The Norwegian government announced
Friday a bold recommendation for the Norwegian Sovereign Wealth Fund to divest
all its holdings, worth nearly $40 billion, from oil and gas industries. The
proposal, if approved by the nation’s parliament, would see the world’s largest
sovereign wealth fund worth $1 trillion, divest from all fossil fuels. (Photo:
In a move that climate campaigners
say should send a “shockwave” through the global oil and gas
industry, the Norwegian Sovereign Wealth Fund—the largest of its kind in the
world—has recommended the Norway government divest the entirety of the fund’s
$40 billion holdings from the fossil fuel industry.
“If [proposal passes through parliament it
will produce a shockwave in the market, dealing the largest blow to date to the
illusion that the fossil fuel industry still has decades of business as usual
ahead of it.”
—Yossi Cadan, 350.org
In a statement on Friday, Minister of
Finance Siv Jensen explained the decision is meant to “reduce the
vulnerability” of the Norwegian fund “to permanent oil price
decline.” With an estimated $1 trillion in total holdings, Norway’s
Sovereign Wealth Fund is the largest publicly held investment in the world.
According to a spokesperson for the finance ministry, the fund currently has
roughly 66 billion Norwegian krone ($7.5 billion) invested in energy
exploration and production stocks—approximately 1.2% of the fund’s stock
The recommendation from the Norwegian
fund will now be sent to the nation’s parliament for approval.
Climate groups that have pushed
aggressively for divestment from the fossil fuel industry in recent years as a
key way to decrease the threat of greenhouse gases and runaway global warming
celebrated the announcement as a possible crucial turning point.
“We welcome and support this
proposal,” said Yossi Cadan, senior divestment campaigner at 350.org, “if
it passes through parliament it will produce a shockwave in the market, dealing
the largest blow to date to the illusion that the fossil fuel industry still
has decades of business as usual ahead of it. The decision should sound like a
red alert for private banks and investors whose oil and gas assets are becoming
increasingly risky and morally untenable.”
Bill McKibben, one of the group’s
co-founders, called it a “huge, huge, huge
In a statement, 350 added:
In order to avoid the most
catastrophic impacts of climate change and keep global warming below 1.5°C we
have to keep fossil fuels in the ground and shift finance towards sustainable
energy solutions for all. Climate impacts are already hitting home and we have
no time left to lose. Last year Nordic heatwaves, wildfires in the Arctic
Circle and alarming news of the thickest Arctic sea ice starting to break up,
showed how climate change is close to home for Norway. It seems unthinkable for
Norwegian financiers to continue to invest in companies that are causing this
Catherine Howarth, chief executive of
ShareAction, which provides analysis for investors focused on creating a more
sustainable society, said the Norwegian fund’s announcement
“is further evidence that investors are growing increasingly dissatisfied
with oil exploration and production companies.”
Institutional investors that manage
sovereign wealth funds and pensions funds, she added, “are withdrawing
their capital from oil and gas companies on the grounds that
quicker-than-expected growth in clean energy and associated regulation is
making oil and gas business models highly vulnerable. This announcement will
put pressure on investors to ramp up their engagement with integrated oil
majors ahead of [annual general meeting] season” when stock holders gather
to assess and review company performance and strategies.
While the financial reality of the
climate crisis comes into increasing view for global investors and markets,
350.org says that credit belongs to the campaigners from around the world who
have bravely stood up to demand an end to the financial and energy hegemony of
the fossil fuel industry.
At the heart of the global divestment
campaign, the group said, “is a people-powered grassroots movement—it’s
ordinary people pushing their local institutions to take a stand against the
fossil fuel industry —the industry most responsible for the current climate
From school children to individuals, companies, and corporations, the
global fossil fuel divestment movement has challenged the right of the fossil
fuel industry to damage the environment. By divesting from fossil fuels, we are
requiring polluters to take responsibility for their products and hitting them
where it hurts the most — their stock values and investor dividends. In this “CleanTechnica
2018 Divestment Year in Review,” we’ll be looking at the progress that
the people-powered grassroots movement has accomplished toward shifting
small and large investments away from fossil fuels and into a greener,
This #CleanTechnica Report post dated December 27th, 2018 by Carolyn Fortuna gives us a pertinent picture of worldwide trends that will no doubt amplify further in the future.
Over 1000 institutions with managed investments
worth almost $8 trillion have committed to divest from fossil fuels. Fund
managers and fiduciaries are increasingly aware of the risks of climate
breakdown and deciding of their own accord to divest from morally unsound and
financially risky industries.
