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Is the Trans Mountain Pipeline (and Other Fossil Fuel Investments) a Future Stranded Asset?

Production

Several major economies, including the U.S. and Canada, rely heavily on fossil fuel production and exports. But the surging market penetration of renewable energy technologies, energy efficiency improvements, and climate emission policies are certain to substantially reduce the global demand for fossil fuels.

In a seminal paper published a week ago in Nature Climate Change, researchers present the results of sophisticated multi-dimensional modeling of the macro-economic impacts of future technology transformations and climate change policy, as the demand for fossil fuels declines and the price of oil falls.

This is a peer-reviewed paper that was scrutinized by other experts for almost a year before it was accepted for publication. Its warnings should be taken seriously.

Irrespective of whether or not new climate policies are adopted, global demand growth for fossil fuels is already slowing due to the accelerating transition to a low carbon global economy. Given the pace of low-carbon technology market penetration, fossil fuel assets are likely to become stranded due to advances in renewable energy deployment, improvements in energy efficiency, and the electrification of the transportation sector.

There can be no doubt that a global energy transition is fully underway. Last year was another record-breaking year for renewable energy — characterized by the largest ever increase in renewable power capacity, falling costs, increased investment, and advances in enabling technologies.

Solar photovoltaic capacity installations were off the chart — nearly double those of wind power (in second place) — and adding more net capacity than coal, natural gas, and nuclear power combined. Check out the numbers.

The Paris Agreement aims to limit the increase in global average temperatures to below 2°C. Attaining this objective absolutely requires that a fraction of existing reserves of fossil fuels remain in the ground, and that a part of present production capacity remains unused — effectively becoming stranded assets.

Since investors had assumed that these reserves will be commercialized, the stocks of listed fossil fuel companies may soon be judged to be over-valued. This situation gives rise to the possibility of a “carbon bubble” — which may eventually burst with global economic consequences.

The modeling results show that the lower demand for fossil fuels leads to substantial stranded fossil fuel assets weven if climate change policies are not adopted. For individual countries, the effects vary depending on their  marginal costs of production, with oil production becoming concentrated in OPEC member countries–where costs are lower. Regions with higher marginal costs experience a steep decline in production (for instance Russia), or risk losing a substantial part of their oil and gas industries — like Canada and the U.S.

The Sell-out

The magnitude of the economic impact depends on a variety of factors. The analysis suggests that the behavior of low-cost producers and/or the adoption of 2°C policies can lead to an amplification of the losses. If low-cost producers decide to increase their ratio of production relative to reserves to outplay other asset owners and minimize their losses by selling out early–in effect a “sell-out” — this strategy has a major and very negative impact on higher cost producers.

The low carbon transition generates a modest GDP and employment increase in regions with limited exposure to fossil fuel production (for example, most of the EU and Japan). This is due to a reduction of the trade imbalance arising from fossil fuel imports, and higher employment arising from new investment in low carbon technologies. The improvement occurs despite the general increase in energy prices and hence costs for energy intensive industries.

However, fossil fuel exporters experience a steep decline in their output and employment due to the near shutdown of their fossil fuel industry. These patterns emerge even though there is only a modest overall impact on global GDP — indicating the impacts are primarily distributional with clear winners — the EU and China, and clear losers — the U.S. and Canada.

Gains and Losses

The figure below shows the gains and losses for major economies including the U.S. and Canada through to 2035.  The units are in trillions of U.S. dollars. The principal winners are the EU, China and India. The main losers are the U.S. and Canada.

GDP gains and losses graphCumulative GDP gains and losses by country/region. Credit: Mercure et al., Nature Climate Change 2018

Although the U.S. losses are larger in absolute terms, the percentage loss of GDP for Canada is much larger — increasing to over 20 percent within the next ten years. Unemployment increases to around 8 percent over the same time frame. These projections are shown in the graphs below.

GDP percent change in stranded fossil fuel assetsPercentage change in GDP. Credit: Mercure et al., Nature Climate Change 2018

For Canada, the higher marginal costs of oil sands production (including transport to tidewater via pipelines or oil trains) doom the industry to a future of increasingly curtailed production and stranded assets.

