Over the last decade, climate activists have successfully pressured governments, banks, and corporations to divest from crude oil and natural gas companies. The energy infrastructures are just like the “civil” infrastructures the American Society of Civil Engineers (ASCE) Infrastructure Report Cards constantly addresses, and the resultant poor “grades” given to the infrastructures of our economy. Under-investment in infrastructure leads to deterioration and supply chain issues that more adversely impact the economy.
ESG “Environmental, Social, and Governance” investments are all the rage on Wall Street these days as climate activists continue to pressure governments, firms, and banks to divest from oil and gas exploration. The ESG investment directions are impacting the energy markets and the supply chain of products and fuels manufactured from crude oil and are, paradoxically, causing rising coal use, carbon emissions, and shortages.
Meanwhile, China, India, East Asia, and Europe are all mining and burning more coal to make up for the lack of natural gas. China, India, Indonesia, Japan, Vietnam, and Africa will have more than 3,000 coal fired power plants by 2030 in those developing countries with billions of people seeking abundant, affordable, and reliable electricity.
The ESG considerations now propagating throughout corporate America account for much of the decline in capital expenditures by international oil companies in recent years. Big financial institutions such as Bank of America and Mastercard, investment managers such as BlackRock and Vanguard, and hundreds of corporations are going all-in on the financial and commercial portion of the Great Reset, pushing environmental, social, and governance (ESG) metrics.
As we have learned from the ASCE Infrastructure Report Cards, under-investment in oil and gas exploration is “supposed” to facilitate the deterioration of fossil fuel infrastructures and lead to an economy rife with inflation and supply-chain disruptions.
Of the three fossil fuels of coal, natural gas, and crude oil, the ESG enthusiasts do not understand that crude oil is seldom ever used for the generation of electricity.
For electricity, most of the worlds continuous uninterruptable electricity generation is by coal, natural gas, hydropower, and nuclear. Crude oil is a non-player for electricity generation.
The primary usage of crude oil is not for electricity, but to manufacture oil derivatives that make 6,000 products used in our daily lives, and the transportation fuels needed by the world’s:
- Militaries
- 23,000 commercial jets
- 20,000 private jets
- 10,000 superyachts over 24 meters in length
- 300 cruise ships
- 53,000 merchant ships, and
- 1.2 billion vehicles
The economic comeback from the covid pandemic has pushed up demand. The underperformance of electricity generation from breezes and sunshine has meant higher demand for both natural gas and coal, to provide continuous uninterruptable electricity generation.
With ESG investment guidelines hovering over corporate America, oil and gas firms have since refused to expand production, even though the proof of this desperately needed infrastructure is in the data. Fossil fuels’ share of global energy production remain unchanged at 81 percent. To the extent emissions in Europe and the US declined, it was largely due to the transition from coal to natural gas.
Socially responsible investing is decades old, but ESG was embraced over the last decade by large university endowments, investment banks like Blackrock, governments, the International Energy Agency, the United Nations and eventually by oil and gas companies themselves, including Shell, Total, and many others. In May, a court in The Netherlands ordered Shell to reduce its emissions, a ruling that made firms reluctant to invest in new oil and gas exploration.
Read the rest of this piece at CFACT.org.
Ron Stein is an engineer who, drawing upon 25 years of project management and business development experience, launched PTS Advance in 1995. He is an author, engineer, and energy expert who writes frequently on issues of energy and economics.
Photo credit: courtesy CFACT.org
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