This article is authored by MOI Global instructor Daniel Gladiš, Director at Vltava Fund, based in the Czech Republic.

Which is the poorest country you have ever visited? For myself, I would probably nominate Lesotho and some remote parts of Tibet. Why do I ask? Because I think that recalling how poor people live in many places on the planet will give you a better understanding of what I want to write about here.

Let’s start by looking at the 20 most populous countries in the world. Nothing surprises us in this ranking. First is China (1.4 billion inhabitants), followed by India (1.4 billion), the USA (336 million), Indonesia, Pakistan and so on down to Thailand in 20th place with its 70 million inhabitants. Interestingly, however, is that only 3 of these 20 countries can be described as rich. They are the USA, Japan, and Germany. The other 17 are designated middle- or lower-income countries. Indeed, only a relatively small proportion of the world’s population lives in rich countries. The majority of people are middle-rich or poor.

The differences between countries become even more pronounced when we look at their energy consumption. Among the large countries, the USA ranks first with annual per capita energy consumption of 295 GJ. Japan and the EU each have annual per capita consumption of about 150 GJ, China 90 GJ, Brazil 60 GJ, India 20 GJ, Nigeria 5 GJ, and Ethiopia, for example, 2 GJ. Nigeria, which has almost twice the population of Japan, annually consumes only 6% of the energy that Japan does. There is a rather close correlation between countries’ wealth and their per capita energy consumption. This is a fairly intuitive and unsurprising conclusion.

But now imagine that people in poorer countries have the ambition and desire to live more comfortable, richer, and better lives. These ambitions are quite natural, and we, as people living in what can be considered a rich country, must be rooting for them. The successful fulfilment of these ambitions, however, will entail significant growth in energy consumption. If China managed to reach the same standard of living as we have in the EU, and if Chinese per capita energy consumption rose to the same level, this additional consumption would itself equal the entirety of energy use in the United States today. If, for example, India wanted to catch up with middle-income Brazil in standard of living, that would represent additional energy consumption equal to all energy consumed in the EU today.

Producing this additional energy will not be at all easy. The world is already facing a deficiency. It is estimated that some 600 million people have no access to electricity at all, and around 3 billion people suffer from chronic shortages of all types of energy, not just electricity. These 3 billion people live at a relatively primitive level in terms of energy consumption, with energy consumption per capita equivalent to that of Germany and France in 1860. The whole situation is further complicated by global demographic trends. Over the next few decades, perhaps as many as 80% of all births will occur in Africa, which is by far the poorest continent and with the lowest current energy consumption.

So, the reality is that the world is suffering from chronic energy shortage. Future energy demand will be most affected by rising living standards in the poorer two-thirds of the world. Growing demand is likely to be met by an inability for supply to keep up, by inadequate infrastructure, and by the fact that energy resources are not evenly distributed across the planet. Some parts of the world, such as Canada, the USA, and Australia, have a surplus of energy resources, while others, especially large parts of Africa and Asia, have a shortage.

If you look at a graph where the x-axis shows GDP per capita in particular countries and the y-axis represents energy consumption per capita in the same countries, then you can easily see that there is a very close direct relationship between the two. The individual countries form a nice band in the graph going from the bottom left to the top right. The richer the country, the greater the energy consumption. At the beginning of the band will be poor countries such as Sierra Leone, Somalia or Burundi, somewhere in the middle will be middle-income countries such as Indonesia, Brazil or Iran, and then at the end will be the richest countries such as Norway. Moreover, the graph will clearly show that there exists no rich country with low energy consumption.

You may be thinking that there is nothing startling about this. The richer a country is, the more energy it can afford to consume. The close relationship between wealth and energy consumption is not really surprising. But what if the causality is the other way around? What if countries do not consume more energy because they are richer but that they are richer because they have more energy at their disposal? If we look back at the development of civilisation and the growth of its wealth, we find that this accelerated significantly sometime after 1800. This was primarily because new and cheaper sources of energy began to appear, and also because they became available to a deeper stratum of the population. This would confirm the notion that the basis for the growth of wealth in society, and the basis for human development in general, is the widespread and common availability of low-cost energy. If we are to give the poor two-thirds of the world’s population any hope of gradually approaching our standard of living, then the world needs every bit of energy it can produce.

The rich world’s current drive to rapidly replace fossil fuels with renewable energy sources can thus succeed only if the living standards of rich countries are lowered and if poor countries are denied their aspirations for a better life. We who live in rich countries can afford to lower our high standard of living if we want to, but indirectly forcing poor countries to remain poor seems to me immoral and selfish. After all, the world is not just California and Germany, but, above all, two-thirds of its poor population. And that population suffers from a lack of the infrastructure necessary for its further development.

Václav Smil, a Czech scientist living in Canada and one of the world’s leading generalists, who studies, among other fields, those of energy, the environment, and population development, says that world civilisation rests on four basic pillars. These are not artificial intelligence, nanotechnology, instant messaging, or talk of colonising Mars. They are, quite prosaically, ammonia, cement, steel, and plastics. These have several things in common. The world cannot do without them, there are no adequate substitutes for them, their production is extraordinarily energy intensive, and they cannot be produced without using fossil fuels. This is simply the reality. It is common for the rich West, which has become accustomed to a life of affluence, to be completely unaware as to the needs of the poor majority of the world, or even to ignore them quite deliberately. It is difficult for many of us to imagine that the main problems for a large part of the world’s population are things like poverty, poor nutrition, malaria, tuberculosis, inadequate education, lack of health care, medicines, and childhood vaccinations, and so forth. Things we long ago forgot that can even exist.

To improve life in the poorer two-thirds of the planet, a lot of investment will be needed, including investment into infrastructure and investment into the supply side of energy production. This will not be possible without the use of fossil fuels. Yet, particularly in the rich countries, we are seeing political pressure to discontinue their production. Companies in extractive industries and their managers are being shamed, they are being presented as the very embodiment of evil and, in some cases, even the companies’ own shareholders are pushing for production cuts. Banks refuse to finance them and insurance companies refuse to insure them. Investors are forced, in various direct and indirect forms, not to invest in their shares.

The plain fact is that none of us can survive even a single day without using fossil fuels and their products. Among other things, it is estimated that without the existence of fertilisers (the main raw material for the production of which is natural gas), the planet would not be able to feed more than 4 billion people. Unfortunately, fossil fuels are essential to life, and they do not, and will not in the foreseeable future, have a suitable replacement. Therefore, massive investment into fossil fuel extraction will be needed to meet the needs of the world, and especially its poorer two-thirds. This is the conclusion I have come to by observing how the world works. It says nothing about what I think about it, what I like or dislike, or what I wish or imagine. In fact, such subjective considerations are altogether irrelevant to investing. Investing is not based on what one wishes would happen, but on what one thinks will happen. These are for the most part two very different things.

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