It’s in the context of these long term macroeconomic projections that the proposed Trans Mountain Expansion pipeline should be viewed. Within a decade there will be no market for the oil sands production of heavy oil and bitumen. Low-cost producers, sensing the end of an era, will start to sell off their assets. Oil prices will tumble.

It makes no sense to build a pipeline intended to increase production from the oil sands when even maintaining the existing level of production is seriously in doubt.

Justin Trudeau, now the proud owner of an obsolete and very expensive pipeline, should check the fine print.

Maybe he’s still got a few days where he can change his mind.

DeSmog Blog



87 Comments on "Is the Trans Mountain Pipeline (and Other Fossil Fuel Investments) a Future Stranded Asset?"

  1. Makati1 on Tue, 12th Jun 2018 5:06 pm 

    “Greg, You are definitely not alone. I am an anti Zionist, too.”

    You can add me to that list, guys.

    BTW:
    USA Jewish population – 5,700,000
    Israel ” ” – 6,500,000
    Philippines ” ” – <200

    https://en.wikipedia.org/wiki/Jewish_population_by_country

    Another reason I like it here in the Ps. ^_^

  2. MASTERMIND on Tue, 12th Jun 2018 5:18 pm 

    Clogg

    No need to cite scholarly papers or reliable sources..Youtube conspircy videos will due..You have to go to youtube because what you are arguing isn’t true..That is why you can’t use any reliable sources to prove it..You are like a flat earther..A total lunatic whack job.

    Get some medical help Clogg..If not for yourself, due it for your families sake..

  3. GregT on Tue, 12th Jun 2018 5:19 pm 

    Good post Cloggie.

    OK Davy boy, here’s yet another opportunity for you to easily shred Cloggie’s argument to pieces.

    Step up to the plate buddy, or continue to make yourself look like a complete moron.

  4. MASTERMIND on Tue, 12th Jun 2018 5:22 pm 

    Madkat

    You left America because your wife of a generation left you..because you are a cruel person and likely impotent and couldn’t satisfy her needs anymore..

    You fucking do gooder, too bad you couldn’t do good in marriage! LOL

  5. Makati1 on Tue, 12th Jun 2018 5:27 pm 

    MM, nothing worthwhile to say? Nothing but immature fantasy ideas of someone else’ life? You have really gone down to Davy’s level. So sad. You are wasting the only life you will ever have.

    BTW: I would say that 28 years was a good run for a marriage. Especially as you have zero experience in that field so you do not know what you are talking about. Get married, if you can, and come back in 28+ years with an intelligent comment.

  6. Harquebus on Tue, 12th Jun 2018 5:31 pm 

    MASTERMIND
    I normally ignore your comments. Your last is a perfect example of why.

  7. GregT on Tue, 12th Jun 2018 5:32 pm 

    “You are like a flat earther..A total lunatic whack job.”

    Says the guy who doesn’t even know what a semite is, or the difference between a Zionist and a Jew.

    Try to claw your way through the basics first MM, before shouting down somebody who clearly has a far better understanding of the subject matter than you do.

  8. MASTERMIND on Tue, 12th Jun 2018 5:38 pm 

    Trump looking to erect tent cities to house unaccompanied children

    http://www.kansascity.com/news/politics-government/article213026379.html

    Immigrant children being caged like dogs in ICE concentration camps..Another holocaust is just one small step away..

  9. GregT on Tue, 12th Jun 2018 5:39 pm 

    “No need to cite scholarly papers or reliable sources.”

    I might add MM, as shown numerous times before, none of the articles that you continue to link to support your conclusions.

    Your reading comprehension skills suck, dude, bordering on non-existent.

  10. Anonymouse1 on Tue, 12th Jun 2018 5:43 pm 

    Davyturd is just playing his usual games, using his sock puppet, ‘mushmind’ to say things that are too ridiculous and embarrassing, or possibly what he imagines are beneath his ‘dignity’ to say himself. Of course the exceptionalturd has quite the barnyard mouth on him and is not terribly shy about using it. However, using his sock allows him more ‘freedom’, to let his insanity run wild, as it were.