Momentum for divestment has only accelerated: pledges span 37 countries
with over 65% of commitments coming from outside the US. The divestment sources
now include major capital cities, mainstream banks and insurance companies,
massive pension funds, faith groups, cultural, health, and educational
institutions — all of which serve billions of people. 350.orgoutlines how 2018 trends about
divestment have pointed to:
rate of growth in the number of institutions and total funds divested from
fossil fuels companies
breakdown of divestments including numerous commitments on every continent
significant commitments such as those of the sovereign wealth funds of Ireland,
Norway, and city divestments of Cape Town and New York
breakdown of divestment actions, which demonstrates the moral leadership of the
faith sector on the issue of divestment
The latest commitments propelling the campaign to over 1000 institutions
that have divested include:
la mondiale (US$114 billions)
Super Fund (US$9 billion)
Want a full list of divestment commitments? Click here.
Recent Global Decisions that Affect Fossil Fuel Portfolios
The Paris Agreement set out aims to limit the global mean temperature
increase ‘well below’ 2 °C. That goal will diminish global carbon budgets
for the 21st century in order to reduce CO2 emissions. Logically, as a result,
a considerable share of fossil fuels will remain underground that might have
otherwise been extracted and sold at tremendous profits.
(the informal name for the 24th Conference of the Parties to the United Nations
Framework Convention on Climate Change) met in December, 2018 in Poland to
work out and adopt a package of decisions ensuring the full implementation of
the Paris Agreement, in accordance with the decisions adopted in Paris (COP21)
and in Marrakesh (CMA1.1) as well as to support the implementation of national
On December 12, May Boeve, executive director of 350.org,
seemed uncertain that diplomats to the COP24 would find common ground.
“When this movement started in 2012, we aimed to catalyse a truly global
shift in public attitudes to the fossil fuel industry, and people’s willingness
to challenge the institutions that financially support it. While diplomats at
the UN climate talks are having a hard time making progress, our movement has
changed how society perceives the role of fossil fuel corporations and is
actively keeping fossil fuels in the ground.”
A short paper published in Nature also
outlines concurrent challenges in delaying the recommendations in the Paris
agreement until 2030 while complying with the 2° C target:
higher CO2 prices
a strong drop in
fossil fuel prices because of the rapid reduction in demand
stranded assets of
fossil fuel-based infrastructure
acceleration in the required ramp-up of low-carbon technologies
By December 15, however, an all-night bargaining session concluded with
a plan to reach the Paris Agreement’s goals to curb global warming, according
to the New York Times.
Diplomats from nearly 200 countries reached consensus on a detailed set of
rules which will, ultimately, require every country in the world to follow
a uniform set of standards for measuring its planet-warming emissions and
tracking its climate policies. Here is the big picture of that accord.
accelerate plans to cut emissions ahead of another round of talks in 2020.
must delineate the kinds of aid they intend to offer to help poorer
nations install more clean energy or build resilience against natural
Countries that are
struggling to meet their emissions goals can follow a new process to get back
The accord should intensify the divestment effect as climate policy
ambition increases and the policy implementation dates come closer.
Why Companies and
Individuals are Divesting
While the divestment trend is expanding exponentially, two responses to
a climate policy suggest a lag between climate action
announcements and action implementations of policies to reduce CO2
The “green paradox”
hypothesizes that near-term CO2 emissions will rise above the ‘well below’ 2 °C
baseline as fossil fuel owners frontload supply from their endowments. They’ll
do so to evade the negative consequences of future fossil fuel price drops due
to planned climate policies.
effect” argues that near-term CO2 emissions will decrease below the baseline as
investors avoid fossil fuel-based infrastructures with high emission
intensities, high capital costs, and long technical lifetimes that could become
The moral argument: Countries around the world can emit up to 565
more gigatons of carbon dioxide and stay below 2°C of warming, but anything
more than that level prescribes catastrophe. The authors of the landmark report by the UN Intergovernmental
Panel on Climate Change (IPCC), written by the world’s leading climate
scientists, have warned there are only a dozen years for global warming to be
kept to a maximum of 1.5 C. Beyond that point, even half a degree will
significantly worsen the risks of drought, floods, extreme heat, and poverty
for hundreds of millions of people.
Burning the fossil fuel reserves that corporations now have would result
in emitting 2,795 gigatons of carbon dioxide, according to GoFossilFree— 5 times the safe
amount. Fossil fuel companies are planning to burn it all — unless we rise up
to stop them with climate action policies and divestment.
