Death of fossil fuels and divesting 
Compiled by Walter Sorochan

Posted: November 24, 2018. Disclaimer

Over the past century the development of the U.S. economy and lifestyle has been fundamentally shaped by the availability of abundant coal and low-cost oil. The world has transitioned from burning wood to coal to oil to gas.  But since 1990, the world has had fossil fuel hiccups; that is, the price of oil has been fluctuating up and down and impacting not just on the world economy but on saturating plant earth with fossil fuel pollution to the breaking point by changing the climate of the world. The chart below displays how the oil companies have been losing status in the stock market for almost 40 years.

oil index 1980-2018

Hirach confirms that oil reached a peak after 2000; it has had an impact on everyone: "The world has never faced a problem like this. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary."  Hirach Prediction oil peak 2005

Talk of oil peaking and more recent air pollution in the world has spurred innovators to find alternatives to fossil fuels. Speculators have bought into the green revolution as an alternative to fossil fuels. Scientists are exploring lithium-graphite batteries to store electric energy for electric cars that, in turn, will replace gasoline guzzling automobiles and stop polluting the environment. United States, France, Germany, India and China are competing is to innovate pollution free electric autos.

Meanwhile scientists have also observed increasing earth destructive forces such as more dry spells, frequent hurricanes with excessive rains and flooding, and more destructive and frequent forest and brush fires since 2000. Basically all these weather earth changes have been linked to disruption of the upper atmosphere and warmer climate in ocean currents; such weather changes have been labeled as climate change. Unfortunately, climate change science has been discredited by politicians and vested fossil fuel entities.

So where does the real truth lie with fossil fuels and climate change?

One approach to answering this question is to use the adage "Deeds speak louder than words!"  What has the fossil industry been doing in the last 30 years?  Are the coal, oil and gas companies starting to realize that their business may be in danger of collapsing?  Are they starting to diversify into safer investments?  This article explores all of this.

We start with the predictions in decline in oil production in United States. Focus on the current oil crisis in United States in 2008 was made to appear as if the energy-oil crisis just happened innocently out of nowhere. But such is not the case. We have had numerous warnings from energy and oil experts since 1956. In 1956, geologist M King Hubbert predicted that U.S. oil production would peak in the early 1970s. Another, Reynolds, an associate professor of oil and energy economics at the University of Alaska Fairbanks, also alluded to it in 2004.  Sorochan: Economic-oil crisis 2016

All these warning signals went unheeded in the United States government. Political candidates cried out that we needed to stop our dependence on crude oil and that the only way to do so was to drill for more oil. This political spin was put on solving the dependence on oil as just that --- and it fooled the general public into a false belief that we needed to drill for oil.  Sorochan: Economic-oil crisis 2016  Well, while the oil companies were in a dither over all this, gas started replacing oil as an energy source about 2000.

Oil field decline [Originally posted in 2009]

With the exception of one find off the coast of Brazil, no major new oil fields have been discovered in over 35 years [since 1975]. More than 80% of the oil pumped today comes from wells that are at least 20 years old — and those oil fields are now in decline. Alaskan and Mexican oil fields are in decline. The U.K., one of the world’s great oil exporters for 25 years, will be importing oil within the decade.

And despite promises to increase oil production over the past three years, Saudi Arabia has been unable to boost output by a single drop!

Now, according to the U.S. Army Corps of Engineers, there are only 41 years-worth of proven oil reserves left on Earth.

And to make matters worse, not a single oil refinery has been built in America since 1976 — while the number of operational refineries is falling fast. In 1981, the U.S. had 324 oil refineries. Today [ 2008 ], there are just 132.  Sorochan: Economic-oil crisis 2016

The interesting observation from this limited data is that oil well companies are not investing in drilling for more oil nor building oil refineries. Why aren't they? This has probably sent the signal to OPEC and other oil exporting nations that the demand for fossil oil has temporarily slowed down. The slow down is not obvious as all countries still need coal and oil to generate electricity. Oil production projects are being silently mothballed left and right. The realistic picture is that oil companies do not perceive oil as a future investment!