  11. MASTERMIND on Tue, 12th Jun 2018 5:46 pm 

    I think the far right now of days is actually much more evil and worse than the German Nazi’s..Since Hitler was fooled by the junk science of eugenics..And now of the days they know better..Its just a matter of time before the oi runs out.And we will crush the fascist..

  12. Davy on Tue, 12th Jun 2018 5:51 pm 

    Wow! the grotesque groupies are all disturbed. Mission accomplished! Notice how the scumbags hunt in packs. This is because as individuals they are too intellectually weak to carry on their distortions. As a group they can enable and support each other’s extremist lies. It is wonderful to cause so much stress among them by fracturing the illusions. All it takes is a little reality and their house of cards collapses.

  13. Makati1 on Tue, 12th Jun 2018 5:55 pm 

    ” That is what Israel and its Prime Minister Benjamin Netanyahu are all about and that is precisely the kind of a nation that America should not want to become, but unfortunately the role of Washington as Israel’s obedient poodle has our once great country moving in the wrong direction. This has all been brought about by Jewish Power and it is time to wake up to that fact and address it squarely.”

    https://www.globalresearch.ca/understanding-jewish-power/5643907

    Nuff said.

  14. Makati1 on Tue, 12th Jun 2018 5:56 pm 

    Again, no intelligent rebuttal from Davy…

  15. MASTERMIND on Tue, 12th Jun 2018 5:56 pm 

    Greg

    Existing oil reserves are scheduled to begin a catastrophic crash within 1 to 3 years. When it hits the economic and social damage will be catastrophic. The end of Western Civilization, from China to Europe, to the US, will not occur when oil runs out. The economic and social chaos will occur when supplies are merely reduced sufficiently….
    https://imgur.com/a/6dEDt
    https://arxiv.org/pdf/1708.03150.pdf
    https://www.scientificamerican.com/article/has-peak-oil-already-happened/
    http://www.sciencedirect.com/science/article/pii/S0301421509001281
    https://www.scribd.com/document/375110698/The-end-of-Peak-Oil-Why-this-topic-is-still-relevant-despite-recent-denials-Chapman-2014
    https://www.scribd.com/document/375110317/Projection-of-World-Fossil-Fuels-by-Country-Mohr-2015
    http://www.energybulletin.net/sites/default/files/Peak%20Oil_Study%20EN.pdf
    http://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017

    ThEy DoNt SaY wHaT yOu ClaIm Mm!

    You are a pathetic low life Nazi! I hope you are alive in a few years because you deserve to suffer

  16. MASTERMIND on Tue, 12th Jun 2018 5:57 pm 

    Greg

    The End of the Oil Age is Imminent!

    Recently, the HSBC oil report stated that 80% of conventional oil fields were declining at a rate of 5-7% per year. This means that there will be an oil shortage of ~30 million barrels per day by 2030 and ~40 million barrels per day by 2040.
    http://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017

    What is mentioned far less often is that annual oil discoveries have lagged annual production since the 1980s.
    https://imgur.com/a/6dEDt

    Now, this problem has nothing to do with the recent decline in the oil price, which started in 2014. This has been an on-going problem for the past 30 years. Now, the IEA is predicting oil shortages by ~2020 due to declining exploration.
    https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000

    Here, the IEA blames this problem on the low oil price. But, this problem started in the 1980s. The problem is geological: we are running out of conventional cheap oil. Shale and tar sands are not the answer, either. Those resources are far too expensive, compared to conventional oil, because the global economy is based on cheap conventional oil. Expensive oil is not a replacement for cheap oil.

    Based upon the HSBC report and the IEA, the End of Oil Age will start around ~2020: there will be a dramatic economic depression due to exhaustion of cheap oil. This will cause a global economic collapse.

