Why Are Fossil Fuels Critical For Creating Renewable Energy?

The Catch-22 of Renewable Energy Infrastructure

Part II of the Interview

Dr. Stephen Leeb, Ph.D.

Let me sum it up like this- there is no way that you get anywhere close to your climate goals without using massive amounts of fossil fuels. And the only country that basically can use those fossil fuels in a way to produce more solar at a fairly steady price would be China. Right now, solar panel prices have started to rise and that’s because there’s a tremendous shortage of polysilicon which is made from ultra pure silicon derived from high quality quartz. We don’t have the facilities in the United States to manufacture anywhere near the kind of ultra pure silicon China is capable of producing. 

Fergus Hodgson | Host & Editor of Gold Newsletter Podcast

This is the point you were leading up to and this Mad Dash toward NetZero emissions ironically will require a huge amount of fossil fuel generation in the short-term to build the infrastructure for renewable energy over the next generation. In some ways, this is having the reverse effect and we have to assume that in the thirty-odd years that this whole infrastructure would work and actually function properly which may be dubious. 

Dr. Stephen Leeb, Ph.D.

Very dubious, at this point. Especially when it comes to hydrogen. We’re going to need to develop electrolyzers that work and we’re nowhere near that point right now. All of this renewable energy infrastructure that we have to develop is going to require lots and lots of energy. 

Why Are Fossil Fuels Critical For Creating Renewable Energy?

One commodity in particular that is critical for building renewable energy infrastructure is copper. Indeed, copper is an essential commodity used in virtually everything, including electric vehicles. Now, electric cars are going to use twice as much copper to manufacture than internal combustion engines. In order to use solar and hydrogen power efficiently, we’re going to need tremendous amounts of copper wire. The demand for copper is going to increase dramatically in the foreseeable future and this means you will begin to see shortages. You’re not going to be able to electrify transportation without copious amounts of copper. You’re not going to be able to do a lot of things without tremendous amounts of copper. 

Now, the reason I mentioned copper is due to the fact that it requires massive amounts of energy to mine. And one of the points I made in my book was that we’re very close to copper grades- the amount of copper you get per ton has declined to about 0.5 grams per ton. This is called a point of inflection with respect to how much energy you need. Once you get below 0.5 grams per ton, the amount of energy needed to produce copper can increase exponentially. 

There are still places on Earth that have fairly high grades of unmined copper, such as the Democratic Republic of Congo. In order to mine this copper, it will be enormously energy intensive. Unfortunately, it will absolutely require oil and fossil fuels to develop the mining operations. Right now, if you were to try and get copper out of the Democratic Republic of Congo, it would still be as costly as copper you’re trying to get out of Chile. 

Fergus Hodgson | Host & Editor of Gold Newsletter Podcast

There’s no infrastructure in place to be able to achieve anywhere near these goals. 

Dr. Stephen Leeb, Ph.D.

And these goals are not even clear. It is going to take trillions and trillions of dollars just to create the infrastructure necessary to create the mining operations and the means to transport these natural resources out of the country.

One of the points Steven Koonin makes in his book “Unsettled’ and ironically the point that no one wants you to hear… 1.5 degrees centigrade is a made-up number. There’s a big error around that- and we don’t know what the numbers could be. The second point- it’s not even clear that you will increase greenhouse gases because greenhouse gases also increase plant growth. There could be a balance- a complete offset. There are other scientists that you could classify as conservative hacks but on the flip side there are very credible professors who say you’re not going to get more than 630 parts per million. That’s about as much as you will go before you offset. 

Fergus Hodgson | Host & Editor of Gold Newsletter Podcast

We’ve been examining all the implications of this mad dash to cut to a tremendous degree the greenhouse gas. Now why does this play into the hands of China? Of course, people are interested in mining precious metals, especially gold. Why does this favor China so much and what should people do about it?

Dr. Stephen Leeb, Ph.D.

Right now, there’s a gold battle going on and to be very honest, I don’t think it’s losing in a bad way. If you look at the action today, basically the FED is getting a little tougher and they didn’t have to get a lot tougher because Europe has gotten easier, for reasons that are hard to understand. Why has Europe decided to increase the amount of bonds they are buying? The United States didn’t decrease it today- suggesting that it may be around the corner. So, the US dollar is very strong and then gold got weaker. 

The guts of this right now is that China has been accumulating tremendous amounts of energy, massive amounts of oil and other critical commodities. They’re not going to reveal their inventory of commodities but whatever quantity they have is a lot more than anyone thinks. China has succeeded and they’ve succeeded by being ruthless. I’m just here to express to people in the U.S. that they’ve got to wake up really quickly. Even more important than buying my latest book ‘China’s Rise and The New Age of Gold’ is to buy a copy of the book by Steven Koonin called ‘Unsettled.’ By all means, buy that book because it’s not written by a so-called conservative hack. It’s written by someone who worked with the Obama administration, who advised Democratic and Republican government agencies. And he’s telling you that we don’t have anywhere near the scientific basis for saying what we’re saying about greenhouse gases. Another point that he made is that even if it’s all true and global warming is increasing faster than expected- there are still going to be ways of dealing with it without facing some sort of existential crisis. And the world is not facing an existential crisis. In all probability, the world is not facing a climate crisis. And even if it were facing a climate crisis, you will have ways of dealing with it. Curiously, Amazon or whatever powers may be don’t want you to read this book… it’s become really clear that when an immediate bestseller suddenly is out of print- something is going on that’s really crazy and dangerous. 

Why Are Fossil Fuels Critical For Creating Renewable Energy?

