Russian oil embargo offers mixed results for sustainability’s future

{"version":"0.3.0","atoms":[],"cards":[],"markups":[["em"],["a",["href","https:\/\/www.aia.org\/articles\/6468882-recovery-in-building-construction-projecte","target","_new"]],["i"],["strong"],["a",["href","http:\/\/www.teamthreellc.com\/"]],["a",["href","http:\/\/www.williamrichards.net\/"]]],"sections":[[1,"h2",[[0,[],0,"Reading between the trend lines with AIA\u0027s chief economist"]]],[1,"p",[[0,[0],0,"As AIA "],[0,[1],1,"projects"],[0,[],1," a recovery in building construction to continue into 2023,"],[0,[],0," "],[0,[2],1,"most businesses\nright now have undoubtedly noticed a jump in prices\u2014notably on gasoline\u2014sparked\nby a U.S.-led embargo of Russian oil. Most architecture and construction firms\nhave also noticed it in the cost of transportation in an already vexed supply\nchain. But, according to AIA\u2019s Chief Economist Kermit Baker, Hon. AIA, the\nconcern bigger than oil is still rising inflation and rising interest rates.\n\u201cThat\u2019s going to have a\nmuch bigger impact on the supply chain in the long run,\u201d he says, \u201cjust as it\nwas before the Russian invasion of Ukraine.\u201d"]]],[1,"p",[[0,[3],1,"We were on the path of\nneeding to act against inflation even before Russia\u2019s invasion of Ukraine\u2014so\nnow that we have an oil embargo, has that exacerbated or accelerated the\nsituation? "]]],[1,"p",[[0,[],0,"Prices have spiked and\nprices are volatile, and it\u2019s difficult to plan when you don\u2019t know what the situation\nwill be day to day moving forward. The embargo on Russian oil and higher\noil prices on the international market filters through the entire economy,\nwhether you\u2019re talking about fertilizers, transportation, or just the price at\nthe gas pump down the street. We\u2019re seeing the Federal Reserve Board become\nmuch more what I\u2019d call hawkish in terms of what an interest rate hike looks\nlike to tamp down inflation. After all that plays out, we\u2019re going to see a\nslowdown in the economy, and many say these oil prices will lead to an economic\nrecession in the U.S., in large part because of the Fed\u2019s response\u2014to raise\ninterest rates, which slows down economic activity, thereby affecting firms\nacross the board."]]],[1,"p",[[0,[3],1,"When the price per\nbarrel peaks above $100, as it has with alarming frequency since the early 1970s,\nis it worth thinking about where we fall in the last 50 years of volatility?"],[0,[],0," "]]],[1,"p",[[0,[],0,"What we had in the 1970s\nwas an oil-producing cartel limiting supply. What we have now is not any one\nentity limiting supply but a lot of uncertainty in terms of who will buy it and\nhow much. The net effect on demand because of Russia\u2019s invasion could be modest\nin the end, or it could be grave. But one thing is certain: There are a lot of\ndimensions to oil. For instance, the spike in its price we saw a couple of\nweeks ago seemed to be because of some pandemic weakness in China, which is\nanother aspect to the discussion and nothing to do with Russia. Now that we are\nin this post-embargo situation, however, Russia has made things a lot more\ncomplicated as we try to manage our expectations around the global supply chain\nin the third full year of a pandemic. "]]],[1,"p",[[0,[3],1,"What is this embargo on\nRussian oil going to do for sustainability and carbon neutrality goals?"]]],[1,"p",[[0,[],0,"I think what we have are\ntwo very strong competing forces at play in terms of the impact this oil\nembargo will have on sustainability. The net positive for sustainability is\nthat with oil and natural gas more expensive, people will use less of it\u2014and\nthere will be a lot more attention to efficiencies and energy use. We\u2019ll see a\ndecline in the purchase of gas-guzzling cars and trucks. Related to that is the\npromise that green energy alternatives and renewables that were once at a financial\ndisadvantage are now looking attractive. How many people will be more serious\nabout electric vehicles now? I think a lot."]]],[1,"p",[[0,[],0,"As strong as the net\npositive, and maybe even stronger, is the negative aspect of this embargo: The\nU.S.\u2019s general reliance on foreign energy sources will increase the \u201cDrill,\nbaby, drill\u201d sentiment and prompt more people to ask, \u201cWhat\u2019s wrong with mining\nmore coal?\u201d and \u201cWhy can\u2019t we open up more oil and gas exploration?\u201d The\nenvironmental impacts of these activities are well-documented, so I won\u2019t go into them,\nbut looking for domestic\u2014or at least nearby---sources of oil and gas will be\nthe countervailing force and proverbial other side of the double-edged sword. "]]],[1,"p",[[0,[3],1,"If I\u2019m a firm owner,\nwhat am I supposed to do? "]]],[1,"p",[[0,[],0,"I think keeping their\nears open to market trends and listening to what owners are thinking is the\nonly thing architects can do right now. This oil embargo is a speed bump in the\nlong road for greater sustainability in the design and construction of\nbuildings of all sizes. It\u2019s still a bump and one worth thinking about from the\nperspective of the people paying for our buildings. It\u2019s a tough one because of\nall the uncertainty, number one, but, number two, because each firm has its own\nbusiness strategy keyed to local factors. I\u2019m guessing there are some clients\nthat are going to be very reactive to higher energy costs\u2014and will want to do\nsomething differently right away. "]]],[1,"p",[[0,[3],1,"What does the client\nlandscape look like beyond the speed bump? Who is able to hold that long view\nthat\u2019s not as reactive?"],[0,[],0," "]]],[1,"p",[[0,[],0,"Some clients, though, will\nkeep looking at the longer view well beyond this oil embargo\u2019s volatility. The\ninstitutional market and the government and leading corporations have longer\nviews, and the Googles and the Apples of the world won\u2019t be as reactive as the\nlocal developer for a 25-acre mixed-use\nproject, for instance. As architects help their clients work through these issues,\nthey can be most helpful by modeling energy costs over the next six years or\nlonger, as well as the next six months, to get their clients thinking about\nthat long term. "]]],[1,"p",[[0,[2],1,"This\ninterview has been edited for length and clarity. William Richards the editorial\ndirector of "],[0,[4,2],2,"Team Three,"],[0,[2],1," an editorial and creative\nconsultancy, and a "],[0,[5,2],2,"writer"],[0,[2],1," whose most recent book, "],[0,[],0,"Bamboo Contemporary: Green\nHouses Around the Globe"],[0,[2],1," (Princeton Architectural Press), appears next month."]]]]}