted banks, oligarchs, and other financial institutions. Insider reports that many countries are refraining from sanctioning Russia’s energy sector, yet Russia’s oil and gas exports are declining anyway as international refiners and banks are halting their business with the nation.
NPR has reported that many oil companies are making an exodus. Shell, BP, and Exxon are cutting ties with Russia. BP was the first to do so when it announced its plans to unwind a 20% stake in Rosneft. BPs chairman, Helge Lund, said: “This military action represents a fundamental change.”
Shell and Exxon followed BP’s lead. Exxon, which has a long history with Russia, shared that it is standing with the people of Ukraine as they try to survive and defend their country.
“ExxonMobil supports the people of Ukraine as they seek to defend their freedom and determine their own future as a nation. We deplore Russia’s military action that violates the territorial integrity of Ukraine and endangers its people.”
During his State of the Union address, President Biden said that the US will release 30 million barrels of oil from the Strategic Petroleum Reserve as part of a global effort to protect both consumers and businesses from rising fuel prices. In total, the US and 30 other countries are releasing 60 million barrels of oil from reserves around the world.
According to the US Energy Information Administration, Russia is the third-largest producer of oil globally. It only trails the US and China. Russia has 11% of the global market share. However, as a portion of the economy, Russia is far more dependent on oil and gas than either the US or China, which have far more diversified and robust economies.
Is Increasing US Oil Production Realistic in the Short Term?
Important to recognize, however, is that boosting oil and gas production much at this point means more drilling. Vox published a brilliant article discussing why drilling isn’t going to solve America’s gas price problem or the problem with Russia. The article takes on four myths that Republicans have spread about oil and gas prices. The first myth is that Biden killed oil production. The reality, Vox noted, is that the Biden administration has outpaced Trump in issuing drilling permits on public lands and water during Biden’s first year (something many on the left have been upset about). The Biden administration has also set a record for the largest offshore lease sale ever in the Gulf of Mexico last year.
Another myth is that the oil and gas industry can quickly ramp up production to make a dent in prices. Compared to what Elon said about sustainable energy solutions reacting instantaneously, it may seem as if the oil and gas industry can move faster than sustainable solutions. Maybe, maybe not.
Vox cited the earnings calls that oil companies have held with their shareholders. According to these calls, these companies don’t plan to produce much more. In 2020, demand for oil crashed due to the pandemic. Now, demand is relatively high for oil and gas, but not historically high. Pioneer CEO Scott Sheffield told Bloomberg TV that he didn’t think the oil industry could grow anyway. He said,
“Whether it’s $150 oil, $200 oil, or $100 oil, we’re not going to change our growth plans. If the president wants us to grow, I just don’t think the industry can grow anyway.”
You can read the full Vox article here.
Final 2.5 Cents
If the world had started the transition to sustainable energy (solar, wind, hydro, tidal, etc.) earlier and accelerated its progress faster, the world would not be dependent on oil-producing nations for their energy.
But nothing can be done to change the past… so… Tesla.$TSLA
— James Stephenson (@ICannot_Enough) March 5, 2022
It’s a really tough situation that the world is in, and I personally find it daunting that one person had the power to throw us all into this situation. That person is Putin. He made the choice to invade Ukraine and it’s really messed up that he can just go over there and bomb people and not be stopped.
Someone mentioned in the comments of another that I was wrong to accuse him of genocide, and although that’s not the term I used, I think killing people on a large scale is genocide, actually. And that’s what he’s doing. What else do you call bombing schools, apartment buildings, businesses, and such? Vacation? Man Ukrainians have pointed out that he simply wants Ukrainians dead and gone.
All of these deaths are unnecessary and could have been avoided if Putin had just left Ukraine alone.
We are seeing again through this humanitarian and geopolitical crisis that we are still critically dependent on oil and gas for a lot of things. Tesla is making massive progress, but it’s not enough to replace those 650,000 barrels per day of oil we are getting from Russia. And for Elon Musk to come out and say this, knowing the implications it could have on Tesla, shows that he looks at the larger picture.
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