  17. MASTERMIND on Tue, 12th Jun 2018 5:58 pm 

    Greg

    I emailed Professor Douglas B Reynolds PhD, Oil and Energy Economics, University of Alaska.
    http://uaf.edu/files/som/REYNOLDS-Doug-2016-CV.pdf

    And I asked him if our upcoming oil shortage will cause a global economic collapse?
    https://imgur.com/a/rBtIrfg

    He replied;

    “Yes, it will be like that, but may be worse with other extenuating circumstances such as war or the decline of international trade. Hyperinflation as happened in the Soviet and Post Soviet economy is a certainty.”
    https://imgur.com/a/rktmHdt

    Once again an expert concluding the exact same thing I have been saying over a year here..Get an education you Nazi scum bag. Canadian neckbeard

  18. MASTERMIND on Tue, 12th Jun 2018 6:00 pm 

    We live in frightening times. It’s my belief that “you personally” will most likely die of starvation or conflict between 2020 to 2035
    You will experience a collapse of human civilization, a die-off of humans, a destruction of the ecosystem, a loss of access to mined and drilled resources, and a dark age from which your descendent’s will not reemerge.

    Simple really….when the World Economy Collapses everything shuts down…the end… We’re talking about grids down all over the world and 7.5B people dropping like f*** flies in short order. The collapse will be absolutely horrible..There is no collapse or horror movie ever produced that has even come close to imagining what the collapse of BAU might look like. I’m talking about every corporation and every social program going bankrupt at once. I’m talking about people eating people. I’m talking about the Worst Catastrophe to ever happen in the history of mankind. Nothing has ever, or will ever come close…

    Sleepwalking Into The Next Oil Crisis
    https://www.forbes.com/sites/rrapier/2018/03/23/is-the-world-sleepwalking-into-an-oil-crisis/#509edc8b44cf

    According to the German Army leaked study. When the oil shortages hit, Wall street will crash, the public will lose all faith/trust in their institutions, and the global economy and world governments will collapse..
    http://www.energybulletin.net/sites/default/files/Peak%20Oil_Study%20EN.pdf

    Scientific American: Apocalypse Soon: Has Civilization Passed the Environmental Point of No Return?
    https://www.scientificamerican.com/article/apocalypse-soon-has-civilization-passed-the-environmental-point-of-no-return/

    Inside the new economic science of capitalism’s slow-burn energy collapse (Ahmed, 2017)
    https://medium.com/insurge-intelligence/the-new-economic-science-of-capitalisms-slow-burn-energy-collapse-d07344fab6be

    Peer Reviewed Study: Society Could Collapse In A Decade, Predicts Historian (Turchin, 2010)
    https://www.nature.com/articles/463608a

    NASA Peer Reviewed Study: Industrial Civilization is Headed for Irreversible Collapse (Motesharrei, 2014)
    http://www.sciencedirect.com/science/article/pii/S0921800914000615

    The Royal Society: Peer Reviewed Study, Now for the First Time A Global Collapse Appears Likely (Ehrlich, 2013)
    https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3574335/

    Peer Reviewed Study: Limits to Growth was Right. Research Shows We’re Nearing Global Collapse (Turner, 2014)
    https://www.scribd.com/document/379418787/Is-Global-Collapse-Imminent-An-Updated-Comparison-of-The-Limits-to-Growth-with-Historical-Data-Turner-2014

    Peer Reviewed Study: Financial System Supply-Chain Cross-Contagion: Global Systemic Collapse (Korowicz, 2012)
    http://www.feasta.org/wp-content/uploads/2012/06/Trade-Off1.pdf

    Gaslighting won’t save you Greg..

  19. Davy on Tue, 12th Jun 2018 6:38 pm 

    3rd world, my rebuttal was the shattering of the legitimacy of your scatter brain assertions. There is no legitimacy and no reality testing going on here with you and your groupies. You are fools that bark at the moon.

  20. Boat on Tue, 12th Jun 2018 6:40 pm 

    Mm

    Oil supply problems to cause catastrophic crash in one to three year. But just a small drop in Supply will cause catastrophic crash before the one to three year catastrophic crash. Lol Your a trip equal to the mushrooms of the eighties. We have to remember the 10 year grace period…. your just in case you need it period. Have I got that right? Do I understand your many varying posts generally?

