Category Archives: fossil fuels

Oil unlikely to ever be fully exploited because of climate concerns, says BP

The Guardian reports: The world’s oil resources are unlikely to ever be fully exploited, BP has admitted, due to international concern about climate change.

The statement, by the group’s chief economist, is the clearest acknowledgement yet by a major fossil fuel company that some coal, oil and gas will have to remain in the ground if dangerous global warming is to be avoided.

“Oil is not likely to be exhausted,” said Spencer Dale in a speech in London. Dale, who chief economist at the Bank of England until 2014, said: “What has changed in recent years is the growing recognition [of] concerns about carbon emissions and climate change.”

Scientists have warned that most existing fossil fuel reserves must stay in the ground to avoid catastrophic global warming and Dale accepted this explicitly. [Continue reading…]

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After eight futile years, Shell has given up drilling for oil in the Arctic

Quartz reports: After eight years and $7 billion of work, including some humiliating seafaring blunders and the black eye of the environmental spotlight, Shell has abandoned a high-stakes effort to find oil in the Arctic sea near Alaska.

The oil giant appears to have decided that, while global warming is melting a lot of northern ice, thus potentially opening up huge oil reserves, the Arctic is still an extraordinarily tough, risky, and expensive place to work.

The drilling effort in the Chukchi Sea may mark a close to an Arctic oil fever ignited in 2008, when the US Geological Survey issued a report saying that some 13% of the world’s remaining oil lay in the north — perhaps as much as 90 billion barrels of oil. Given that a 1-billion-barrel field is known as a supergiant, and that oil prices at the time were closing in on $100 a barrel, oil companies drooled over the prospects. Climate change even seemed to be co-operating, making the northern sea routes passable to drilling vessels and supply ships. [Continue reading…]

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For decades, Exxon has understood the role of fossil fuels in climate change

InsideClimate News reports: At a meeting in Exxon Corporation’s headquarters, a senior company scientist named James F. Black addressed an audience of powerful oilmen. Speaking without a text as he flipped through detailed slides, Black delivered a sobering message: carbon dioxide from the world’s use of fossil fuels would warm the planet and could eventually endanger humanity.

“In the first place, there is general scientific agreement that the most likely manner in which mankind is influencing the global climate is through carbon dioxide release from the burning of fossil fuels,” Black told Exxon’s Management Committee, according to a written version he recorded later.

It was July 1977 when Exxon’s leaders received this blunt assessment, well before most of the world had heard of the looming climate crisis.

A year later, Black, a top technical expert in Exxon’s Research & Engineering division, took an updated version of his presentation to a broader audience. He warned Exxon scientists and managers that independent researchers estimated a doubling of the carbon dioxide (CO2) concentration in the atmosphere would increase average global temperatures by 2 to 3 degrees Celsius (4 to 5 degrees Fahrenheit), and as much as 10 degrees Celsius (18 degrees Fahrenheit) at the poles. Rainfall might get heavier in some regions, and other places might turn to desert.

“Some countries would benefit but others would have their agricultural output reduced or destroyed,” Black said, in the written summary of his 1978 talk.

His presentations reflected uncertainty running through scientific circles about the details of climate change, such as the role the oceans played in absorbing emissions. Still, Black estimated quick action was needed. “Present thinking,” he wrote in the 1978 summary, “holds that man has a time window of five to ten years before the need for hard decisions regarding changes in energy strategies might become critical.”

Exxon responded swiftly. Within months the company launched its own extraordinary research into carbon dioxide from fossil fuels and its impact on the earth. Exxon’s ambitious program included both empirical CO2 sampling and rigorous climate modeling. It assembled a brain trust that would spend more than a decade deepening the company’s understanding of an environmental problem that posed an existential threat to the oil business.

