Publications: Notes at the Margin

The Fossil Problem: Few Companies Will Survive (January 27, 2020)

 

The recently concluded World Economic Forum (WEF) held at the Swiss ski resort of Davos highlighted the growing conflict between those advocating the rapid reduction of emissions of global-warming gasses and the fossil fuel industry. The discussions were generally polite—except for the dispute between the young environmental advocate, Greta Thunberg, and the two US climate-change deniers: President Trump and Secretary of Treasury Mnuchin. The fundamental but unstated import of these discussions became clear. Those pushing action on global warming and the fossil fuel industry, especially oil, are at war. Furthermore, the war will end with most fossil fuel companies out of business and many oil-producing nations bankrupted. While the battle will continue for years, the conclusion is clear: oil will lose.

 

Oil will lose because the industry fragmented between 1970 and 2020. The twenty-nine oil companies comprising the "Chase Group" in 1975 produced almost seventy percent of the world’s crude. Today, the remaining Chase Group companies, augmented by three newcomers, account for less than fifteen percent of global production. This means the industry is in a position similar to that of farmers. Specifically, just as one farmer or group of farmers cannot take action that might benefit the planet without suffering economic losses, no one oil company can act alone or even in a group to address global warming without experiencing the same consequence.

 

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