[Graeme]

The carbon bubble will burst, warns Jonathon Porritt

Bubbles always burst. Confronted with the increasingly traumatic consequences of a rapidly warming world (already a harsh physical reality for many), politicians will be forced into panic policy responses. They will seek to do in a very short time what we should have been doing over the last 25 years, including putting a higher price on every tonne of CO2. And when they do, all those oil, gas and coal assets will first become unviable and then completely stranded, destroying trillions of dollars of economic value in the process.

It’s already too late to avoid that particular Hobson’s choice: either we burn the planet by crashing through the 2°C barrier and on to 4°C or even higher, or the bubble bursts, with very severe economic consequences. But we don’t have to go on making it worse – and we don’t have to further penalise the world’s poor in managing the outfall. As is now well understood, the principal alternatives to fossil fuels (renewables and energy efficiency) are even more important in developing and emerging countries as they are in the rich world.

If ever there was a preconditional imperative, this is surely it. Accelerating climate change, caused by the continuing emissions of greenhouse gases from burning fossil fuels, represents an existential threat to our species – by which I mean it threatens the stability and economic wellbeing of every society on Earth.

This is the “inconvenient truth” at the heart of the global economy today. It is recognised (although often set aside) by a minority of politicians. It remains totally unseen as far as the vast majority are concerned. But if we don’t move very rapidly indeed through programmes of radical decarbonisation in every sector of the economy, increased social justice will become a very distant dream. Indeed, the lives of billions of people will become too horrendous to contemplate.

So can it still be done? I believe it can – which is the main thrust of my new book, “The World We Made”, to be published in October. But debates about whether social justice or biophysical sustainability ‘comes first’ are little more than a self-indulgent irrelevance. Some ‘issue’!

forumforthefuture

[rollin]

First, let's look at where we are. Greenhouse gases are at about 450 ppm and average global temp has risen about 1 degree C since preindustrial time (during a cooling trend). The time lag for temperature effects is about 30 to 40 years so much of the CO2 input has not been realized as temperature effects yet, it is in the pipeline so to speak. Pollution effects are holding back about 1 degree of temperature rise (more in the pipeline). Natural feedbacks have already started, most dramatically seen in the arctic, with albedo changes from loss of ice and snow cover and methane releases from melting tundra and warming waters. Large deforestation from natural fires due to droughts is occurring, putting another chunk of CO2 in the atmosphere. We are in worse trouble than is generally advertised and there is no time for "niceties".

So as the desertification increases, drought increases, and floods increase agriculture and lives will be effected across the globe. Temperature rises will cause major shifts in plant life (and plant death) as well as make some areas uninhabitable. Ocean rise will eventually cause the loss of huge amounts of area, infrastructure and mass migration. Ocean acidification will eventually kill most of the ocean life if allowed to continue and act as a reservoir of carbon to extend the warming for thousands of years.

Worrying about the social justice of mediation and de-carbonization of our industry and transportation is an oxymoron. Economic losses of a toxic and planet killing system of operation are of no concern. Any pain or sacrifice to stop this juggernaut will be more than balanced by the results of having a viable world.

We, as people and as a species, have a huge debt to pay back to the ecosystem and it's inhabitants. We have thoughtlessly stolen much of the environment and used it for harm. Our only concern should be the stabilization of carbon system at a "normal" level and the healing of the planetary ecology through a non-destructive human civilization.

[Graeme]

Try telling this to fossil-fuel companies! Will they listen? Eventually they will.

[AgentR11]

They'll listen once they run out of profitable resources to produce... then expect a pivot on a dime. Till then... drill baby drill.

[Graeme]

Hope they can dodge all natural disasters, diseases, irate shareholders and those who want change.

[Graeme]

Is the carbon bubble about to bust? One unlikely pundit thinks so

Evans-Pritchard sees a lot of crazy things going on in the markets right now — China’s construction boom, in particular — but he says that the most disconcerting is the amount of effort that oil and gas companies are spending looking for new resources in areas with such low profit margins. The gradual end of the Federal Reserve’s quantitative easing policy in the U.S., and similar monetary tightening elsewhere, may also cause oil and gas prices to fall, turning the infrastructure that has been invested in finding oil and gas and getting it to market into an expensive liability.

Writes Evans-Pritchard:

Data from Bank of America show that oil and gas investment in the U.S. has soared to $200 billion a year. It has reached 20 percent of total U.S. private fixed investment, the same share as home building. This has never happened before in U.S. history, even during the Second World War when oil production was a strategic imperative.

The International Energy Agency (IEA) says global investment in fossil fuel supply doubled in real terms to $900 billion from 2000 to 2008 as the boom gathered pace. It has since stabilized at a very high plateau, near $950 billion last year.

The cumulative blitz on exploration and production over the past six years has been $5.4 trillion, yet little has come of it. Output from conventional fields peaked in 2005. Not a single large project has come on stream at a break-even cost below $80 a barrel for almost three years.

