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Daily Archives: August 29th, 2012

Just read an excellent article by Bill McKibben via The Monthly’s Shortlist which came from Rolling Stone’s July issue, Global Warming’s Terrifying New Math.

Plainly, transitioning away from fossil fuels affects the future profitability of Oil companies. But there is an immediate threat to big oil which dwarfs that, and that threat comes about due to loss of value in oil inventory.

Simply put, to keep the planet from warming more than the 2 degrees celsius ‘safety bar’, we must not burn more than 20% of the proven reserves of carbon-based fuels. A committment to do that means 80% of the assets of the world’s oil companies become essentially woorthless.

As McKibben describes, the proven reserves of the world’s biggest energy companies, still in the ground has a current market value of $27 Trillion. Now, while all that oil and gas is still in the ground, from a financial perspective it is an asset and therefore in certain important respects is treated as tradeable. To quote McKibben:

it’s already economically aboveground it’s figured into share prices, companies are borrowing money against it, nations are basing their budgets on the presumed returns from their patrimony. It explains why the big fossil-fuel companies have fought so hard to prevent the regulation of carbon dioxide – those reserves are their primary asset, the holding that gives their companies their value.

To avoid an AGW carbon fuel-driven temperature increase of 2 degrees celsius, optimistically regarded as a liveable, non-catastrophic medium-term average global warming outcome, only 20% of those reserves can be burnt. Which means that 80% or $20 Trillion worth of oil and gas would become valueless as an energy source…

you’d be writing off $20 trillion in assets.

… which would obviously cripple the great energy corporations of the planet and the wallets and personal stock portfolios of their CEOs and major shareholders…which creates a great reason to engage in AGW denial.

So the threat to the wealthy and the companies they controlarising from meaningful transitions to renewable energy is immediate. They have outstanding loans, salaries and stock portfolios based on under-the-ground inventory.

No wonder they’re fighting like cornered wolves.