Then, toward the end of the 1980s, Exxon curtailed its carbon dioxide research. In the decades that followed, Exxon worked instead at the forefront of climate denial. It put its muscle behind efforts to manufacture doubt about the reality of global warming its own scientists had once confirmed. It lobbied to block federal and international action to control greenhouse gas emissions. It helped to erect a vast edifice of misinformation that stands to this day. [Continue reading…]

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Why I oppose Keystone XL

Hillary Clinton writes: When I was secretary of state, the department began reviewing an application to build a pipeline that would bring Canadian oil sands crude across the border, run more than a thousand miles through the American heartland, and terminate in Nebraska  —  Keystone XL.

As the secretary who initiated the review, I refrained from commenting on the pipeline after I left the federal government. I didn’t want to get ahead of President Obama while the process was still underway — — because the decision was and is his to make.

Since the application was filed, the effects of climate change have grown more acute. More than 8 million acres have burned in the United States so far this wildfire season. California is in the fourth year of a historic drought scientists say has been made worse by climate change. More severe storms and extreme heat waves have wreaked havoc around the world. [Continue reading…]

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Edelman ends work with coal producers and climate change deniers

The Guardian reports: The world’s biggest public relations company has decided it will no longer work with coal producers and climate change deniers.

Edelman said it believes such clients pose a threat to the company’s legitimacy and its bottom line.

The exclusion of coal and climate denial, as well as fake front groups that oppose action on global warming, is outlined in internal communications obtained by the Guardian and confirmed by company executives. It signals an important shift in a company that reported earnings of $833m (£540m) and has played a critical role in shaping public opinion in the US and globally about climate change.

The new approach follows a two-year review of Edelman’s operations aimed at protecting what the company calls its “licence to lead”, following negative publicity about its work on behalf of the oil lobby and pipeline companies.

The conclusion was that coal producers and climate denial, as well as tactics such as greenwashing, were high-risk. [Continue reading…]

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Thomas Edison was right about solar power

Truthout: Famed inventor Thomas Edison brought us electric lights, phonographs, movies and even the first research and development laboratory.

But in 1931, he also was one of the first promoters of renewable energy – especially solar.

That year, he described our approach to energy to two industry magnates of the day: Henry Ford and Harvey Firestone.

He told them, “We are like tenant farmers chopping down the fence around our house for fuel when we should be using nature’s inexhaustible sources of energy – sun, wind and tide.”

That was more than 80 years ago and we’re still living the same way.

In 2014, just over 13 percent of US electricity production came from renewables in some form or another.

That’s not terrible, but it means that we’re still getting nearly 90 percent of our electricity production from “chopping down the fence around our house for fuel.” [Continue reading…]

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UK backs bid by fossil fuel firms to kill new EU fracking controls, letters reveal

The Guardian reports: The UK government has added its weight to a behind-the-scenes lobbying drive by oil and gas firms including BP, Chevron, Shell and ExxonMobil to persuade EU leaders to scrap a series of environmental safety measures for fracking, according to leaked letters seen by the Guardian.

The deregulatory push against safety measures, which could include the monitoring of on-site methane leaks and capture of gases and volatile compounds that might otherwise be vented, appears to go against assurances from David Cameron that fracking would only be safe “if properly regulated”.

In a comment piece in 2013 the prime minister wrote: “We must make the case that fracking is safe … the regulatory system in this country is one of the most stringent in the world.”

But UK government sources say that any new form of industry controls would be “an unnecessary restriction on the UK oil and gas industry”. [Continue reading…]

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Blair, Gaza and all that gas

David Hearst writes: Of all the bizarre encounters the Palestinian conflict has generated, Tony Blair’s four meetings in Doha with Khaled Meshaal, the Hamas leader must surely rank as one of the oddest.

Here was the Quartet’s Middle East envoy breaking the Quartet’s own rules about talking to Hamas until it recognises Israel – rules that Blair and Jack Straw , enforced as prime minister and foreign secretary by pressing the EU to declare Hamas a terrorist organisation. Two of the four meetings were held before Blair resigned as envoy.

Here was Blair, the man linked in mind, body, and soul to the military coup in Egypt (he said the army intervened ” at the will of the people” to bring democracy to Egypt) attempting to mediate between Hamas, Israel and Egypt – the two countries that have kept a stranglehold around Gaza’s neck. The Egyptian leader has been an even more zealous enforcer of the blockade than Netanyahu is.