  21. GregT on Tue, 12th Jun 2018 6:44 pm 

    “Again, no intelligent rebuttal from Davy…”

    Just more of the usual delusional bullshit. No surprise there.

  22. GregT on Tue, 12th Jun 2018 6:47 pm 

    MM,

    We’ve been through all of this before, many times. Provide quotes that support your conclusions please, otherwise stop misrepresenting other peoples’ work.

  23. GregT on Tue, 12th Jun 2018 6:58 pm 

    “You are fools that bark at the moon.”

    You’re projecting again Davy.

    Step up to the plate, or give the delusional bullshit a rest already.

  24. Boat on Tue, 12th Jun 2018 7:05 pm 

    These billionaires missed the crash predictions.

    http://www.businessinsider.com/bill-gates-mark-zuckerberg-investing-energy-startups-2018-6

  25. Makati1 on Tue, 12th Jun 2018 7:17 pm 

    Davy, your rebuttal was just more of your delusional bullshit, not an intelligent reply. Grow up or get help…

  26. Davy on Tue, 12th Jun 2018 7:57 pm 

    GEEEZE, change your tampons. what is the question you uptight pussies? You guys are losing it. This is just an internet forum. Maybe you two need to get your shits and grins somewhere else because you are getting lost in your little world of make believe.

  27. GregT on Tue, 12th Jun 2018 8:14 pm 

    Give it a rest already Davy.

    5 years of your daily BS is far more than beyond stupid.

  28. Davy on Tue, 12th Jun 2018 8:24 pm 

    greghgie, you messed with me yesterday and now you are whining to me to give it a rest?? What is it with you? Do you regret doing your pricking and then getting your melon thumped?

  29. GregT on Tue, 12th Jun 2018 9:42 pm 

    You haven’t neutered anybody Davy, you haven’t moderated anybody, you haven’t bitch slapped anybody, you haven’t given anybody an ass kicking, you haven’t pussy whipped anybody, and you haven’t thumped anybody’s melon.

    This is an open unmoderated Internet discussion forum, where anybody is free to express their own personal opinions whenever they like. You have absolutely zero say, or control over what anybody else thinks.

    Why is that so difficult to get through your sick deluded sad little excuse of a mind?

  30. Makati1 on Tue, 12th Jun 2018 11:27 pm 

    Davy lives in Davyland where everything and everyone agrees with his warped view of everything. To have a different view is to be considered insane, immaterial, deluded, or in plain words, “wrong”. There is no place on the planet that can be any better, safer, more enjoyable than Davyland. All of us outside Davyland must be dismissed as old, feeble, uneducated, senile, etc.

    Unfortunately, most Americans share some part of his Davyland fantasy. The awakening is going to be rude, crude and very painful, and soon.

    https://www.theburningplatform.com/2018/06/12/the-reality-gap/#more-178024

    Slip slidin’…

  31. BobInget on Wed, 13th Jun 2018 9:24 am 

    On Topic:

    With President Donald Trump roiling the American relationship with its neighbor to the north, the Canadian oil industry’s biggest trade group is floating ideas for reducing its dependence on the U.S.

    One possibility would be reviving Enbridge Inc.’s Northern Gateway pipeline proposal, according to Tim McMillan, chief executive officer of the Canadian Association of Petroleum Producers. Currently, all but one of Canada’s oil pipelines run to the U.S., and gaining the ability to ship crude off the northern Pacific coast to Asia is “crucially important,” McMillan said during an on-stage interview at an industry conference on Tuesday.

    “Today Canada only has one customer for our crude oil, and growing markets around the world want Canadian product,” McMillan said. “So there’s a natural incentive for us to build to new markets.”

    The Northern Gateway pipeline was rejected in 2016 by Prime Minister Justin Trudeau, who said the project wasn’t in the best interest of the indigenous communities along its route from an oil hub near Edmonton to Kitimat, British Columbia. But in light of Trump’s recent imposition of tariffs on Canadian metals and his personal attacks on Trudeau, the government should consider revisiting the proposal, McMillan said.