Financial incentives: Fossil fuel reserves are defined as economically
and technically recoverable sources of crude oil, natural gas, and thermal
coal. Using analytics to maintain a persistent view on an investment portfolio,
many capital investment groups are suggesting that their clients turn
to Fossil Free indices, which outperformed many 2018 benchmarks that
contained fossil fuels. Despite being among the top 500 wealthiest
corporations, the energy sector (coal, oil, and gas) performance lagged behind
the market for the last 5 years plus. The S&P 500 Fossil Fuel Free Index is
designed to measure the performance of companies in the S&P 500 that do not
own fossil fuel reserves.
Read more in the above mentioned #CleanTechnica Report.
We would quote Greenpeace’s ongoing ‘Take Action’ world campaign that started with the rightful words “ Plastic has become so integral to our lives that we no longer think twice when using it . . .” to introduce their other eye opener article by Jen Fela that follows.
I love the ocean, but for years I haven’t been able to visit a beach without seeing the effects of plastic pollution. Microplastics mix with seashells in the sand. Plastic bags roll down the beach. Foam cups break down in the surf.
We are surrounded by plastics that are intended to be used once and thrown away almost immediately. But plastic never goes away! These single-use plastics are filling up our oceans and choking marine life. Birds, fish, and whales have been found dead, their insides filled with straws, plastic bags, and wrappers.
This terrapin found was trapped in a plastic ring, altering the shape of its shell. Stefan Leijon / CC BY-ND 2.0
Big companies tell us to recycle more.
Companies like Coca-Cola, PepsiCo, Nestlé, Unilever, Procter & Gamble, Starbucks, McDonald’s produce massive amounts of single-use plastics while our oceans suffer. They tell us to recycle more, but over 90% of plastic is not recycled, and plastic production is still increasing.
In Mexico, each person uses an average of 48 kilos of plastic per year. In the image a person carries a huge bag containing plastic bottles to illustrate the problem of plastic consumption. # YoSinPlásticos is the name of the citizen movement promoted by Greenpeace in Mexico, aiming to reduce to the minimum or eliminate the consumption of single-use plastics, major cause of marine pollution.
For too long, corporations have been telling us that recycling is the answer to the plastic waste problem. But we will never be able to recycle our way out of this crisis. We need to solve the problem at the source. It’s time we make corporations take responsibility for their part of this problem, and take steps to reduce the amount of plastic they produce.
People are waking up to the truth.
We can do something about all this plastic. There is a growing chorus of voices saying “enough.” People around the world have been posting photos to social media, calling out big companies, retailers, and supermarkets for their role in plastic pollution.
Over one million people around the world have already signed petitions and taken other actions to send a strong message to companies that it’s time they do their part for a plastic-free future. And soon, thousands — maybe even a million — more people will be stepping up their actions even further to help their communities break free from plastic.
You can join this growing movement by signing the petition today. And look out for some exciting tools coming very soon to make an even bigger impact!
Water is the lifeline that connects us all, through oceans, rivers, and the tap water from our faucets. We have a right to healthy, clean water that is free from plastic pollution. Let’s make 2018 the year we break free from plastic!
Electric and / or Self-Driving cars vs Conventional ones?
The oil and gas giant British Petroleum (BP) predicted in a report that was published last week that although electric cars are increasingly being put on the roads and renewable energy growing at exceptional rates, fossil oil extraction, production, etc. which needless to remind is BP’s main business line, would not only remain in demand but see this latter rise to unprecedented levels. The reason for this unabated level in demand would be according to this report the greater numbers of the Third World countries (cum Emerging) populations reaching levels of prosperity allowing car ownership. The question beside that of the validity of fossil oil demand predicted not to decrease in the future, is which direction the automotive manufacturing industry would take in the future. Would it be Electric and / or Self-Driving cars and in which part of the World would these be on the roads? And most importantly, which type of energy would be used in which type of vehicle ?
We republish the following Brookings article on driveless cars as these obviously will be marketed mainly in the so-called First World.
“Driverless cars are a transformative technology that could have important implications for society, national security, the economy, and the environment,” Darrell West and Hillary Schaub wrote in a 2015 piece that outlined a number of challenges, benefits, and policy recommendations related to autonomous vehicles. West, vice president and director of Governance Studies, and Schaub, a program coordinator, addressed specific issues for the continued development of this technology, including: cybersecurity and liability, increasing fuel efficiency and reducing traffic fatalities, and addressing international safety and testability. “The discussion surrounding driverless cars involves a great deal of uncertainty,” West and Schaub observed. “There are huge ethical decisions that must be made regarding these new technologies. It is the responsibility of policymakers to help decide these issues.”
