The Companies in Your Portfolio Have Yet to Disclose This…

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Oil & Gas

The Paris Climate Change Conference is underway. Today, President Obama and about 150 other heads of state will meet to secure an agreement to cut greenhouse gases worldwide.

This could render many of the fossil fuel reserves held by major oil and gas companies unburnable. Why? Because the only way to reduce greenhouse gas emissions is to cut back on the burning of fossil fuels like coal, oil and natural gas.

Have the energy exploration companies in your portfolio disclosed this possibility? Probably not.

I’ll review the risks to your portfolio in a minute. First, let’s look at another goal of the Paris climate talks.

The Climate Conflict

Another aim of the Paris climate talks is to limit the rise in global temperatures. The plan is to keep global temperatures at 2 degrees Celsius or less above the average temperature at the start of the Industrial Revolution. Any rise higher than 2 degrees Celsius would cause the polar ice caps and Greenland’s cap to melt faster than they already are.

If that happens, many low-lying areas of the world would be underwater and uninhabitable. Others would be subject to frequent flooding.

Average Global Tempertaure Chart
Notice the current temperature is about 0.75 degrees Celsius above average and about 1 degree Celsius above the temperature during the Industrial Revolution.

So why are temperatures rising?

Carbon dioxide (CO2), the primary greenhouse gas, traps heat in the atmosphere that would otherwise escape into space. It’s widely believe that this trapped heat is slowly raising the Earth’s temperature.

CO2 is a byproduct of burning fossil fuels. Increased fossil fuel consumption leads to higher levels of CO2 in the atmosphere and, subsequently, higher global temperatures.

Lowering CO2 Emissions

There are several ways to combat climate change and control greenhouse gas emissions. All of which can have a huge impact on your energy portfolio.

One is to put even stricter limits on power plants that burn fossil fuels. That would mostly affect coal-fired generating plants.

In the U.S., Republicans are generally opposed to climate change legislation. They are currently trying to pass a bill that will gut Obama’s power plant CO2 emission limits.

The House vote on the bill is due during the Paris meetings. If passed, Obama won’t be able to deliver the promised 26% to 28% cut in emissions by 2030.

Another way to lower emissions is to boost vehicle fuel efficiency standards. This becomes more difficult and expensive the higher the limits.

In a low gasoline- and diesel-priced environment, it will be difficult to pass higher fuel efficiency standards.

Electric vehicles are an easy step toward meeting America’s emissions goals. Unfortunately, few cost-effective vehicles are available that have the range of their gasoline or diesel counterparts.

In terms of your energy portfolio, I don’t think you have much to worry about… yet. You see, the rest of the world is adopting stricter carbon emission rules.

It will eventually result in less oil use on a global scale. Big oil companies will have to lower their reserves to account for unburnable oil.

This will lower the values of these companies. Shares will drop accordingly.

So will the shares of every other oil producer. When will it happen? It’s hard to say. I expect you could see a scenario like this play out within the next five to 10 years.

What will happen to oil prices? As demand for oil wanes, prices will drop, but so will production. That will eventually force prices higher. Stay tuned…

Good investing,

Dave

  • Chuck

    Data presented appears conclusive what is the source and accuracy?

  • Donald Lloyd Castle

    I don’t believe any of it. I think it’s just a way for the government to tax everything they can get their hands on ! If you believe the government cares about climate change, I’ll bet you also believe they care that everyone has health insurance. Climate change and health insurance is nothing more than trillions of dollars the government will control and waste, I might add. Let’s look at their track record the Post Office not to mention the federal government themselves can’t even live on a budget from year to year, even when their 18 trillion plus in debt already. Please someone give me a break, am I the only one that can smell bullshit. The federal Government couldn’t manage a pay toilet.

