Price stability and energy investments

2008-09-18

in Economics, Politics, The environment

It is frequently argued that ever-rising oil prices will encourage good climatic outcomes. They make people cut back on flying and buying SUVs, and thus reduce emissions through destroyed demand. One counter-argument highlights how consistently high prices encourage the use of fuels even filthier than oil: such as coal and hydrocarbons produced from the oil sands. Arguably, uncertainty and instability actually produce the best climatic outcomes, since they leave the profitability of huge hydrocarbon investments uncertain.

This piece in The Globe and Mail argues that the recent fall in oil prices, combined with constrained access to credit due to the financial turmoil in the United States, is threatening the development of the oil sands.

Of course, uncertainty about future energy prices and restricted access to capital are also likely to hurt the development of renewable sources of power, such as concentrating solar plants in the American southwest that retain enough thermal energy overnight to produce electricity continuously. The ideal option is a predictable, ever-increasing price for carbon emissions. That would give clean sources of energy the confidence to invest, while simultaneously discouraging the development of amply available yet climatically disastrous sources of energy – at least until such a time (if ever) when effective carbon sequestration emerges.

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. September 18, 2008 at 11:40 am

Oil Prices Return to $100 Territory

By JAD MOUAWAD
Published: September 18, 2008

After spending only three days under $100 a barrel, oil prices shot back up on Thursday morning, erasing most of a $10-a-barrel decline in just two days.

Crude oil futures traded above $100 shortly after the open, before falling back slightly to $99.75. The rise follows a large jump on Wednesday when oil gained 6.6 percent as panicky investors fled the stock market to seek shelter in the perceived safety of commodities.

Sarah September 18, 2008 at 4:28 pm

“Shell and BP have been warned by investors that their involvement in unconventional energy production such as Canada’s oil sands could turn out to be the industry’s equivalent of the sub-prime lending that poisoned the banking sector and triggered the current financial crisis.

The criticism came as a report was released yesterday warning of the potential financial risks of tar sands, and members of the UK Social Investment Forum met in London to consider a Co-op Investments campaign on halting oil industry involvement in the carbon-intensive oil projects.”

From The Guardian http://www.guardian.co.uk/environment/2008/sep/17/fossilfuels.carbonemissions , which is unsurprisingly a lot more critical of oil sands development than is the Globe and Mail.

. September 18, 2008 at 5:40 pm

Gore warns investors of ‘subprime carbon’
Address at U.N. on real costs associated with assisting global warming

UNITED NATIONS – Al Gore advised Wall Street leaders and institutional investors Thursday to ditch businesses too reliant on carbon-intensive energy — or prepare for huge losses down the road.

“You need to really scrub your investment portfolios, because I guarantee you — as my longtime good redneck friends in Tennessee say, I guarandamntee you — that if you really take a fine-tooth comb and go through your portfolios, many of you are going to find them chock-full of subprime carbon assets,” the former vice president said.

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