Here are analyses and data about driverless cars drawn from recent Brookings research.
Computers can be considered legal drivers of vehicles
Noting that in early 2016, the National Highway Transportation Safety Administration determined that under federal law computers could be considered legal drivers of vehicles, Darrell West and Jack Karsten of the Center for Technology Innovation write that, “With the combined efforts of the technology industry, automakers, and federal regulators, driverless cars could achieve widespread use sooner than many drivers and policymakers might expect.”
With technology companies and automakers continuing to make advances on driverless cars, and with increased federal research, companies like Toyota are saying they aim to deliver driverless vehicles around 2020. Given this pace of development, West and Karsten argue that “creating a national strategy for driverless cars is a crucial task for federal transportation officials.”
Pittsburgh is a leader in driverless car technology research and testing
Bruce Katz, the Brookings centennial scholar, writes of Pittsburgh, Pennsylvania Mayor Bill Peduto being the first person to hail and ride a driverless taxi. The former steel manufacturing center has become, Katz notes, “the research lab and test bed for this revolutionary technology” due to an “ecosystem” that includes the robotics research unit at Carnegie Mellon University, plus start-ups and large firms, and Uber’s Advanced Technology Center. “But what has made Pittsburgh especially effective,” Katz says, “is public, private and civic leadership that is willing and eager to make the city itself a laboratory for technological invention and testing.”
The U.S. military has an interest in self-driving vehicles
“People and businesses will have driverless options for taking them safely to their destinations,” he says, “and it is important for leaders to provide reasonable guidance on how to commercialize advanced technologies in transportation.”
Fragmented regulatory framework the biggest challenge to driverless cars in America
In a briefing paper included in the Election 2016 and America’s Future series, and now part of the “Brookings Big Ideas for America” book meant to inform the new Trump administration, West explains that the “biggest American challenge” for autonomous vehicles “is overcoming the fragmentation of 50 state governments and having uniform guidelines across geographic boundaries. Public officials should address questions such as who regulates, how they regulate, legal liability, privacy, and data collection.”
In the briefing paper, West reviews the benefits and needed policy actions—including better national technical standards, addressing legal liability, and improving data protection and security. “Governments can accelerate or slow the movement towards self-driving vehicles by the manner in which they regulate,” West writes. “Addressing relevant issues and making sure regulatory rules are clear should be high priorities in all the countries considering autonomous vehicles.”
Existing products liability law is adaptable to new issues in autonomous vehicles
John Villasenor, a nonresident senior fellow in Governance Studies, examines the liability issues associated with autonomous vehicles as new technologies continue to advance us into an era of widespread commercial use of vehicle automation. In 2012, Villasenor notes, motor vehicle accidents caused over 33,000 deaths in the United States alone. Just as existing vehicle automation technologies have provided safety improvements, additional automation promises to improve safety even more. In this context, Villasenor argues that “broad new liability statutes aimed at protecting the manufacturers of autonomous vehicle technology are unnecessary.”
In this paper, Villasenor offers a set of guiding principles for legislation. “In short,” he writes, “the liability concerns raised by vehicle automation are legitimate and important. But they can be addressed without delaying consumer access to the many benefits that autonomous vehicles will provide.” He concludes that the U.S. “has a robust products liability law framework that, while certainly not perfect, will be well equipped to address and adapt to the autonomous vehicle liability questions that arise in the coming years.”
The adoption of driverless cars can save thousands of lives each year
Drawing upon research that shows that as unemployment rises, more dangerous drivers drive less and safer ones drive more—thus decreasing traffic deaths—Senior Fellow Cliff Winston and Vikram Maheshri of the University of Houston argue that policymakers “could allow the most dangerous drivers … to continue to have access to an automobile provided it is driverless or at the very least has more autonomy than current vehicles.” Doing so, they say, “will not only save lives but also would “expedite the transition to driverless cars and help educate the public and build trust in the new technology.”
Automated vehicles will save government billions of dollars
As Kena Fedorschak of Arizona State University and Brookings Nonresident Senior Fellow Kevin Desouza observe, state and local governments derive billions of dollars in revenue from speeding tickets, DUIs, towing fees, and other driver-related laws. They argue that while the safety improvements offered by autonomous vehicles will remove these sources of revenue, the technology will save taxpapyers an estimated $10 billion per year by eliminating “inefficiencies” in the transportation system such as congestion, road damage, and deaths.
“Even if the public sector refuses to innovate, government entities will save big bucks from the impending driverless car revolution,” Fedorschak and Desouza conclude. “Billions will be saved as a result of increased safety and the reduction of transportation inefficiencies. The future is bright for autonomous vehicles.”