  • Alan

    The norm is for the earth to be in an Ice age. Interglacial periods are relatively rare time wise. What pray tell brought the earth out of the last 4 ice ages? It wasn’t industrialization.It wasn’t mankind. There were effectively no humans when the earth cycled out of an ice age to an interglacial period in three of the last four interglacial periods and only 50 million or so at the onset of the last warming cycle. What makes anyone think that the force that caused warming and then waned in the previous cycles isn’t the force driving this one? Anthropological Egotism? Carbon Dioxide is an almost inconsequential “global warming” gas when compared to water vapor. It may be “intuitively obvious” that all this burning is adding heat, but many things in history that were intuitively obvious were in fact false.

  • Brent Wauterlek

    Donald is exactly right! This is all a power grab to control and profit from an important industry. How arrogant for anyone to believe that man has any power whatsoever to control global temperatures in the slightest. Really disappointed that David and Oxford Club is buying into this B. S.!

  • john a. cleary

    I have recently read a book by John Casey, called “Dark Winter” which calls the “Climate Change” issue an utter farce, because responsible apolitical scientists know climate changes are strictly due to Sun not man. The book also claims some former temparature readings have been falsified deliberately to show a rise in temps that does not exist. It also touches on the stability of the Polar Bear population. What is worse, a coming cold sesson will crush the ability of crop farmes to feed millions who will starve. All for political theater and positive world-saving write-up in the history bookks. SAD.

    Jclearyent@yahoo.com

    • Sulpicio Galba

      “Responsible apolitical scientists know climate changes are **strictly** due to Sun not man.”

      I cannot altogether agree.

      Replace the word “strictly” with “at least in part” and your sentence is completely correct. It has been known for over 200 years that there was a strong correlation between the number of observed sunspots and the price of wheat in the UK (as tabulated by Adam Smith in The Wealth of Nations in 1776); this negative correlation covering a period long before the industrial revolution.

      No one really knows what the relative importance is of sunspot activity (which affects the earth’s cloud cover) and the tiny increase in atmospheric CO2 levels since the industrial revolution.

  • Paul

    When will SOMEBODY acknowedge the simple fact that one volcanic eruption does more harm to the envionment than years of fossil fuel? Oh, I forgot…….AL Gore couldn’t make any money touting that reality!

  • Donald Lloyd Castle

    We have environmental issues, But most can be fixed without a bunch of self important monkeys sitting in world meetings, reminding themselves just how important they are. The governments are the problem not the solution. Common sense will solve more of our environmental issues, Instead of the cause being little more than just being right, along with making sure your side gets the money. The Oxford Club’s not any different than a lot of people, I know some very smart people that are very confused with the mix of politics and climate change or whatever it’s being called today. The Oxford does a good job and I thank them.

    • Victoria Bessinger

      I can’t agree with any of what you said, Donald. If Governor Reagan had not signed into law the strictest auto emissions standards in the USA, Los Angeles today would look and smell like Beijing. If you watch any old movies set in LA, you can see the thick smog hovering over the city. Auto makers would never have cleaned up voluntarily, their “common sense” would be to go with the profit motive (they are businesses, after all). I shudder to think what the Hudson River would look like without the EPA. It is cheaper to dump chemical waste into the rivers and oceans than to dispose of it safely.
      It is time to stop investing in outmoded fossil fuel energy and start gearing up the renewables.
      Fact is there is MUCH more money and political power on the side of the oil companies than on the side that favours reducing carbon emissions. You will see this if you just think about it for one minute. The big oil companies are fearful that they will lose their big profits, so they publish lots of misinformation about climate change.

      • Donald Lloyd Castle

        I don’t disagree with you, I just get tired of every time someone makes a profit it makes them the bad guy. You wouldn’t be very comfortable in this world without big oil, for now anyway. Ronald Reagan also said “Government is the problem not the solution” No truer words were ever spoken, and it becomes more so every day ! You don’t want to believe this but your not going to get away from using fossil fuel no matter how much we need to. Your right about misinformation about climate change, sometime take a break from what you think is right, and see if what your being told about climate change really makes sense. You will find some more misinformation and it’s not all coming from big oil.
        I thank you for your response it may not seem like it, but we are on the same side the trouble is we can’t trust either side, if we can’t agree on anything else I hope we agree on that.

