Why Economics, Not Mandates, Will Define the Energy Transition
Dr Edward Libbey
The pace of change in global energy markets is now so rapid that many of the working assumptions of the last half century are being upended. To navigate this landscape, a new operating reality is evolving : one respecting economic fact rather than solely political mandate. The central challenge facing us is not a lack of energy, as physical availability is virtually unlimited, but its location and the economics of its delivery. Indeed, supply logistics can remain the Achilles’ Heel of both military and commercial success.
The Paradox of Fossil Fuel Abundance
We are entering an era of physical oil and natural gas oversupply, a reality that stands in stark contrast to the alarmist projections that dominated the market only a decade or two ago. While some major investment banks famously spoke of prices reaching as high as $380 in the wake of the Ukraine conflict, lower prices have since become the baseline. Brent is currently close to $60, and as oil demand peaks, prices are likely to remain subdued.
There is, however, a hard floor for oil prices, beginning at $40 and $45 per barrel, below which production in high-cost regions simply ceases to be viable. Venezuela is the definitive case in point. Rebuilding its industry could require investment between $50 billion and $250 billion. These figures, though broad estimates, likely have the right number of zeros, but the heavy oil reserves and extraction costs as well as political and social realities make the sector, as ExxonMobil’s Darren Woods noted recently, uninvestable. To suggest Venezuela can return to 4 million barrels per day any time soon is pure fiction.
The Age of Electricity and Structural Dysfunction
While we are entering what the IEA recently called the “Age of Electricity,” the transition is fraught with structural challenges. In the UK, electricity prices are among the highest in the developed world. Current policies often force one group of consumers, both homeowners and industries, to subsidise others, which is not sustainable economics.
The physical constraints are equally daunting. Billions of pounds are currently paid to wind power generators not to produce power because the grid infrastructure does not match where the demand is. Furthermore, the viability of Sustainable Aviation Fuel (SAF), Hydrogen, and biofuels is tethered to the price of oil and electricity. When fossil fuel prices remain low, and electricity prices high, these alternatives become commercially unaffordable for mass consumption. Economic reality is sinking in.
The Transition’s Economic Resistance
Scientific innovation is working, but it is hitting a wall of economic resistance. In the UK, electric vehicle (EV) registrations are failing to meet the projected mandates required for 2030, as price replaces range anxiety as the primary consumer constraint. In the US, Ford’s $19.5 billion write-off on its EV plans is a stark example of capital being destroyed rather than creating value. BP recently announced a similar $5 billion write off of recent renewable investments – some 5% of its stock market value.
The High Voltage Grid is also a major bottleneck. Living in East Anglia, I see mounting concern about prime arable land being turned over to solar farms, while others resist the overhead power lines required to bring North Sea wind power to London. We continue to see extensive house building without mandated solar panels, which should be installed during construction rather than as a costly retrofit though recent Government initiatives should stop this in the future.
A New Strategic Threat: Rare Earths
The Lanthanides, or Rare Earths, were once elemental curiosities. As an inorganic chemist by training, I recall my university textbook devoting only 15 pages out of 1150 to them; today, modern life cannot function without them.
The 1973 oil price hike was driven by over-dependence on a few countries. With Rare Earths, that concentration is worse. Refined capacity for some elements is 70 to 90% concentrated in a single country. This concentration has severe implications for everything from consumer electronics to military readiness. China could solve our children's iPad addiction overnight, but the impact on our modern infrastructure would be severe.
Conclusion: Facing Reality over Illusions
Political considerations often trump energy realities. The idea that stable, home-grown energy will somehow be cheaper is, frankly, nonsense. We should continue to develop our UK oil and gas reserves as we will continue to need and use them for decades; better we collect the taxes than give them to the Saudis or Norwegians.
Sustainable change occurs best when the economics work. Mandating change that is fundamentally uneconomic is unsustainable, but when the economics align, change takes off like a rocket. We should move forward with the optimism that has defined the last half century of innovation, but we cannot be lemmings. We must face our climate challenges with economic reality, not illusions and mandates.
February 2026