In a British context, Blair’s dialogue with Hamas took place as his supporters accused the far left candidate in the Labour leadership race Jeremy Corbyn of making Labour unelectable if he became leader. Corbyn had advocated talks with Hamas and Hezbollah – a crime of which the man who won power three times was a repeat offender.

Blair did not just talk to Meshaal. He invited him to London, offering him a specific date in June, on which the current prime minister David Cameron must have agreed. This is the same prime minister who has strived and failed, so far, to publish a report branding the Muslim Brotherhood presence in Britain as extremist. Bizarre.

And yet Blair kept going, even after the existence of the talks was revealed by the Middle East Eye, In the last few days he has still been pushing the deal in Cairo. Why?

His motivation is not obvious. It is surely not out any belated humanitarian concern for 1.8m Gazans. As prime minister and peace envoy, Blair has provided Israel with valuable international cover for one operation in Gaza after another. [Continue reading…]

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Wind power sets records as countries seek climate fixes

National Geographic reports: As global climate efforts intensify this year, a renewable power source is setting new records. Wind’s costs are plummeting in the United States, and offshore farms are soaring in Europe — at least for now.

Worldwide, wind power expanded more last year than ever before, and new reports show it’s continuing to gain ground. Since it emits no heat-trapping carbon dioxide, wind will be a key tool for countries crafting a new UN-led climate accord this December in Paris.

Europe’s offshore wind farms are producing record amounts of power. They tripled capacity in the first six months of this year compared to the same period of 2014, owing largely to “explosive growth in Germany and the use of higher capacity wind turbines,” according to a recent report by European Wind Energy Association, an industry group.

In the U.S., wind now provides 5 percent of the nation’s electricity, the Department of Energy reported this week. It can produce 66 gigawatts (a gigawatt is a billion watts), enough to power 17.5 million homes. American companies are also joining the move off land. This year, near the coast of Rhode Island, the first U.S. offshore wind farm broke ground. [Continue reading…]

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Nine out of ten seabirds have plastic waste trapped in their guts

The New York Times reports: Seabirds like albatross, petrels and penguins face a growing threat from plastic waste in parts of the Pacific, Atlantic, Indian and Southern Oceans, according to a new study published on Monday.

Brightly colored floating bits – debris that includes items such as discarded flip-flops, water bottles and popped balloons – often attract seabirds, which confuse them for food like krill or shrimp. Many die from swallowing the plastic.

The problem received some national attention in 2013 with the documentary “Midway,” which showed a remote island in the Pacific covered in corpses of baby albatross. Their exposed innards revealed lighters, bottle caps and toothbrushes mistakenly fed to them by their parents.

The number of incidents like these is rapidly increasing, according to the new study in Proceedings of the National Academy of Sciences.

Researchers from Australia and Britain analyzed a number of papers from 1962 to 2012 that had surveyed 135 seabirds. The team found that fewer than 10 percent of seabirds had traces of plastic in their stomachs during the 1970s and 1980s. They estimated that today that number has increased to about 90 percent of seabirds. And they predict that 99 percent of all seabirds will swallow plastic in 2050. [Continue reading…]

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Hawaii’s governor dumps oil and gas in favor of 100 percent renewables

Juan Cole reports: At the Asia Pacific Resilience Innovation Summit held in Honolulu, Hawaii, this week, Governor David Ige dropped a bombshell. His administration will not use natural gas to replace the state’s petroleum-fueled electricity plants, but will make a full-court press toward 100 percent renewables by 2045. Ige’s decisive and ambitious energy vision is making Hawaii into the world’s most important laboratory for humankind’s fight against climate change. He has, in addition, attracted an unlikely and enthusiastic partner in his embrace of green energy—the US military.

