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The
research by the Carbon Tracker Initiative (CTI) shows how oil companies are exposing investors to a multi-trillion-dollar gamble on high oil prices, strong demand and indifference to climate change. The analysis links the investments in fossil fuels with the amount of them that can be burned if the world is to keep global warming below 2°C in this century, as agreed by the world’s leaders.
The CTI says that between 60% and 80% of fossil fuel reserves owned by publicly-listed companies must stay in the ground if the fight against global warming is to be won.
Alberta, the tar sands province in Canada, is the region with the highest risk of wasted capital. The companies with the highest exposure to risk there are the Canadian companies, Canadian Natural Resources Limited and Suncor Energy, and Shell.
All the big tar sands operators also make the top 20, reflecting the capital intensity and high uncertainty of the projects in Alberta.
The report concluded: ‘Gambling on a $95 per barrel oil price on behalf of shareholders is risky given that oil prices have dropped to $40 per barrel twice in the last decade. Demand for oil could be impacted by a range of future issues, such as the increasing constraints on emissions [through climate policies], efficiency gains, improvements in technology, and slowdown in the Chinese economy.’
Despite pressure to achieve a meaningful climate deal at the Paris climate summit late next year, the oil industry seems to be banking on nothing coming from it that would affect current levels of investment in oil production. Recently the US giant ExxonMobil – producers of Esso fuels – said it thought it was ‘highly unlikely’ that the world would cut carbon emissions.
Just two weeks after the launch of the CTI Report, Shell executive vice-president JJ Traynor dubbed the report’s findings ‘alarmist’ and completely ignored the issue at hand: ‘We do not believe that at a minimum any of our potential reserves are at risk from any potential change in regulation from climate change or the carbon bubble/stranded assets concept.’
NGOs and leading figures are calling for universities, municipalities, churches, and large fund managers to sell their shares in fossil fuel companies, a policy known as ‘divestment’. The campaign has been backed by the UN’s top climate diplomat Christiana Figueres, and the retired South African archbishop Desmond Tutu
last month called for an ‘anti-apartheid style boycott’ of the fossil fuel industry.
