The decision that set us back a century and how it will be reversed this year

We didn’t run out of stone in the Stone Age, bronze in the Bronze Age, iron in the Iron Age, gold in the Golden Age or coal during the Industrial Revolution. Instead, the material that defined the age was gradually supplanted by a better option.

And that new option redefined the world each time, beginning a new age. Ships that weren’t possible became possible. Industries that hadn’t existed boomed. Commodities that were worthless became crucial. And the nations which led the charge – those that were the most open about adapting to a changing world – dominated others.

One such change was the adoption of oil as fuel. And the crucial moment in the process is still famous.

A young Winston Churchill put it like this: “To commit the Navy irrevocably to oil was indeed to ‘take arms against a sea of troubles.’” The thing is, the Royal Navy sort of thrives on trouble – its very purpose, you might say. And it was Churchill who convinced the Admiralty to make the move to oil.

Cue a lot of subsequent history featuring oil, the Royal Navy and just about everything else that has happened since. Boaz Shoshan is exploring exactly what occurred over at Capital & Conflict. I’ll let Churchill sum up Boaz’s editorial: “Mastery itself was the prize of the venture.”

Which sounds good. And it was for Britain, for a while. But the Suez Crisis reversed which way that mastery flowed.

Today, our world looks the way it does because of oil, as we dug into in past Exponential Investors. And oil certainly has been a boon as well as a boom.

But what if it was all a mistake? What if the world should’ve been running on a completely different fuel all this time? A fuel that doesn’t come with a sea of troubles and involves a lot less mastery of anyone else.

That’s what I’ll argue today.

Churchill’s decision was a false dichotomy. A choice between less-than-perfect Welsh coal or explosive Iranian oil. Which should the Royal Navy run on?

He chose oil. As he should have, given the choice between the two. But what if he got the options to choose from wrong?

About half a lifetime earlier, another fuel was promising what oil would eventually deliver. The difference? It’s a climate change warrior’s wet dream – it emits only water and electricity.

Thanks to a letter from the Welsh scientist who discovered the new power, we know a lot about how the discovery was made. But that’s another story.

Shortly after this power was invented, a German born engineer used it to power a boat on the Russian Neva River in St Petersburg. The American telegraph industry also used it extensively.

The grand plan of the scientists at the forefront of the tech was to replace steam power. They envisioned a future where pipelines and giant tanks would provide the power source we needed to produce the electricity we wanted. As the Welshman who discovered its ability to generate power put it:

… we could realise as electricity the whole of the chemical force which is active in the combustion of cheap and abundant raw materials… we should obtain one of the greatest practical desiderata, and have at our command a mechanical power in every respect superior in its applicability to the steam-engine.

The world we live in today – with its myriad of uses of electricity – was dreamed up by those who planned to use their newly discovered fuel to generate that electricity. In that sense, their vision came true. But, ironically enough, it was burning coal to generate steam to generate power which provided that electricity in the end. Cruel, isn’t it? 

Not that everything does run on electricity today. Not yet. Oil is the other key source of power – the one which the Welsh scientists’ discovery really should’ve claimed for itself because of how similar it is to oil. And that is where we get back to Churchill’s Greatest Mistake.

It was the discovery of oil’s uses and its cheap cost which truly spoiled the party which the scientists had envisioned decades earlier. And Winston Churchill took us down a century-long blind alley as a result.

This sort of momentous decision has happened many times in history. Tesla vs Edison during the Current Wars. Tesla’s AC won, although direct current is making a secret comeback. Thorium nuclear power versus uranium was even more similar. Although thorium is far superior for generating power, it has no weapons potential, so uranium was chosen by the US government instead.

Am I suggesting that Churchill should’ve chosen to power the Royal Navy with the promising power source I’m on about instead of oil?

Not really. More that Churchill’s decision was the rather large pebble that changed the course of the river of history. Without that decision, we may have chosen what the Welsh scientist had discovered and the German-born engineer had used to power a boat decades before Churchill made his choice for the Royal Navy.

Our world would’ve looked very different today. How? It’s a fun thought to ponder. But you may not have to.

In coming days, a Southbank Investment Research presentation will reveal how Churchill’s decision will finally be reversed. The future will once again belong to the fuel which should’ve dominated the last 100 years, as its inventors imagined so long ago.

On the one hand, you’ll barely notice a change around you. On the other hand, it could transform Britain and your bank balance.

And the climate change warriors of the Earth could find themselves aimless and unemployed.

Until next time,

Nick Hubble
Editor, Southbank Investment Research

Category: Energy

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