June 2015 /// Vol 236 No. 6

Columns

Oil and gas in the capitals

“Disinvestment” nonsense

Dr. Roger Bezdek, Contributing Editor

Two days, Feb. 13-14, were designated as “Global Disinvestment Day,” to demand that governments, universities, financial institutions, religious organizations and other entities divest their holdings of fossil fuel companies. At over 450 events in 60 countries, activists demanded that society stop investing in the “rogue” industries (e.g., oil, natural gas and coal) and fight to “de-legitimize the fossil fuel industry.”

The international campaign continues, with a lead-up to the COP21 climate negotiations in Paris, in December. Britain’s Prince Charles has joined, and even Pope Francis may sign on. Such efforts are misguided, naïve and downright dangerous.

First, fossil fuels created (and continue to create) an economic and technological bonanza. They facilitated successive industrial revolutions, launched the modern world, and ensured the livelihoods, living standards, health and longevity that we all enjoy. Just 200 years ago, most humans were poor, sick and malnourished. Life expectancy in 1810 was less than 40 years. Even royal families lived under sanitation, disease and housing standards inferior to what poor Americans enjoy today.

Then, a veritable revolution occurred. In just two centuries, average incomes rose 11-fold, disease rates plummeted, and life expectancy more than doubled. Hydrocarbons provide 85% of world energy, and the relationship between fossil fuels and economic growth is strong—supporting $70 trillion/year in global GDP.

All major forecasts predict that, for decades to come, energy and the global economy will remain closely linked, and that fossil fuels will continue providing more than 80% of world energy. The benefits of fossil fuel utilization will continue to outweigh, by orders of magnitude, any conceivable costs.

The fossil fuel industry produces almost all of the energy used to feed, clothe, shelter, heal, comfort and educate people. It has fueled the unprecedented increase in industrial development, life expectancy, and quality-of-life that the world has enjoyed over the last 30 years. Importantly, our fossil-fueled society has seen dramatic improvement in all environmental indicators worldwide, including a huge decline in climate-related deaths.

Ironically, those advocating disinvestment lead comfortable lives made possible by fossil fuels. I expect that those who advocate disinvestment will continue to use fossil fuels in their day-to-day lives: Automobiles, refrigeration, trains, planes, electricity, petrochemicals, plastics, pharmaceuticals, communications, central heating and A/C, computers, the Internet, smart phones, and social media. None of these would exist without fossil fuels.

Second, fossil fuels are mankind’s most effective anti-poverty mechanism. Over the past two centuries, fossil fuels have liberated most of the world’s population from short, brutal lives of grinding poverty, including 1.3 billion people over the past three decades. Unfortunately, not everyone benefitted equally. Billions of people still live under conditions little better than those in 1810. Bringing them to modernity may be our most important challenge.

Access to abundant, reliable, affordable energy is the key to reducing poverty:

  • “If you could pick just one thing to reduce poverty, by far you would pick energy.” Bill Gates
  • “Energy use is essential for conquering poverty.” Dr. Amartya Sen (Nobel Laureate in economics)
  • “Energy is central to sustainable development and poverty reduction.” UN Development Program
  • “Access to energy is absolutely fundamental in the struggle against poverty.” Rachel Kyte, V.P., World Bank
  • “Fossil fuels reduce poverty.” Professor Deepak Lal, UCLA

Electrification was named the world’s most significant engineering achievement of the 20th century. Fossil fuels provide most of the world’s electricity and virtually all the transportation fuels, and will continue to do so for decades to come.

Billions of people seek modern living standards, requiring increased energy supplies. Under current trends, in 2030 over 1 billion people will still lack access to reliable energy, and 2.5 billion will have no access to clean cooking facilities. Energy demand by 2050, with a world population approaching 10 billion, will
be unprecedented.

The disinvestment movement’s recommendation—that society stop using fossil fuels—would immediately jeopardize everyone’s health and living standards. It also would preclude billions of people in developing nations from escaping poverty.

Third, no scalable alternative fuels exist to replace fossil fuels. The disinvestment movement ignores the enormous size of current and future global energy needs, and fails to understand the inability of renewable technologies to meet them. According to IEA and EIA, renewables comprise less than 15% of world energy, and by 2040 they will account for only about 15%. Global energy demand will increase 35% by 2040, a task only fossil fuels can meet. Not using fossil fuels is tantamount to not using energy, which is economic suicide.

Finally, divesting a fossil fuels portfolio is financially imprudent. Fossil-fuel stocks have provided superior returns in institutional and university investment portfolios, and such investments are among the best for yielding a solid, risk-adjusted return. Further, of the top five state pension funds operating in 17 U.S. states, fossil fuel company shares outperformed all other investments 7-to-1.

In sum, a moral imperative exists, to expand access to modern energy to billions of people around the world who lack it. The disinvestment movement refuses to recognize, let alone educate, students or others about the enormous, irreplaceable benefits we derive from fossil fuels. Disinvestment initiatives will undermine energy progress and must be opposed vigorously. wo-box_blue.gif 

The Authors ///

Dr. Roger Bezdek is an internationally recognized energy analyst and president of MISI, in Washington, D.C. He has 30 years’ experience in the energy, utility, environmental, and regulatory areas, serving in private industry, academia, and government. He has served as senior adviser in the U.S. Treasury Department, as U.S. energy delegate to the EU and NATO, and as a consultant to the White House, governmental agencies, and various corporations and organizations. His most recent book is The Impending World Energy Mess.

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