    “If there’s ever a time where we need to reassess decisions made even a year or two ago, it’s now,” McMillan said.

    Enbridge declined to comment beyond saying that it is focused on its C$22 billion ($16.9 billion) growth program.

  32. MASTERMIND on Wed, 13th Jun 2018 9:36 am 

    Guy McPherson is on the edge of extinction. Guy is crazy. He should be put in a cage and displayed at a freak show in a circus…

  33. BobInget on Wed, 13th Jun 2018 9:37 am 

    Quite Bullish EIA Repore

    Summary of Weekly Petroleum Data for the week ending June 8, 2018

    U.S. crude oil refinery inputs averaged 17.5 million barrels per day during the week
    ending June 8, 2018, which was 136,000 barrels per day more than the previous week’s
    average. Refineries operated at 95.7% of their operable capacity last week. Gasoline
    production increased last week, averaging about 10.5 million barrels per day. Distillate
    fuel production decreased last week, averaging more than 5.1 million barrels per day.

    U.S. crude oil imports averaged about 8.1 million barrels per day last week, down by
    247,000 barrels per day from the previous week. Over the past four weeks, crude oil
    imports averaged about 8.1 million barrels per day, 1.3% less than the same four-week
    period last year. Total motor gasoline imports (including both finished gasoline and
    gasoline blending components) last week averaged 824,000 barrels per day, and distillate
    fuel imports averaged 104,000 barrels per day.
    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum
    Reserve) decreased by 4.1 million barrels from the previous week. At 432.4 million
    barrels, U.S. crude oil inventories are in the lower half of the average range for this time
    of year. Total motor gasoline inventories decreased by 2.3 million barrels last week and
    are in the upper half of the average range. Both finished gasoline and blending
    components inventories decreased last week.

    Distillate fuel inventories decreased by 2.1
    million barrels last week and are in the lower half of the average range for this time of
    year. Propane/propylene inventories increased by 3.7 million barrels last week and are in
    the lower half of the average range. Total commercial petroleum inventories decreased by
    1.8 million barrels last week.

    Total products supplied over the last four-week period averaged more than 20.4 million
    barrels per day, up by 1.7% from the same period last year. Over the past four weeks,
    motor gasoline product supplied averaged about 9.6 million barrels per day, up by 0.3%
    from the same period last year. Distillate fuel product supplied averaged 4.0 million
    barrels per day over the past four weeks, down by 0.5% from the same period last year.
    Jet fuel product supplied was up 1.2% compared with the same four-week period last
    year.

  34. BobInget on Wed, 13th Jun 2018 9:43 am 

    ” At 432.4 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year”.
    (so called ‘driving season’ ha begun)

    CONSUMPTION

    “Total products supplied over the last four-week period averaged more than 20.4 million
    barrels per day, up by 1.7% from the same period last year. Over the past four weeks,
    motor gasoline product supplied averaged about 9.6 million barrels per day, up by 0.3%”

    Were it not for EV’s shortages would be far worse.

  35. BobInget on Wed, 13th Jun 2018 9:54 am 

    DISTILLATES: Because almost 40% of America’s
    ‘crude oil’ production isn’t heavy enough to produce good diesel, shortages are world-wide.

    Another cause, Davy. Venezuela.
    “Slowly, slowly, then, suddenly”*

    I warned of these shortages months ago, for the record.

    To pay for Canada’s new pipelines, Canada best tax US exports. Now, watch the entire house of cards collapse.\

    * result for slowly slowly then suddenly…
    It’s often attributed to Mark Twain or F. Scott Fitzgerald, or misquoted as something like “At first you go bankrupt slowly, then all at once.” But the theme is the same. Nations go bankrupt in the same way. Banking collapses occur in the same way.

  36. jawagord on Wed, 13th Jun 2018 9:29 pm 

    Bob, generally you don’t tax exports, you tax imports. An export tax gets paid by the exporter, Trudeau Sr., did this in 1981 and devastated the Canadian oil industry. A devastated oil industry wouldn’t need a new pipeline so I guess an export tax is a greenie solution to the pipeline problem.

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