        • Victoria Bessinger

          Thank you, Donald. I wish more of our elected officials were as willing as you are to look for common ground upon which to find solutions to the serious problems we face.

          • Donald Lloyd Castle

            Victoria,
            Michael Crichton wrote a book called “state of fear” it is fiction but still delivers plenty to think about. I think you might enjoy it.

      • Chuck

        I believe we would all endorse drastic action by governments if we believe the data. I don’t and I know I’m not alone. My last look at real data came from satellite data from early 70’s forward showing a distinct cooling trend. The only true correlation I’ve see was published I the Wall Street Journal linking earths temperature to solar activity That’s why I question the data in an earlier comment. Until we can agree on the data and its source it will remain a political football. We will be on the losing side.

      • Robbie Thomas

        true

  • steve reeder

    I’m a little surprised to see in an Oxford Club publication what appears to be acceptance of government concepts on global climate change without skepticism. It’s laughable for a bunch of elitists to get together and decide to keep the global temperature at a certain level. Do you see the big polluters signing on to this? I don’t think so.
    Doesn’t matter to the climate anyway.

  • johnboy

    so many ignorant people 51 % of the problem is the beef , raising co2 levels are from all the toxins from raising all the beef that we humans consume but you are not aware of it because laws have been put in place to prosecute anyone that rocks the boat do your research people people have been murdered to keep it out of the public eye watch the show conspiracy it has interviews with several of the organizations that are basically concealing the truth

    • Robbie Thomas

      This is so true; so who really knows the facts; for greedy mankind hides and pays off people to keep the truth from us

  • Andy

    Dave
    my energy stocks have already taken a beating however I am over-weighted in
    energy so being foolish I am continuing to buy more of these stocks on a monthly
    basis while they are dirt cheap, at least (for the moment) I am still collecting
    dividends. This might come back to bite me or it might financially speaking as I
    call it “buy my freedom.” I am guessing that we have until 2017 or 2018 before
    energy stocks start rebounding that is if they are going too and I believe they
    will.

    I
    worked for many years in the drilling industry on both land and offshore, so I
    know there is More Wild Life around the rigs than in many if not most other
    areas.

    I
    am also a licensed private pilot and a one of my instructors who also flies jets
    he and a number of other well qualified jet or high altitude pilots ran the
    Aviation Charts all of the back to the 1950’s when these temperatures or High
    Altitude Temperatures began being recorded. The numbers from the 1950’s to 2016
    have NOT changed.

    Thus
    far the only temperature changes are seasonal changes. The Only Scientists that
    I know of that are spouting the government spew receive their funding either
    directly from the government or indirectly from the government feeding trough.
    Global Warming is based on political lies and with people constantly hitting
    them with the truth (actual numbers) thus the new name change to calling it
    Climate Change. The problem with that is many of the world’s glaciers are
    growing not shrinking so we might be heading into a mini ice age thus we might
    need to create some actually global warming.

    I
    do not trust any branch of government to tell the truth or to do anything in a
    forthright manner, we might want to try to create actual global warming first on
    Mars! If it works there then maybe? Maybe not?

  • Robbie Thomas

    The American people really have the control; there’s power in numbers; if we stop buying and start pulling back our money and start at home here in America with control of emissions, recycling and we the people were to get paid for recycling our bottles and plastics, and paper good;s this would some what cut down on the pollution and we help feed our people; more would recycle when they get something back for doing it; also we need to stop out sourcing; The American companies and our government out source and waste money Our Tax payers money by doing so; and the quality is awful as well when they do so. Our government and our country out source and export our trash and paper to china than china recycles it’s and returns it to us for 5 times as much; yet we have the factories here to do the same thing and often cheaper; This is just one of the wastefulness of out American dollars. This has been going on for at least 20 years and more and it’s plan stupid to do so.