Ige said Monday that LNG (liquefied natural gas) will not save the state money over time, given the plummeting prices of renewables. Moreover, “it is a fossil fuel,” i.e., it emits dangerous greenhouse gases. He explained that local jurisdictions in Hawaii are putting up a fight against natural gas, making permitting difficult. Finally, any money put into retooling electric plants so as to run on gas, he said, is money that would better be invested in the transition to green energy.

Ige, trained as an electrical engineer, is leading his state in the most ambitious clean-energy program in the United States. On June 8, he signed into law a bill calling for Hawaii’s electricity to be entirely generated from renewables in only 30 years. He also directed that the University of Hawaii be net carbon zero in just 20 years. [Continue reading…]

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Oil shock: Fears of unrest in petro economies as oil prices drop

The New York Times reports: While the price has been declining for months, forecasts have always been hedged with the assumption that oil would eventually stabilize or at least not stay low for long. But new anxieties about frailties in China, the world’s most voracious consumer of energy, have raised fears that the price of oil, now 30 percent lower than it was just a few months ago, could remain depressed far longer than even the most pessimistic projections, and do even deeper damage to oil exporters.

“The pain is very hard for these countries,” said René G. Ortiz, former secretary general of the Organization of Petroleum Exporting Countries and former energy minister of Ecuador. “These countries dreamed that these low prices would be very temporary.”

Mr. Ortiz estimated that all major oil exporting countries had lost a total of $1 trillion in oil sales because of the price decline over the last year.

“The apparent weakness in the Chinese economy is radiating out into the world,” said Daniel Yergin, the vice chairman of IHS, a leading provider of market information, and the author of two seminal books on the history of the oil industry, “The Prize” and “The Quest.”

“An awful lot of producers who enjoyed good times were more dependent on Chinese economic growth than they recognized,” Mr. Yergin said. “This is an oil shock.”

Although the price drop has most directly hurt oil exporters, it also may signal a new period of global economic fragility that could hurt all countries — an anxiety that already has been evident in the gyrating stock markets.

The price drop also has become an indirect element in the course of Syria’s civil war and other points of global tension. Countries that once could use their oil wealth as leverage, like Russia, Iran and Saudi Arabia, may no longer have as much influence, some political analysts said. Iran, which once asserted it could withstand the antinuclear embargo of its oil by the West, appeared to have rethought that calculation in reaching an agreement on its nuclear activities last month. [Continue reading…]

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Laura Gottesdiener: The king is dead!

On August 5th, West Virginia Attorney General Patrick Morrisey banded together with 15 other state attorneys general to demand that the Environmental Protection Agency (EPA) suspend the implementation of new rules devised by the Obama administration to slow the pace of climate change.  The regulations, announced just two days earlier, sought to reduce power plant emissions of carbon dioxide — a major cause of global warming — by 32% from 2005 levels by 2030.  Because the rules are likely to fall most heavily on coal-fired power plants, which emit more carbon than other forms of electricity generation, states that produce and burn coal (mostly led by Republicans) are adamantly opposed to them. Because West Virginia is especially dependent on coal production, it has been selected by Republican leaders and industry lobbyists to lead the charge against the new rules.

“These regulations, if allowed to proceed, will do serious harm to West Virginia and the U.S. economy,” Morrisey said. “That is why we are taking quick action to bring this process to a halt.”

Although pleading the case for West Virginia, which has suffered a sharp rise in unemployment due to the closing of many of its coal mines, Morrisey is clearly acting as the mouthpiece for a larger alliance of coal producers, power utilities, and Republican strategists who seek to sabotage any progress on climate change.  As the New York Times revealed recently, this alliance (don’t call it a conspiracy!) originated at a meeting of some 30 corporate lawyers, coal lobbyists, and Republican strategists at the headquarters of the U.S. Chamber of Commerce in Washington last year.

“By the time Mr. Obama announced the regulations at the White House on [Aug. 3rd],” theTimes reported, “the small group that had begun its work at the Chamber of Commerce had expanded into a vast network of lawyers and lobbyists ranging from state capitols to Capitol Hill, aided by Republican governors and congressional leaders.  And their plan was to challenge Mr. Obama at every opportunity and take the fight against what, if enacted, would be one of his signature accomplishments to the Supreme Court.”