This article by Nafeez Mosaddeq Ahmed, Investigative journalist, recovering academic, tracking the Crisis of Civilisation patreon.com/nafeez was published on Medium.com of January 5th, 2017. We republish it for all intents and purposes, above all for its spreading further afield. Bracing for the oil, food and financial crash of 2018 could be as we kick start the young 2017 considered as wise an advice as any. This future as described by Nafeez simply doesn’t work the way we are accustomed to. Indeed “the old, industrial era rules for the dying age of energy and technological super-abundance must be re-written for a new era beyond fossil fuels, beyond endless growth at any environmental cost, beyond debt-driven finance”.
80% of the world’s oil has peaked, and the resulting oil crunch will flatten the economy.
Published by INSURGE INTELLIGENCE, a crowdfunded investigative journalism project for the global commons. Support us to keep digging where others fear to tread.
New scientific research suggests that the world faces an imminent oil crunch, which will trigger another financial crisis.
A report by HSBC shows that contrary to industry mythology, even amidst the glut of unconventional oil and gas, the vast bulk of the world’s oil production has already peaked and is now in decline; while European government scientists show that the value of energy produced by oil has declined by half within just the first 15 years of the 21st century.
The upshot? Welcome to a new age of permanent economic recession driven by ongoing dependence on dirty, expensive, difficult oil… unless we choose a fundamentally different path.
Last September, a few outlets were reporting the counterintuitive findings of a new HSBC research report on global oil supply. Unfortunately, the true implications of the HSBC report were largely misunderstood.
The HSBC research note — prepared for clients of the global bank — found that contrary to concerns about too much oil supply and insufficient demand, the situation was opposite: global oil supply will in coming years be insufficient to sustain rising demand.
Yet the full, striking import of the report, concerning the world’s permanent entry into a new age of global oil decline, was never really explained. The report didn’t just go against the grain of the industry’s hype about ‘peak demand’: it vindicated what is routinely lambasted by the industry as a myth: peak oil — the concurrent peak and decline of global oil production.
The HSBC report you need to read, now
INSURGE intelligence obtained a copy of the report in December 2016, and for the first time we are exclusively publishing the entire report in the public interest.
Read and/or download the full HSBC report by clicking below:
Headquarted in London, UK, HSBC is the world’s sixth largest bank, holding assets of $2.67 trillion. So when they produce a research report for their clients, we should listen.
Among the report’s most shocking findings is that “81% of the world’s total liquids production is already in decline.”
Between 2016 and 2020, non-OPEC production will be flat due to declines in conventional oil production, even though OPEC will continue to increase production modestly. This means that by 2017, deliverable spare capacity could be as little as 1% of global oil demand.
This heightens the risk of a major global oil supply shock around 2018 which could “significantly affect oil prices.”
The report flatly asserts that peak demand (the idea that demand will stop growing leaving the world awash in too much supply), while certainly a relevant issue due to climate change agreements and disruptive trends in alternative technologies, is not the most imminent challenge:
“Even in a world of slower oil demand growth, we think the biggest long-term challenge is to offset declines in production from mature fields. The scale of this issue is such that in our view rather there could well be a global supply squeeze some time before we are realistically looking at global demand peaking.”
Under the current supply glut driven by rising unconventional production, falling oil prices have damaged industry profitability and led to dramatic cut backs in new investments in production. This, HSBC says, will exacerbate the likelihood of a global oil supply crunch from 2018 onwards.
Four Saudi Arabias, anyone?
The HSBC report examines two main datasets from the International Energy Agency and the University of Uppsala’s Global Energy Systems Programme in Sweden.
The latter, it should be noted, has consistently advocated a global peak oil scenario for many years — the HSBC report confirms the accuracy of this scenario, and shows that the IEA’s data supports it.
The rate and nature of new oil discoveries has declined dramatically over the last few decades, reaching almost negligible levels on a global scale, the report finds. Compare this to the report’s warning that just to keep production flat against increasing decline rates, the world will need to add four Saudi Arabia’s worth of production by 2040. North American production, despite remaining the most promising in terms of potential, will simply not be able to fill this gap.
Business Insider, the Telegraph and other outlets which covered the report last year acknowledged the supply gap, but failed to properly clarify that HSBC’s devastating findings basically forecast the longterm scarcity of cheap oil due to global peak oil, from 2018 to 2040.
The report revises the way it approaches the concept of peak oil — rather than forecasting it as a single global event, the report uses a disaggregated approach focusing on specific regions and producers. Under this analysis, 81% of the world’s oil supply has peaked in production and so now “is post-peak”.
