An Interesting Thought About St Greta’s Demand

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OK, perhaps not interesting to all but it is to me. What would actually happen here in the financial markets if this were to be done?

We demand that at this year’s forum, participants from all companies, banks, institutions and governments immediately halt all investments in fossil fuel exploration and extraction, immediately end all fossil fuel subsidies and immediately and completely divest from fossil fuels.

We don’t want these things done by 2050, 2030 or even 2021, we want this done now – as in right now.

Ending the subsidies I’m fine with, obviously. They’re grossly overestimating what those are but it is still true that there’s some $500 billion a year spent on directly subsidising consumption. And there shouldn’t be.

True, they’re difficult to get rid of as Iran recently found out. Those riots and shouting recently were because the government there decided to do the right thing. Stop subsidising the consumption of fossil fuels and instead supply the same amount of money directly to people as cash. Entirely the correct move but as we can see somewhat difficult.

The $5 trillion number they quote is nonsense. Things like the righteous carbon tax not paid is a subsidy – nonsense.

But, more interesting to me, what then happens? So, all institutional holders divest. OK, that makes the sin portfolio of oil stocks look very attractive indeed. Because there’s still going to be, whatever else is done, a 30 to 40 year run off from investments already made. And if no one else is buying them then we’d see very tasty indeed yields from such stocks.

Then to the one I’m not sure about and would welcome thoughts upon. Just roughly, I seem to recall that Shell spends $25 billion a year on investment. And we all do know that the value of reserves the company has for 20 or 30 years out is about zero percent of the company’s stock price.

So, not investing $25 billion a year and instead paying that out to investors – would the stock price rise at that point? Efficient market theory (not quite the EMH) suggests no because if it did then they would already be doing it. But, well, I’m not entirely certain. I do have this sneaking feeling that someone could go out and spend $500 billion or whatever buying one of the oil majors, only invest in care and maintenance and completely kill off exploration and new field investment and come out ahead.

Actually, perhaps we should ask St Greta to lead the fundraising, she might actually be able to get enough people to chip in $100 each to make it happen. We being the capitalist exploiters that we are would treat the $100 as a donation and keep the equity returns for ourselves.

Leaving aside that bit of financial prestigitation though I do wonder whether the base idea would actually be viable. Asset stripping an oil major in effect.

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Michael van der RietBlokeInTejasGavin LongmuirAndrew CareyChester Draws Recent comment authors
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jgh
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jgh

Hasn’t she noticed where she lives? One immediate effect would be that she and her neighbours would freeze to death.

Spike
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Spike

Is there any evidence that Greta cares what the effect would be, as long as she has Made A Difference In The Community? (That is, that we were forced to change and that we knew it was she behind it?) Her currency is neither euros nor megawatts.

Spike
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Spike

If energy investment were halted, existing producers would continue to profit, knowing new competitors were impossible. Under Jimmy Carter, many companies were worth more liquidated than operating, and they slowly liquidated through dividends rather than investing in new lines. They also bought back their undervalued stock rather than deploy the money productively. Trump, through tax cuts and deregulation, has gotten companies interested in innovation again. If we went back to the Carter days, companies would go back to doing what they used to do. And lefties would be just as angry, as they were.

Raffles
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Raffles

One immediate effect would be that she and her neighbours would freeze to death. – oh they wouldn’t (too late for panto?)
Most Swedish houses either use electricity or city systems for heating. The electricity is largely renewable because of geography and the city systems use biomass/ rubbish etc.
It’d just be everyone else that freezes.

jgh
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jgh

Burning rubbish for energy? Don’t you know that’s spunking in Mother Nature’s face, you eco-faschist-rapist-bigot! City-dwellers should freeze along with everybody else for the glory of Gaia!

Emil
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Emil

Electiricity in Sweden in largely renewable because they (still) use nuclear + have a lot of hydro. Of course the enviro-freaks have convinced the government to shut down nuclear and refuse to allow them to build new hydro-dams. This shit began way before Greta and will lead to self-destruction. Maybe someone will then learn from the Swedes how not to do things… (or they will just blame Trump)

john77
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john77

Most Swedish energy isn’t renewable – it’s zero-carbon because it’s using nuclear power.

john77
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john77

Well, since investment in developing oil and gas resources involves a risk that is higher than the risk from running down proved resources you should expect the risk-averse investor to pay more for shares in a Shell or BP or Exxon that ceases exploration to run down its assets. EXCEPT that BP, Shell, Exxon etc only invest in seeking and developing oil and gas fields when the expected returns are a lot higher than those from buying in shares. You may be right that someone could make a profit from buying shares in oil companies as a result of governments… Read more »

Chester Draws
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Chester Draws

I’m beginning to think that we should follow Greta’s suggestions.

All the oil companies in Sweden should agree that they will, together, cease operations. Stop importing and selling any fossil fuel.

How long do you think it would be before they would be forced — at gunpoint — to resume operations?

Andrew Carey
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Andrew Carey

One immediate effect would be that companies, banks, institutions and governments would stop attending Davos.

Gavin Longmuir
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Gavin Longmuir

Back in the day, John D. Rockefeller’s original Standard Oil of Ohio had effectively one significant asset — a big share of the super-giant Prudhoe Bay oil field. One astute analyst noted that the market value of Standard Oil was $X; but the discounted value of future oil production from Prudhoe Bay was $3X. He surmised that the market had concluded that $2X was a fair estimate of the amount of future revenues that the company’s management would waste. While companies like BP and Shell have a much more complicated set of assets, it would not be surprising to find… Read more »

BlokeInTejas
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BlokeInTejas

“WE demand”?

dipshit.

Michael van der Riet
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Michael van der Riet

Except in Venezuela, big chunks of those subsidies are recovered at the pumps.