“What is shocking is that upstream costs in the oil industry have risen threefold since 2000 but output is up just 14 percent,” said Mark Lewis, from Kepler Cheuvreux. The damage has been masked so far as big oil companies draw down on their cheap legacy reserves.

Also, later, on Twitter, he added: “Time to shrink oil, gas, coal to much smaller industry, before they waste any more money. Solar will eat their lunch.”

grist

[Graeme]

Carbon bubble, oil or trouble?

What does the fossil fuel industry make of the argument that it won't be allowed to burn its main product?

In 2011, campaign group Carbon Tracker warned that large portions of fossil fuel companies' assets are "unburnable" if the world intends to limit global warming to no more than two degrees.

If energy companies can't burn their reserves, they're overvalued, the group argues, in an analysis aimed squarely at the world's financial markets.

In the intervening years, the argument has gained some traction, including in key financial industry publications like the Financial Times and The Economist. But what do the fossil fuel companies themselves think?

While we weren't particularly optimistic that they'd want to talk about it, we asked oil, gas and coal companies for their take on the carbon bubble research. Many didn't respond. But some of the bigger companies did, acknowledging that while strong climate action could affect their activities, none of them considered it a threat to their business this century.

Responses

We contacted 76 oil, gas and coal companies, drawn from the main trade groups. Seven companies provided substantial responses. Fifty-eight companies didn't respond. We got no response from the coal industry.

Of the substantial responses, six came from major oil companies on the Fortune 500 list of the world's largest businesses, and followed a similar formula.

BP, Shell, ExxonMobil, ConocoPhillips, Statoil, and MOL all acknowledged climate change was real, and that climate policy posed a risk to their businesses – to an extent. They agreed that regulations to curb greenhouse gas emissions should become more stringent over time, and probably will.

But none of the companies we asked saw climate action as a threat to their business in the coming decades – or if they did, they weren't prepared to share that assessment with us.

businessspectator

[Graeme]

A Carbon Bubble in 2015?

The dot-com bubble caused a market crash in 2000, a housing bubble almost brought down the global economy in 2008, and today's gushing excitement over new US oil and gas discoveries could also prove to be a bubble that is likely to collapse about 2015 – a "carbon bubble."

My TechCast Project (www.TechCastGlobal.com) has been cautious about the new energy discoveries, and the following trends suggest good reasons for thinking the bloom is off the rose. Yes, abundant optimism abounds, but that's how it always looks at the top of a bubble – endless opportunity and other exaggerated promises. Our forecasts reported below suggest it would be wise to consider the prospect of a major oil shock to the global economy in the next few years, triggering a global downturn.

LIMITED The new discoveries are a boon to Americans, but they only add a few percent to global supplies. The US's 3 million barrels/day output pales in comparison to global demand of 90 million barrels/day, which. is increasing rapidly as China, India, and other nations industrialize. The new oil in the Dakotas, for instance, is considered the greatest find ever in the US, yet this is only 0.5 percent of global reserves.

DECLINING It is also clear that the supply of carbon is declining. The International Energy Agency reports that four million barrels are being depleted every day, and the rate of loss is increasing. The US Energy Information Administration thinks oil and coal seem to be flattening and gas is likely to peak in a decade or two. (MIT Technology Review, Jul 3, 2013) Shale gas only produces about 1 percent of transport fuel, even while the first gas mines are now declining. Some think gas will peak in a decade. (Atlantic, May, 2013)

OVERSTATED There is also evidence that energy companies are overstating the supply to discourage competition from alternative energy. Shell's head of exploration stated: "I am sick and tired of lying about the extent of our reserves." Because of low output, Shell's $24 billion investment in unconventional oil and gas in North America has been disappointing. The outgoing CEO said "Unconventionals did not play out as planned." (Guardian, Mar 28, 2014)

wfs

[Graeme]

Bubble time: Friends and relatives act as if we've returned to business-as-usual

Now there was a time when investing in the stock market for the long term worked because the businesses that made up that market were supported by unconstrained supplies of energy and other critical resources. The undulations in the economy were due primarily to economic cycles. But as economist James Hamilton has pointed out, 10 of the last 11 recessions were preceded by an oil price spike. That's not definitive proof that the oil price was THE cause of any particular recession. But it would be hard to rule out oil as a major factor in those recessions.

My view is that there is no more long-term in the stock market or any market. The relentless, if zigzag, rise in financial markets for the past 150 years has been sustained by cheap fossil fuels and a benign climate. We cannot count on either from here on out. In fact, oil has been at or near a record average daily price for more than three years. We are paying more for oil on average than we did in 2008, the year of the spike.

Another thing we cannot necessarily count on is the remarkable geopolitical stability that the world experienced for two long stretches during the fossil fuel age. The first one lasted from the end of the Napoleonic Wars in 1815 to the beginning of World War I in 1914 (interrupted only by the brief Franco-Prussian War). The second lasted from the end of World War II in 1945 until now.

resilience