Using a more restrictive definition puts the quantity of global oil that has peaked at 64%. But either way, well over half the world’s global oil supply consists of mature and declining fields whose production is inexorably and irreversibly decreasing:
“If we assumed a decline rate of 5%pa [per year] on global post-peak supply of 74mbd — which is by no means aggressive in our view — it would imply a fall in post-peak supply of c.38mbd by 2030 and c.52mbd out to 2040. In other words, the world would need to find over four times the size of Saudi Arabia just to keep supply flat, before demand growth is taken into account.”
What’s worse is that when demand growth is taken into account — and the report notes that even the most conservative projections forecast a rise in global oil demand by 2040 of more than 8mbd above that of 2015 — then even more oil would be needed to fill the coming supply gap.
But with new discoveries at an all time low and continuing to diminish, the implication is that oil can simply never fill this gap.
Technological innovation exacerbates the problem
Much trumpeted improvements in drilling rates and efficiency will not make things better, because they will only accelerate production in the short term while, therefore, more rapidly depleting existing reserves. In this case, the report concludes:
“… the decline-delaying techniques are only masking what could be significantly higher decline rates in the future.”
This does not mean that peak demand should be dismissed as a serious concern. As Michael Bradshaw, Professor of Global Energy at Warwick University’s Sloan Business School, told me for my previous VICE article, any return to higher oil prices will have major economic consequences.
Price spikes, economic recession
Firstly, oil price spikes would have an immediate recessionary effect on the global economy, by amplifying inflation and leading to higher costs for social activity at all levels, driven by the higher underlying energy costs.
Secondly, even as spikes may temporarily return some oil companies to potential profitability, such higher oil prices will drive consumer incentives to transition to cheaper renewable energy technologies like solar and wind, which are already becoming cost-competitive with fossil fuels.
That means a global oil squeeze could end up having a dramatic impact on continued demand for oil, as twin crises of ‘peak oil’ and ‘peak demand’ end up intensifying and interacting in unfamiliar ways.
The demise of fossil fuels
But the HSBC report’s specific forecasts of global oil supply and demand are part of a wider story of global net energy decline.
A new scientific research paper authored by a team of European government scientists, published on Cornell University’s Arxiv website in October 2016, warns that the global economy has entered a new era of slow and declining growth. This is because the value of energy that can be produced from the world’s fossil fuel resource base is declining inexorably.
The paper – currently under review with an academic journal – was authored by Francesco Meneguzzo, Rosaria Ciriminna, Lorenzo Albanese, Mario Pagliaro, who collectively conduct research on climate change, energy, physics and materials science at the Italian National Research Council (CNR) — Italy’s premier government agency for scientific research.
According to HSBC, oil prices are likely to rise and stabilise for some time around the $75 per barrel mark. But the Italian scientists find that this is still too high to avoid destabilising recessionary effects on the economy.
The Italian study offers a new model combining “the competing dynamics of population and economic growth with oil supply and price,” with a view to evaluate the near-term consequences for global economic growth.
Data from the past 40 years shows that during economic recessions, the oil price tops $60 per barrel, but during economic growth remains below $40 a barrel. This means that prices above $60 will inevitably induce recession.
Therefore, the scientists conclude that to avoid recession, “the oil price should not exceed a threshold located somewhat between $40/b [per barrel] and $50/b, or possibly even lower.”
More broadly, the scientists show that there is a direct correlation between global population growth, economic growth and total energy consumption. As the latter has steadily increased, it has literally fueled the growth of global wealth.
But even so, the paper finds that the world is experiencing:
“… declining average EROIs [Energy Return on Investment] for all fossil fuels; with the EROI of oil having likely halved in the short course of the first 15 years of the 21st century.”
EROI is the total value of energy a resource can generate, calculated by comparing the quantity of energy extracted, to the quantity of energy put in to enable the extraction.
This means that overall, despite total liquids production increasing, as the energy value it generates is declining, the overall costs of extraction are simultaneously increasing.
This is acting as an increasing geophysical brake on global economic growth. And it means the more the economy remains dependent on fossil fuels, the more the economy is tied to the recessionary impact of global net energy decline:
“The chance of future economic growth matching the current trajectory of the human population is inextricably bound to the wide and growing availability of highly concentrated energy sources enjoying broad applicability to energy end uses.”
The problem is that since the 1980s, the share of oil in the global energy mix has declined. To make up for this, economic growth has increasingly had to rely on clever financial instruments based on debt: in effect, the world is borrowing from the future to sustain our present consumption levels.
