The Rational Optimist

By Antonio Gallizio

An expansion on a critique. By Antonio Gallizio

Energy and technology have changed throughout history. We used to rely on human energy, now we rely on consumable energy, and recently we have started to move into renewable energy. This most recent shift will have a massive impact across the grid and across all transportation technologies.

Recently, our CoB at Cleantech Invest Lassi Noponen published an article discussing the implications of energy consumption and our reliance on oil products. In the article Lassi takes a critical approach of Finnish oil tycoon Mika Anttonen’s pro-oil arguments.

Mika Anttonen is the founder of one of the Nordics’ biggest energy players, St1, which covers about a fifth of the region’s petrol retail network. The excerpt below is taken from a Nordic Business Insider article titled ‘Finnish Energy Billionaire: Tesla is Heading for Bankruptcy — Norway’s Electric Car Hype is Misguided’.

“People don’t realize how complex the world’s energy system really is. Because of that we are putting our time and energy into the wrong topics, like supporting electrification of vehicles and emission trades through taxation. Instead we should focus on changing consumption habits, like decreasing flying with higher taxation, improving women’s status in developing countries as a means of controlling population growth, and research and development investments.”

“For instance, have a law in place that cars could only ride at a maximum allowed limit, for instance 120 km/h. Then the vehicle would be smaller, as the engine would be lighter, and it would ultimately consume 40% less fuel.”

When someone who is highly revered by the public like Mika Anttonen expresses his opinion, it is sometimes taken for granted that what he says must be true.

Mika Anttonen regularly downplays the role of Electric Vehicles (EV) arguing they will have no effect on the global market for oil. His justification is that any reduction of consumption in gas and diesel will not reduce the demand for crude oil because of: 1. growing air traffic demand for kerosene; 2. increased demand from the chemicals industry for more oil products; and 3. increased demand from the developing world. In his opinion, these factors guarantee that all available crude oil will ultimately be refined.

When someone who is highly revered by the public like Mika Anttonen expresses his opinion, it is sometimes taken for granted that what he says must be true. Taking a pragmatic approach to this debate, it is easy to see how someone who has invested billions of dollars into refineries would want to argue for the continued consumption of its by-products. However, the arguments made by Mika Anttonen also have the effect of stifling future innovation by motivating a newer generation of pro-renewable entrepreneurs to take our reliance on oil as a fact.

Following such ‘ceterus paribus’ principles, rural Africa should be covered in telephone poles and wires.

It is easy to agree with a number of points Mika Anttonen has made in the past, such as the need to improve the position of developing countries, and the necessary role for regulation in climate change (such as carbon taxes). However, the argument he presents above against the electrification of transportation and for the continued consumption of oil products regardless of any advancement in technology, is fundamentally flawed. He has carefully crafted his statements and developed his thoughts in a vacuum and fallen under the false pretense of ‘ceterus paribus’ or ‘all else being equal’.

Just because places like the US and the Nordics developed with a strong reliance on crude oil for energy does not mean that countries like Kenya and Vietnam will have to develop along the same path.

Following such ‘ceterus paribus’ principles, rural Africa should be covered in telephone poles and wires. However, if you were to drive through remote villages in Zambia or Kenya you would not see any such telephone poles or wires. Instead, you will see thousands of Kenyans and Zambians closely guarding their cell phones, using them to do their banking, trade in goods as well as using them for telecommunications.

At the end of the day it all comes down to timing. While those of us fortunate to live in places like Finland and California have over time developed the infrastructure to consume crude oil products, in Africa and parts of Southeast Asia this is not true. Investments in large refineries and power plants are going to be a significant hurdle to overcome, especially when solar energy and batteries continue to provide cheaper and more modular alternatives. This electrification of the grid will then have a secondary effect on transportation, such as in China, where consumers are already adopting electrified scooters as an alternative to combustion engines. Just because places like the US and the Nordics developed with a strong reliance on crude oil for energy does not mean that countries like Kenya and Vietnam will have to develop along the same path.

The ‘ceterus paribus fallacy’ is present in several institutions that are comfortable under the status quo. However, taking the past as an example, it is impossible to see how all else does in fact remain equal. Technological progress is infinite, evolving as we continue to progress.

If this was 1907 and not 2017 the same article could be written about Manhattan’s biggest horse feed salesman downplaying the role of the car for his business model.

When we apply this thinking to the fossil fuel industry, replacing petrol cars with EVs will reduce our reliance on fossil fuels. In the same way that AT&T could not rely on Africa to sustain its ‘telephone poles and wires’ business model, Mika Anttonen cannot rely on Africa or Vietnam to take over the demand for fossil fuels.

Mika Anttonen completes his argument by saying: “When we look at population levels we cannot expect anything else but mankind taking the easiest path, and not carrying any additional burden than they have to”.

Why would we take for granted that oil and gas are in fact the path of least resistance, when there is absolutely no historical precedent to back this claim? If this was 1907 and not 2017 the same article could be written about Manhattan’s biggest horse feed salesman downplaying the role of the car for his business model.