So .... what are the oil companies doing with their money and business? There is a silent economic revolution taking place and no one is talking about it.  Kroft: Oil speculation & prices 2009  But if one explores and finds where oil companies are investing their money, one can begin to get a sense that oil barons are divesting from coal, oil and fossil fuels. They foresee the hand writing on the dark clouds of pollution. Here is evidence to back these observations:

Rockefeller Brothers Fund, formally announced plans in 2014 to begin divesting itself of fossil-fuel stocks, citing concerns about climate change. The symbolic cutting of ties to a key part of the family’s heritage is being timed with the start of another symbolism-laden event: a gathering of world leaders to grapple with the environmental consequences of decades of fossil-fuel burning. Rockefeller's announcement is symbolic, for 140 years, the Rockefellers were the oil industry’s first family, scions of a business empire that spawned companies called Exxon, Mobil, Amoco and Chevron. So it was no trivial matter when a group of Rockefeller heirs decided in 2014 to begin severing financial ties to fossil fuels.  Warrick: Oil heirs support climate change 2014   Satlin: Rockefellers divesting from oil 2014

Other oil companies have likewise started to divest silently while keeping one foot in the old oil can. Saudi Arabia, running out of oil, is divesting in solar energy. Saudi Crown Prince Mohammed bin Salman announced plans to generate 200 gigawatts of solar energy by 2030—the largest solar project ever conceived, through a partnership with Japanese telecom investor SoftBank, according to CNBC. The partnership, reported by AL Jazeera, is expected to lead to $200 billion in solar investments and create 100,000 jobs for the country. The announcement is part of Salman’s “Vision 2030” plan, which seeks to transform the country’s economy by transitioning away from fossil fuels, expanding sectors such as tourism and technology, and providing more opportunities for women.  McCarthey: Saudis divesting in solar energy 2018

Global Divestment: Divestment is the opposite of investment – it is the removal of your investment capital from stocks, bonds or funds. The global movement for fossil fuel divestment (sometimes also called disinvestment) is asking institutions to move their money out of oil, coal and gas companies for both moral and financial reasons. These institutions include universities, religious institutions, pension funds, local authorities and charitable foundations.

There is a global movement to get rid of fossil fuels. This movement is being blocked by vested interest coal and oil companies and their politicians. However, such resistance is being challenged by other non-fosssil groups divesting money away from fossil fuels. 

In 2018, 985 institutional investors with $6.24 trillion in assets under management have committed to divest from fossil fuels, up from $52 billion four years ago. Fossil fuel divestment is now a mainstream financial action that is starting to have a material impact on the fossil fuel industry, as illustrated in the fourth “Global Fossil Fuel Divestment and Clean Energy Investment Movement” report by Arabella Advisors:

For example: "Earlier this year [2018], Mayor Bill de Blasio and Comptroller Scott Stringer announced a plan to divest New York City’s $189 billion pension funds from fossil fuel companies within five years. This announcement follows similar actions in Berlin, Paris, Copenhagen, New Zealand and Sydney in previous years. In July, Ireland became the first nation in the world to divest. "  Arabella Advisors: Global fossil divestment 2018

New York City is taking on the oil industry on two fronts, announcing a lawsuit in 2018 that blames the top five oil companies for contributing to global warming and saying the city will sell off billions in fossil fuel investments from the city's pension funds.

A handful of liberal universities, churches, and financial institutions have jumped into divesting from coal.  Norway’s $890 billion government pension fund joined the trend, followed by an endorsement by Sir Mark Moody-Stuart himself, the former chairman of oil giant Royal Dutch Shell. We’re talking about divesting from coal investments, and even other fossil fuel funds. According to Bloomberg New Energy Finance, there are as many as 200 organizations that have pledged to cut back or eliminate investments in coal or in fossil fuels more generally. Large universities include Stanford (which took the plunge over a year ago), Syracuse, and Oxford. Large corporations include AXA, France’s largest insurer. Coal plants are being closed all over the U.S., and 23 gigawatts—or 7% of US coal capacity—will be taken offline and replaced by gas, according to Bloomberg New Energy Finance. China, too, is closing some of its smaller, and dirtiest, coal plants.  Fehrenbacher: World divesting from coal 2015  Howard: Guide to divestment 2015

Coal is the most polluting industry and the most damaging for increasing world temperature. 31 coal companies in the world use coal to generate electricity and at the same time are responsible for producing much of the air pollution. Germany is trying to eliminate lignite coal burning - the dirtiest coal: Germany has substantial domestic coal mining operations for electricity generation and coke. The Germany government has committed to reducing greenhouse gas emissions by 40 percent by 2020, and cut emissions from energy production by half by 2030. 