In an interview, lead author Dr. Francesco Meneguzzo explained:
“Global conventional oil peaked around the year 2005. All the following supply increase was due to unconventional oil exploitation and, since 2009, basically to US shale (tight) oil, which in turn peaked around March, 2015.
What looks like to be even more important, anyway, is the fact that global oil supply has failed to keep the pace with the increase in total energy consumption, which ‘natural’ growth requires to be approximately proportional to population increase, leading to the decline of the oil share in the energy mix. While governments have struggled to fuel their economies with ever increasing energy supply, other sources have steadily replaced oil in the energy mix, such as coal in China. Yet, no other conventional source has proved to be a valuable substitute for oil, hence the need for debt in order to replace the vanishing oil share.”
On a business as usual trajectory, then, the economy can quite literally never recover — unless it transitions to a truly viable new energy source which can substitute for oil.
“In order to avoid the [oil] price affordable by the global economy falling below the extraction cost, debt piling (borrowing from the future) becomes a necessity, yet it is a mere trick to gain some time while hoping for something positive to happen,” said Meneguzzo. “The reality is that debt, basically as a subsitute for oil, does not work to produce real wealth, as apparent for example from the decline of the industry value added as a percentage of GDP.”
Where will this end up?
“Recently, debt has started shrinking, basically because it has failed to generate real wealth. Assuming no meaningful (and fast) transition to renewable energy, the economic growth can only deteriorate further and further.”
Basically, this means, Meneguzzo adds, “delocalizing manufacturing to economies using local, cheaper and dirtier energy sources (such as coal in China) as well as lower wages, further shrinking domestic aggregate demand and fueling a downward spiral of deflation and/or debt.”
Is there a way out? Not within the current trajectory: “Unless that debt is immediately used to exploit renewable sources on a massive scale, along with ‘accessories’ such as storage making them as qualified as oil, social and political derangements, even before an economic crash, look to be unavoidable.”
Seen in this broader scientific context, the HSBC global oil supply report provides quite stunning confirmation that for the most part, global oil production is already in post-peak — and that after 2018, this is going to manifest in not simply a global supply shock, but a world in which cheap, high quality fossil fuels is increasingly hard to find.
What will this mean? One possible scenario is that by 2018 or shortly thereafter, the world will face a similar convergence of global crises that occurred a decade earlier.
In this scenario, oil price hikes would have a recessionary affect that destabilises the global debt bubble, which for some years has been higher than pre-2008 crash levels, now at a record $152 trillion.
In 2008, oil price shocks played a key role in creating pre-crisis economic conditions for consumers in which rising living costs helped trigger debt-defaults in housing markets, which rapidly spiralled out of control.
2018 is likely to be crunch year for another reason. 1 January 2018 is the date when a host of new regulations are set to come in force, which will “constrain lending ability and prompt banks to only advance money to the best borrowers, which could accelerate bankruptcies worldwide,” according to Bloomberg. Other rules to come in play will require banks to stop using their own international risk assessment measures for derivatives trading.
Ironically, the introduction of similar well-intentioned regulation in January 2008 (through Basel II) laid the groundwork to rupture the global financial architecture, making it vulnerable to that year’s banking collapse.
In fact, two years earlier in July 2006, Dr David Martin, an expert on global finance, presciently forecast that Basel II would interact with the debt bubble to convert a collapse of the housing bubble into a global financial conflagaration.
Just a month after that prescient warning, I was told by a former senior Pentagon official with wide-ranging high-level access to the US military, intelligence and financial establishment that a global banking collapse was imminent, and would likely occur in 2008.
My source insisted that the event was bound up with the peak of global conventional oil production about two years earlier (which according to the UK’s former chief government scientist Sir David King did indeed occur around 2005, even though unconventional oil and gas production has offset the conventional decline so far).
Having first outlined my warning of a 2008 global banking collapse in August 2006, I re-articulated the warning in November 2007, citing Dr. Martin’s forecast and my own wider systems analysis at a lecture at Imperial College, London. In that lecture, I specifically predicted that a housing-triggered banking crisis would be sparked in the context of the new era of expensive fossil fuels.
I called it then, and I’m calling it now.
Some time after January 2018, we are seeing the probability of a new crisis convergence in global energy, economic and food systems, similar to what occurred in 2008.
Today, we are all supposed to quietly believe that the economy is in ‘recovery’, when in fact it is merely transitioning through a fundamental global systemic phase-shift in which the unsustainability of prevailing industrial structures are being increasingly laid bare.