Incidentally, what is even more dangerous right now is stopping the production of oil and letting oil prices rise. As a result, this is inevitable if you slow down production and demand increases. Among other things, the need for renewable energy, commodities and infrastructure continues to rise. Not only do you need renewable energies in this world but the other point that I make is that developing countries (which are 80% of the world’s population) have 1/5th the income per capita in comparison to the developed world. Developing countries are going to be growing very quickly and their demand for fossil fuels are going to increase. The countries that we cannot control in terms of production of fossil fuels are those in the eastern part of the world. The state-owned oil companies such as Saudi Aramco- you’re not going to sell Saudi Aramco. You can’t produce more oil than them and China will be the buyer. 

Basically, what will come out of this will be, in my opinion, a new currency. And that currency will very likely involve some sort of blockchain and it will include a basket of other currencies that will be backed by gold. We’re no longer living in a world where you can just print as much money as you want and create haphazard demand for commodities. If oil or energy is scarce, well all commodities are scarce. It’s just the way it works. You cannot get a commodity- whether it be copper, zinc or aluminum (for example) without energy. If energy is scarce, the world could really face a crisis. It would make anything you can think of regarding a climate crisis seem like a day in the park. Literally, that’s the kind of situation we may be putting ourselves in. 

Fergus Hodgson | Host & Editor of Gold Newsletter Podcast

Incredible line of discussion there. Now, another book which dovetails neatly into what you are saying is ‘Apocalypse Never’ by Michael Shellenberger and the subtitle is ‘Why Environmental Alarmism Hurts Us All.’

One of his key points is the point you just made… that whatever climate threat there is: the damage being done in the name of fighting it represents a much greater threat to the livelihood of people who are poor, right now.

Dr. Stephen Leeb, Ph.D.

So much so… and that’s where China becomes a very important player and that’s why they are accumulating as much oil and as much commodities as they possibly can. The BRI Belt and Road Initiative is part of developing the undeveloped part of the world. The BRI will create the economic infrastructure to make this possible, you are going to need commodities to supply them with. Geographically, China is basically in the best position to do that. Whether China is in a sufficient position, I have no idea. However, I do know that the direction the United States is going… we’re not going to have any say in the developing world. We will be lucky to get through anything- we’re facing an existential crisis.

Let me put it this way, instead of trying to explain it myself, what you just quoted from the book ‘Apocalypse Never’ is something that Koonin (one of the most prominent scientists especially in climatology) is saying exactly. And he is saying it with very hard, cold facts and figures that I agree with. These complex models that climatologists produce are so complicated. It’s ridiculous to think they’re either going to be right in one direction or they’re going to be wrong in the other direction. The point is that even if they’re wrong in predicting the acceleration of global warming- it’s still something we can manage. What we cannot manage is a lack of energy. We cannot grow the 80% of the population that’s desperate for growth in the developing world without energy. In the developed world, basically we cannot exist here either without energy. There are no computers without energy. Computers are one of the biggest users of energy right now in the world,  transportation is not. Industry uses more energy than probably anything.

Fergus Hodgson | Host & Editor of Gold Newsletter Podcast

Okay, so you really believe that this agenda to get zero emissions and challenge or limit our energy production is going to ravage the dollar over the long term because of the less productivity, alongside a great amount of money printing. Right now, you are right that just recently gold has taken a bit of a hit. You are a late coming or later in life ‘gold bug.’ Can you explain how you think this actually leads to you being bullish for gold and how you think it could be the end of the U.S. dollar as the reserve currency.

Dr. Stephen Leeb, Ph.D.

Right, this is either part of an end game, China and the U.S. have come to some form of agreement as to how this will take place. How we will gravitate into another currency in which the dollar does not have complete say over everything. A very high dollar does not do us a whole lot of good at this particular point. The last thing we need is to be able to import a lot of stuff, it’s not a particularly good thing for America. It may check gold and it may slow down the increase in commodities. It just won’t work, if commodities are in short supply and we are growing- it’s going to be very serious and commodities are going to be in even shorter supply if we have less oil. It’s going to be self-defeating, eventually. In regard to what I said earlier, it makes sense that there is some sort of end game where people have governments work out a solution behind closed doors. Or if it’s not an end game, it could very easily be a road to game over with real existential consequences. 

The way it’s conceived today, the only kind of climate change would be if the sun exploded. Let me just put it this way- I’ve always been in favor of renewable energy because I’ve always predicted commodities are growing increasingly scarce. Before fossil fuels become scarce, we better develop renewable energies before we run out. And fracking is highly energy intensive so we must preemptively develop renewable energies. And fracking threw that off. It created excess oil and that was the last thing that we needed. Oil was mispriced and we weren’t using it for the right reasons, which was to create renewable energies and now we have less oil on this planet. If we run out of fossil fuel, which is by far our major energy shortage, we run short of everything that you can think of that makes life possible. That includes food, drinking water, ect. That’s exactly where we’re going with these policies to stop producing oil when oil demand is going to be rising very rapidly. Using oil for no other reason than developing renewable energies but also for growing the developing world, which is finally starting to grow and it’s going faster than the developed world. So, you get these two things and again you’re creating policies that will short-circuit one element that is totally necessary for the success of these policies. That is desperation but it’s desperation motivated by political factors not economic factors. 

And why is this so dangerous? The United States is a country which is on a political tightrope and climate change has become an expression of secular religion filled with its own causes. If you’re not in favor of climate change, you’re some sort of roaring conservative nut. Basically, that’s what happened when the book ‘Unsettled’ opened this whole calculus around climate change being a gospel that you had to believe in. Collectively, we can deal with climate change and the chances of it working out as they say it’ll work out, according to these models is virtually nil.

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