Publications: Notes at the Margin

Adapting: From Anticipatory to Responsive (December 14, 2020)


The initial focus here is on the calls for the oil industry to make future investments as espoused by the International Energy Forum (IEF). The IEF and other world organizations want the industry to expand operations to prevent future price spikes. In making their pleas, they would like the oil industry to act as it always has, that is, as ExxonMobil's CEO is trying to do today. The spokespersons for such global entities, who likely have no direct financial stake in the game, are lobbying for the industry to invest in anticipation of future demand.


Today, those with "skin" in the market, those who will profit if prices rise and lose if profits fall, are responding to such calls with a single word: NO. Richard Nixon's vice president Spiro Agnew once described some political commentators as "effete snobs who call themselves intellectuals." Today, the people buying oil shares might call the IEF or IEA officials "effete snobs who call themselves energy professionals."


Over the next decade, the industry will invest when high prices justify the action, not when demand is "expected to increase." This investment philosophy change could add $10, $20, or $30 to oil prices. This change in investment strategies also has important implications for the fight against global warming because it heralds the much faster demise of oil and other fossil fuels.


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