Europe's biggest insurance group, Germany-based Allianz, has stopped selling insurance policies to coal companies in Germany effective immediately [2018] under efforts to reduce the use of fossil fuel and foster climate-saving energy policies. Allianz has now expanded its insurance of compatible green energy companies to Europe and United States.  Allianz: Insurance Co stop insuring coal mines & users 2018 This business approach will have a close-out affect on coal mining and coal power plant companies.  [Coal companies need mandatory insurance for their miners, and coal users to stay in business.]

The World Bank has announced it will stop funding oil and gas projects beginning 2019. Annie Pickering, a campaigner at UK student campaigning network People & Planet, has told Sputnik it marks a "seismic shift" towards renewable energy.  Pickering: Work bank stops funding oil /gas 2017

oil old model Professor Paul Stevens makes the point that we have the death of an old oil company business model. Stevens: Death of old model 2016  Professor Johnson, University of Oklahoma, adds support to Stevens' observation with his remarks: " Recent essays and media coverage have pointed out the back-and-forth alternative energy commitments of various oil companies, such as BP, Shell, and Chevron, as well as the relatively small size of oil industry investments in alternative energy when compared to overall profits — all this, despite prominent advertising campaigns by these same companies which touted their ongoing commitments to renewable energy sources."  Johnson: Oil invests in green energy 2015

Finally Sanzillo, Hipple and Ferry point out that stocks outside the fossil fuel industry have outperformed the coal oil and gas investments. This was also displayed in the table at the beginning of this article. This has given stock holders in insurance, retirement -pension funds and other investors a reason to divest from the sagging fossil fuel companies; putting the fossil fuel industry in jeopardy. Fossil fuel investments are no longer a sure fire profit.   Sanzillo: Fossil fuel divestment 2018 

Faucon Benoit, in The Washington Post, reported that the challenges for the Saudi's, Canada, United States, Mexico and other oil-producing economies will get worse even if oil and gas prices remain elevated.  Faucon: Presure to diversify 2018

In summary, divestments from fossil fuels in 2018 are expected to mushroom in the next five years. Fossil fuel executives feel the divestment heat and are diversifying their investments into green energy, medicine, health care, education, real estate and other safer investments.

So in answer to an earlier question, where does the real truth lie between fossil fuels and climate change? The answer: Why would coal and oil companies divest if they did not perceive that fossil fuels were destroying the planet earth, causing climate change and their old business model would be losing money in the future? Obviously they see the end of their coal-oil-gas boom period. Although they still hold on to their outdated financial model, they are at the same time slowly withdrawing from it, while at the same time not admitting that their model causes climate change.

Meanwhile the general public has been kept in the dark about all of this. Monbiot: No one telling us 2016 On November 23, 2018, a second major 1,656-page scientific report by 13 federal agencies and released by the Trump administration, issued the starkest warnings to date of the consequences of climate change for the United States, "predicting that if significant steps are not taken to rein in global warming, the damage will knock as much as 10 percent off the size of the American economy by century’s end. Global warming is now affecting the United States more than ever, and the risks of future disasters — from flooding along the coasts to crop failures in the Midwest — could pose a profound threat to Americans’ well-being". Davenport: Climate change offers dire warning 2018

Both 2014 and 2018 report findings are directly at odds with President Trump’s agenda of environmental deregulation, which he asserts will spur economic growth. Although there has been no response at this early date from the fossil fuel industry, the trends reported above about fossil fuel divesting have probably got more supporting evidence to do so.

