Inflection Point

[jsburbidge]

The recent news that New York is divesting from oil based investments may mark, at least symbolically, and possibly substantially, an inflection point for the fossil fuel industry.

For some years the price per erg of renewables has been dropping, while the price per erg of fossil fuels has not been keeping pace (fracking brought prices down from all-time highs, but the risks and externalities associated with fracking make the long-term prospects dimmer than they would otherwise be). I am not even including the problems raised by carbon taxes or other responses to environmental concerns.

The thing to note is that the costs of fossil fuels do not have to jump massively for the industry to fall over a cliff. Especially in the context of a political and social world where concern with anthropogenic climate change places a thumb on the scales in favour of carbon-neutral, or at least less carbon-generating, renewables (outside the Trumpian bubble), it doesn't take a big drop by comparison on ROI for renewables for fossil fuel investments to fall off a cliff. Once the two curves cross, the medium-term and long-term prospects - the things that pension funds look at - for oil and gas decline markedly. In short, you don't have to hit peak oil for markets to respond; all you need is a comparative disadvantage.

This is not a small thing. Once this starts to be factored into the future of energy securities the notional value of the fossil fuel companies (already overvalued by any rational standard) will collapse. This particular event may not be the signal which will trigger such a collapse, but it will be something like this,

Comments

[graydon]

"economic carbon bubble" isn't as good a search term as it used to be, but it's interesting.

Everybody will point to the solar cost graph; some will point out just how enormously determined the PRC has become about where that graph is going. The graph I'd like, and can't get, is the graph of extraction price versus market price for oil. (Ideally regionally.) Once those lines cross, that's it. I think what fracking rescued the oil industry from was those lines crossing. (By not letting people attach the price of their well becoming flammable to the extraction price.)

[graydon]

The other part of this is that it's starting to sink in that no-one can make accurate predictions for sea-level rise; it's rising, it's going to keep rising, it's possible to talk about how much ice is available to melt, but a specific rate is inherently unknowable. Anthropogenic carbon forcing is way off any naturally occuring anything,so we haven't got a paleo-example (and certainly not one recent enough to be in the high-resolution data that goes back a million years or so at most.)

If you listen to the arctic amplification and glacier collapse process specialists, you can't rule out ten metres of sea level rise by 2050. They're not predicting that; most of them have stopped predicting anything. But they're pointing out it's a plausible outcome on the basis of current knowledge. If some dim intimation of that is starting to register in New York I'd expect to see much more of this sort of thing as the awareness spreads.

I figure the tipping point is not so much divestment as building codes that ban combustion furnaces; that's the point at which the clue will have well and truly hit.

(I don't expect that to happen before agriculture goes catastrophically unstable.)