The truth is that the cycles of protracted economic crisis are symptomatic of a deeper global systemic process.
One way we can brace ourselves for the next crash is to recognise it for what it is: a symptom of global system failure, and therefore of the inevitable transition to a post-carbon, post-capitalist future.
The future we are stepping into simply doesn’t work the way we are accustomed to.
The old, industrial era rules for the dying age of energy and technological super-abundance must be re-written for a new era beyond fossil fuels, beyond endless growth at any environmental cost, beyond debt-driven finance.
This year, we can prepare for the post-2018 resurgence of crisis convergence by planting seeds — however small — for that future in our own lives, and with those around us, from our families, to our communities and wider societies.
Nafeez is a Visiting Research Fellow at the Global Sustainability Institute at Anglia Ruskin University’s Faculty of Science and Technology. He is also an award-winning 15-year investigative journalist and creator of INSURGE intelligence, a crowdfunded public interest investigative journalism project.
This INSURGE intelligence story was enabled by crowdfunding: Please support independent journalism for the global commons for as little as a $1/month via www.patreon.com/nafeez.
An article published on Tuesday, January 3rd, 2017 by Common Dreams and written by Deirdre Fulton, staff writer is reproduced here for its interest to all concerned in the MENA region countries about the Peak-Oil theory being concretised under our eyes and that renewable energy would eventually replace all fossil oil based energy production. The author asserts rightly that the Future is Not in Fossil Fuels and that “Solar is also creating jobs at an unprecedented rate, more than in the oil and gas sectors combined, and 12 times faster than the rest of the economy.” (The above Photo is by David Goehring/flickr/cc)
While oil and gas companies falter, ‘renewable energy has reached a tipping point,’ says World Economic Forum expert.
Underscoring the need for a global shift to a low-carbon economy, a new report finds a record number of U.K. fossil fuel companies went bust in 2016 due to falling oil and gas prices.
The Independent reported the analysis from accounting firm Moore Stephens which found “16 oil and gas companies went insolvent last year, compared to none at all in 2012.” And the trend was not unique to the U.K.—a year-end bankruptcy report from Texas-based Haynes and Boone LLP showed there have been 232 bankruptcy filings in the U.S. and Canadian energy sector since the beginning of 2015.
“As the warnings from climate science get stronger, now is the time to realize…that the future is not in fossil fuels,” Dr. Doug Parr of Greenpeace U.K. told The Independent. “It’s also time for government to recognize that we should not leave the workers stranded, but provide opportunities in the new industries of the 21st century.”
Those opportunities are likely to come in the renewable energy sector, as the World Economic Forum (WEF) announced (PDF) in December that solar and wind power are now the same price or cheaper than new fossil fuel capacity in more than 30 countries.
“Renewable energy has reached a tipping point,” Michael Drexler, who leads infrastructure and development investing at the WEF, said in a statement at the time. “It is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns.”
And as Paul Buchheit noted in an op-ed published Tuesday at Common Dreams, “solar is also creating jobs at an unprecedented rate, more than in the oil and gas sectors combined, and 12 times faster than the rest of the economy.”
But it remains unclear how these trends will develop under an incoming Donald Trump administration.
As Moody’s Investor Services reported Tuesday, under Trump’s fossil-friendly cabinet, “U.S. energy policy likely will prioritize domestic oil and coal production, in addition to reducing federal regulatory burdens.”
In turn, according to Moody’s:
Increasing confidence in the oil and gas industry’s prospects will spur acquisition activity among North American exploration and production (E&P) firms, Moody’s says. Debt and equity markets are again offering financing for producers seeking to re-position and enhance their asset portfolios after a lull. [Merger and acquisition activity] will also pick up in the midstream sector. At the same time, integrated oil and gas firms will continue to improve their cash flow metrics and leverage profiles by cutting operating costs, further reducing capital spending and divesting assets.
Even so, the oilfield services and drilling (OFS) sector is in for another tough year, with continued weak customer demand, overcapacity, and a high debt burden.
Bottom line, wrote Buchheit, is that with the rapid expansion of solar power, Trump has “the opportunity to make something happen that will happen anyway, but he can take all the credit, with the added bonus of beating out his adversary China.”
“Unfortunately, Trump may not have the intelligence to recognize that he should act,” Buchheit wrote. “And the forces behind fossil fuel make progress unlikely. But there is plenty of American ego and arrogance and exceptionalism out there. We need some of that ego now, just like 60 years ago, when the Soviet accomplishments in space drove us toward a singular world-changing goal. Then it was the moon. Now it’s the sun.”