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References:

Allianz, "Allianz stops insuring coal companies," Allianz Group Insurance, 2018.  Allianz: Insurance Co stop insuring coal mines & users 2018

Arabella Advisors, "Global Fossil Fuel Divestment Movement Reaches $6.24 Trillion," DivestInvest, September 11, 2018.  Arabella Advisors: Global fossil divestment 2018

Christensen Jen, "Climate change will have dire consequences for US, federal report concludes," CNN Report, November 23, 2018.  Christensen: Climate change report 2018

Davenport Coral and Kendra Pierre-Louis, "U.S. Climate Report Warns of Damaged Environment and Shrinking Economy," The New York Times, November 23, 2018.  Davenport: Climate change offers dire warning 2018

Faucon Benoit, "Saudis, Other Big Oil Producers Face Pressure to Diversify, IEA Says," The Wall Street Journal, October 24, 2018.  Faucon: Presure to diversify 2018

Fehrenbacher Katie, "Divesting from coal is becoming more mainstream and it's about risk," Fortune, June 6, 2015.  Fehrenbacher: World divesting from coal 2015

Hubbert M King, Hubbert's Peak, Wikipedia. Hubert peak oil theory

Hirsch Robert, Roger Bezdek, Robert Wendling, “ PEAKING OF WORLD OIL PRODUCTION: IMPACTS, MITIGATION, & RISK MANAGEMENT Report, February 2005.   Hirach Prediction oil peak 2005

Howard Emma, "A beginner's guide to fossil fuel divesrment," The Guardian, June 23, 2015.  Howard: Guide to divestment 2015

James Louis, "Casey on Climate and the Fate of Mankind," Whiskey & Gunpowder, December 28, 2009.  James: Casey on climate change 2009

Johnson Timothy C. P., "Oil Industry Investments in Alternative Energy: Comparative Rationales for Diversification and Divestment," University of Oklahoma, 29 May 2015.  Johnson: Oil invests in green energy 2015

Klare Michael T., "The Impending Decline of Saudi Oil Output: Matt Simmons' Bombshell," Tom Dispatch,June 26, 2005.K;are: S Arabia oil peak 2005

Kroft Steve, " Did Speculation Fuel Oil Price Swings?" CBS 60 Minutes, January 11, 2009. Kroft: Oil speculation & prices 2009

McCarthey Joe,"Saudi Arabia is investing $200 billion in solar energy,"Global Citizen, March 28, 2018.  McCarthey: Saudis divesting in solar energy 2018

Mildenberger Matto and Leah Stokes,"No, we didn’t almost s­olve the climate crisis in the 1980s," Vox, August 6, 2018  Mildenberger: Climate change unsolved 2018

Monbiot George, "The climate crisis is already here - and no one's telling us," The Guardian, August 3, 2016.  Monbiot: No one telling us 2016

NASA, "Climate change: How do we know?" Global Climate Change. NASA, October 15, 2018.  NASA: Climate change

Pickering Annie, "Seismic shift: World bank pulls plug on oil and gas, will divest no more," Sputnik, December 13, 2017.  Pickering: Work bank stops funding oil /gas 2017

Rich Nathaniel, "Losing Earth: The Decade We Almost Stopped Climate Change," The New York Times Magazine, August 01, 2018.  Rich: Ignoring climate change 2018

Sanzillo Tom, Kathy Hipple and Clark Williams-Derry, "The financial case for fossil fuel divestment," Sightline Institute, July 2018.  Sanzillo: Fossil fuel divestment 2018

Satlin Horowitz Alana, "Rockefellers Divesting From Big Oil," Environment, September 22, 2014  Satlin: Rockefellers divesting from oil 2014

Sorochan Walter, "Warnings of Peak Oil & Economic Crisis: Summary," Freegrab.net, May 1, 2016.  Sorochan: Economic-oil crisis 2016

Stevens Paul, "International Oil Companies: The Death of the Old Business Model," Chatham House- The Royal Institute of International Affairs, May 2016.  Stevens: Death of old model 2016

Warrick John and Steven Mufson, "Big Oil’s heirs join call for action as climate summit opens," The Washington Post, September 21, 2014.  Warrick: Oil heirs support climate change 2014