Why bet against human ingenuity?
Some phrases in our lexicon just make us feel good. For whatever reason, they strike an elemental chord and just give you the warm and fuzzies, like “Dinner’s ready” or “We’re giving you a raise” or “Looks like they’re not going to press charges”.
Weirdly enough, I came across just such an example in a news headline, of all places, an arena I’d thought sacrificed to clickbait. The news is seldom a place of enlightenment; it is a scared group of group thinkers promoting singular narratives and not stepping out of line for fear of banishment (to the unemployment line).
That’s what made this particular headline so awesome. It was a Financial Post article in which the CPPIB (Canada Pension Plan Investment Board) was quoted as saying that “to exclude oil and gas companies from [investment] portfolios…would be an active short on human ingenuity.”
Isn’t that a brilliant statement? It captures so much. For those not familiar with trading terminology, an “active short” is a bet against something, to sell it in the expectation that will fall.
The guy who was quoted is absolutely right. It’s crazy to dismiss the hydrocarbon industry and try to relegate it to the waste bin, when it can be such a huge springboard for where we want to go next.
That quote recognizes the fundamental value of oil and gas companies as investments. Yes, reserves have been written down, but that’s a function of price crashes, not the end of hydrocarbon demand. Oil and gas are going to be the predominant energy source in the world for decades, under any plausible scenario. (There are a few completely implausible scenarios, such as those put forward by Green New Deal advocates such as plans, for example, to replace American inter-city plane travel with high-speed rail; in the real world where people actually build things, even California’s uber-green governor is queasy about a LA-SF high speed rail project with an estimated tab that now exceeds $80 billion. In an article about it, the CEO of California’s bullet train authority came out with a remarkable observation: “Building the nation’s first truly high-speed rail system is certainly not easy,” he said, in noting that the expected timetable now extends to 2033, a sentimentally rounded 25 years after the project received its first funding. There will be no quick transition from hydrocarbons.)
Secondly, it recognizes that divesting from oil and gas companies does nothing as far as pollution goes, just as torching coca fields in Colombia does nothing to stop cocaine usage in NYC. All that can do is influence the price, but if the price of cocaine goes up, more supply will appear from elsewhere until the market is satisfied. Anyone that wants to reduce hydrocarbon usage needs to not just understand that, but also to create an alternative that people run to (as opposed to forcing them to – two entirely different propositions.
Third, it brings back into focus the role of human ingenuity, which is what got us to this wonderful place in history. If you want emissions cleaned up or eliminated, provide an incentive. It’s not the same as trying to destroy demand through “incentives” (which is the carbon tax); that is something entirely different.
By incentivizing the oil/gas community to do something, they will bring not just their full entrepreneurial mindset, but also the unbelievably large array of infrastructure and knowledge and research capabilities. That is a very powerful combination.
Divestment campaigns achieve nothing. If they work, they will strangle the supply of capital for oil/gas producers that need it, and make windfall profits for those producers that don’t.
There will be those who disagree, and get apoplectic at the mention of carbon capture/storage because it will allow petroleum companies to remain in the business of producing hydrocarbons. There is an audience for such nihilistic silliness, but a very narrow one. The vast majority of citizens can see the wisdom of working with what we have now, if for no other reason than environmental ones. Do any of those who want to collapse the hydrocarbon industry have any idea of the environmental mayhem that would create? Where would one dispose of the tens of thousands of gas and oil processing facilities, millions of wells, millions of miles of pipeline, thousands of tankers, millions of trucks, and on and on.
No, there has to be a better way, and human ingenuity, combined with the world’s most sophisticated and comprehensive energy system, is the best path forward.
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