This process gained further momentum on August 13th, when Morrisey and 14 other state attorneys general petitioned a federal court in Washington to block action on the EPA rules, in the first of several expected legal challenges to the Obama administration measure.

As Laura Gottesdiener demonstrates so graphically in today’s post, many West Virginians are indeed suffering from the decline of the coal industry.  But if they allow themselves to be used as pawns in a struggle by King Coal, corporate lobbyists, and Republican hard-liners to fight progress on climate change, they are doing themselves (and the rest of us) an enormous disservice.  Nothing can save the coal industry in the face of market forces — especially the boom in natural gas extracted from shale deposits via fracking — and the relentless advance of climate change.  If Morrisey and his cohorts had West Virginia’s true interests at heart, they would be petitioning for federal funds to turn the state into an innovation center for clean energy — the only sure path to economic growth in a climate-ravaged world.  In the meantime, let TomDispatch regular Gottesdiener take you on a tour of what’s left of King Coal’s once mighty domain. Michael Klare

Coal dethroned 
In Appalachia, the coal industry is in collapse, but the mountains aren’t coming back 
By Laura Gottesdiener

In Appalachia, explosions have leveled the mountain tops into perfect race tracks for Ryan Hensley’s all-terrain vehicle (ATV). At least, that’s how the 14-year-old sees the barren expanses of dirt that stretch for miles atop the hills surrounding his home in the former coal town of Whitesville, West Virginia.

“They’re going to blast that one next,” he says, pointing to a peak in the distance. He’s referring to a process known as “mountain-top removal,” in which coal companies use explosives to blast away hundreds of feet of rock in order to unearth underground seams of coal.

“And then it’ll be just blank space,” he adds. “Like the Taylor Swift song.”

Skinny and shirtless, Hensley looks no more than 11 or 12. His ribs and collarbones protrude from his taut skin. Dipping tobacco is tucked into his right cheek. He has a head of cropped blond curls that jog some memory of mine, but I can’t quite figure out what it is. He’s pointing at a peak named Coal River Mountain. These days, though, it’s known to activists here as “the Last Mountain,” as it’s the only ridgeline in this area that’s still largely intact.

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Arctic drilling approval threatens Obama’s climate legacy

InsideClimate News reports: The Obama administration’s final approval of Royal Dutch Shell’s drilling for oil in Alaska’s Chukchi Sea provoked an angry reaction on Monday from environmentalists who had come to consider President Obama a champion in the fight against climate change.

The decision comes two weeks after the release of the United States’ most aggressive attempt to limit greenhouse gas emissions, known as the Clean Power Plan, and just days after Obama announced he will visit Alaska later this month to highlight the impacts of climate change, which he recently referred to as “one of the greatest challenges we face this century.”

“I’m flummoxed,” said Jamie Henn, co-founder and director of strategy and communications of the green group 350.org. “Arctic drilling is so blatantly out of line with the President’s stated goals that the only possible explanations seem to be that he truly doesn’t understand the issue or that the White House is somehow convinced that the project won’t go forward.” [Continue reading…]

Mashable reports: The warmest year on record so far may have claimed another milestone, and this time it’s a big one.

According to preliminary data from NASA along with information from the Japan Meteorological Administration, July 2015 was the warmest month on record since instrument temperature records began in the late 1800s.

Research using other data, such as tree rings, ice cores and coral formations in the ocean, have shown that the Earth is now the warmest it has been since at least 4,000 years ago. [Continue reading…]

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Michael Klare: Big Oil in retreat

On July 14, 2011, at TomDispatch, Bill McKibben wrote that he and a few other “veteran environmentalists” had issued a call for activists to descend on the White House and “risk arrest to demand something simple and concrete from President Obama: that he refuse to grant a license for Keystone XL, a new pipeline from Alberta to the Gulf of Mexico that would vastly increase the flow of tar sands oil through the U.S., ensuring that the exploitation of Alberta’s tar sands will only increase.” It must have seemed like a long shot at the time, but McKibben urged the prospective demonstrators on, pointing out that “Alberta’s tar sands are the continent’s biggest carbon bomb,” especially “dirty” to produce and burn in terms of the release of carbon dioxide and so the heating of the planet.

Just over four years later, the president, whose administration recently green-lighted Shell to do test-drilling in the dangerous waters of the American Arctic, opened the South Atlantic to new energy exploration and drilling earlier this year, and oversaw the expansion of the fracking fields of the American West, has yet to make, or at least announce, a final decision on that pipeline. Can anyone doubt that, if there had been no demonstrations against it, if it hadn’t become a major issue for his “environmental base,” the Keystone XL would have been approved without a second thought years ago? Now, it may be too late for a variety of reasons.

The company that plans to build the pipeline, TransCanada Corporation, already fears the worst — a presidential rejection that indeed may soon be in the cards. After all, we’ve finally hit the “legacy” part of the Obama era. In the case of war, the president oversaw the escalation of the conflict in Afghanistan soon after taking office, sent in the bombers and drones, and a year ago plunged the country back into its third war in Iraq and first in Syria.  Only late in his second term has he finally overseen an initiative worthy of a less warlike legacy: the embattled Iran nuclear deal. Similarly, the man who headed an “all of the above” administration on energy policy in an era in which the U.S. became “Saudi America” has only now launched a legacy-shaping climate change initiative that could matter, aimed at cutting back carbon dioxide emissions from coal-powered plants. So maybe in this legacy era, the Keystone XL will be next to fall. Or maybe Obama will let his final year and a half play out without a decision on whether or not to build it and turn the issue over to Hillary Clinton, who refuses to commit on the matter, or one of 17 Republicans, all of whom would build a pipeline to anywhere carrying anything rather than enact a single climate change initiative, no matter how mild.

Another factor has, however, entered the picture.  As Michael Klare, TomDispatch’s resident energy expert and the author of The Race for What’s Left, explains, the dynamics of the energy industry may be changing in a way that could sink Canada’s vast tar sands enterprise in a sea of red ink.  If so, the tar sands industry, already hit hard by the plunge in oil prices last year, may face an even more rugged future.

“If you build it, he will come” is the classic tag line from the movie Field of Dreams. For the Keystone XL pipeline, however, that might someday have to be rewritten as: “If you build it, it won’t come.”  Even if built, it might prove to be a pipeline to nowhere. Let Klare explain why. Tom Engelhardt

Double-dip oil rout
Why an oil glut may lead to a new world of energy
By Michael T. Klare

The plunge of global oil prices began in June 2014, when benchmark Brent crude was selling at $114 per barrel. It hit bottom at $46 this January, a near-collapse widely viewed as a major but temporary calamity for the energy industry.  Such low prices were expected to force many high-cost operators, especially American shale oil producers, out of the market, while stoking fresh demand and so pushing those numbers back up again.  When Brent rose to $66 per barrel this May, many oil industry executives breathed a sigh of relief.  The worst was over.  The price had “reached a bottom” and it “doesn’t look like it is going back,” a senior Saudi official observed at the time.

Skip ahead three months and that springtime of optimism has evaporated.  Major producers continue to pump out record levels of crude and world demand remains essentially flat. The result: a global oil glut that is again driving prices toward the energy subbasement.  In the first week of August, Brent fell to $49, and West Texas Intermediate, the benchmark for U.S. crude, sank to $45. On top of last winter’s rout, this second round of price declines has played havoc with the profits of the major oil companies, put tens of thousands of people out of work, and obliterated billions of dollars of investments in future projects. While most oil-company executives continue to insist that a turnaround is sure to occur in the near future, some analysts are beginning to wonder if what’s underway doesn’t actually signal a fundamental transformation of the industry.

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California pension funds lose $5 billion on fossil fuels

San Francisco Chronicle reports: California’s huge public pension funds, CalPERS and the California State Teachers’ Retirement System, have lost more than $5 billion on their fossil fuel investments at a time when some legislators are urging the funds to dump their coal company stocks.

An analysis from the environmental group 350.org found that the two pension funds lost $5.2 billion from June 2014 through June of this year on companies that produce coal, oil and natural gas. And many of those stocks have plunged even further since then, driven down by sinking oil and coal prices.

“It’s important to see that fossil fuels in general, and coal in particular, are risky bets for the pension system,” said Brett Fleishman, senior analyst with 350.org, which promotes fossil fuel divestment as a way to fight climate change. “When folks are saying divestment is risky, we can say, ‘Well, not divesting is risky.’” [Continue reading…]

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Republican hopefuls reap $62m in support from donors with fossil fuel ties

The Guardian reports: Republican presidential candidates have banked millions of dollars in donations from a small number of mega-rich individuals and corporations with close ties to the fossil fuel industries that stand to lose the most from the fight against climate change.

Eight out of the 17 GOP figures currently jostling for their party’s presidential nomination have between them attracted a bonanza of at least $62m so far this year from sources either directly involved in polluting industries or with close financial ties to them. Three Republican contenders stand out as recipients of this fossil fuel largesse: the Republican climate change denier-in-chief, Ted Cruz; the party establishment favorite Jeb Bush; and the former governor of Texas, Rick Perry.

The funds have come from just 17 billionaires or businesses that have pumped enormous sums – in one case $15m for a single candidate – into the support groups or Super Pacs that work alongside the official campaigns yet are free to attract unlimited contributions. The $62m forms a substantial chunk of almost $400m that has been given to presidential contenders from both main parties in 2015, raising questions about the leverage that fossil fuel interests might seek to exert over the next occupant of the White House at a critical time for the battle against climate change. [Continue reading…]

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Oil demand will dry up faster than oil supply

Amory Lovins writes: Why would anyone want to be in the oil business? Like airlines, it’s a great industry but a bad business. Here are the most obvious challenges to its business model:

  • Oil companies are extremely capital-intensive; they can’t charge a high enough price to pay for Arctic oil because to deliver energy at a given rate takes more capital investment than photovoltaics do.
  • They have decadal lead times and high technological, geological, and political risks.
  • National oil companies own about 94 percent of global reserves and can take or tax away the major oil companies’ remaining 6 percent at any time, holding their most basic assets and expected profits at risk.
  • Resource owners force major oil companies into riskier and costlier plays even as investors demand lower risks and higher returns.
  • The industry is politically fraught, unpopular, interfered with, and reputationally damaged by its worst actors.
    Its service companies (like Schlumberger and Halliburton) and the national oil companies are becoming formidable competitors.
  • Its permanent subsidies are coming under greater scrutiny and criticism.
  • It must sell its products at world oil prices that are highly volatile and beyond its control.
  • Much of the reserve base underlying its market valuation is unburnable for climate reasons, potentially wiping trillions off balance sheets.
  • The costly Arctic, deep-sea, and otherwise remote reserves that until a year ago got half the new investments by the biggest oil companies are also economically stranded assets  — at least four times costlier than demand-side competitors and increasingly challenged even by some supply-side competitors.

What a recipe for headaches! No wonder savvy investors are starting to shift their money into assets with rapid growth, wide benefit, solid public acceptance and even enthusiasm, modest risk, and durable value. Energy efficiency and renewables lead the pack. Increasingly they poach investment, momentum, and people from major companies’ deep talent pools. Even my own nonprofit organization’s CEO is a ten-year Shell veteran.

Yet I think these widely recognized challenges are easier to handle than others the industry is only just starting to realize. Having advised oil companies for 42 years, I’m worried that many don’t yet grasp how their competitive landscape is being transformed far faster than their cultures can comprehend or cope with.

Most importantly, their demand is going away — not incrementally but fundamentally. Like whale oil in the 1850s, oil is becoming uncompetitive even at low prices before it becomes unavailable even at high prices. [Continue reading…]

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