Check the share portfolio for CARBON

In January this blog suggested that carbon companies were a SELL.  It became one of our best recorded posts.   Much of that commentary was based on the excellent research conducted by the Carbon Tracker Initiative.  That website is listed at the bottom of this page.


Now the Rolling Stone magazine has given their work much greater coverage with a fantastic article by Bill McKibben; himself one of the renowned authors in this field.  It is five pages but provides an excellent summary of where we have been and are headed.  I exhort you to read it.  Most of the following comes from his article. 

And he starts of with the fact there are only a few numbers anybody needs to know when considering carbon dioxide (CO₂₎ in the atmosphere.  The first is that the temperature around the world has increased 0.8 degrees Celsius.  Which I have written about previously.

The international community has agreed that beyond 2 degrees Celsius is catastrophic for the weather and humans.  So we are nearly half way there already. 

But some reports calculate that even if we stopped increasing CO₂ now, the temperature would likely still rise another 0.8 degrees, as previously released carbon continues to overheat the atmosphere. That means we're already three-quarters of the way to the 2 degree limit target.

The second number that it is important to know is that to reach that 2 degrees,  by mid century humans can only release another 565 gigatons of carbon dioxide into the atmosphere. 

The third important number is that in 2011, the International Energy Agency said that CO₂ emissions rose to 31.6 gigatons. So by the end of this year, that means that we have only 16 years remaining before we must stop emitting ANY CO_2. 

Not just reducing, but stopping.  Cars, power plants, fires, planes, etc.

Now here is the next important number (and a return to our investing theme) the number of CO₂ contained in confirmed coal / fuel / gas fields is 2,795 gigatons.  That is, 5 times higher than what we can burn. 

That is, this is the known reserves in the ground and excludes any future discoveries from exploration. 

Now we can put some further analysis around those numbers.  The first point to make is that for children entering primary school this year, when they graduate, they will face a very frightening world (as McKibben points out).  That is how soon it is.

The second is in our investment portfolios.  At some stage in the next 16 years, we are going to realise – through more catastrophic weather events – that owning shares in the companies that produce this fuel is not a good idea.  

And that is because those 2,795 gigtons is actually on the companies’ balance sheets, and is built into the share price as an asset, and we simply cannot burn it all and survive.  The Carbon Tracker Initiative lists all those companies and you can look it up if you like.  Al Gore puts the number at US$7 trillion of value in carbon related companies, of which one fifth is US$1.4 trillion -  an overvaluation of US$5.6 trillion.

So can we then derive that those company balance sheets are possibly 5 times over-valued? I guess it is a toss-up really.  Kids or carbon.  Australian legislation on what has become known as the "carbon tax" is not the first to introduce it, but it became effective this month.  And as McKibben points out, it is the only way to stop these behemouth companies in their tracks and save this planet. Oh, but sell the shares first huh!

This is what you get!!

I recall the first time I went to the USA.  On business.  I stayed at the Ritz in New York.  And every time I walked out the door, a few paces, I would be accosted all the way down the street by people trying to sell me drugs, consorts, and pan handlers.  The touts were rampant.  And frightening. It would have been fall 1987.  It seemed to me at that time that the city’s crime rate, which was very high, could never be turned around.  Tourists were turning away in droves. 

And of course it was.  Turned around.  I visited the city a hundred times over the next several decades, and observed its transformation.  The touts disappeared; new buildings were erected; the parks cleaned up; and it once again felt safe to walk down the street.  Into the parks, the churches, just walk and walk.  Or run on occasion. On one occasion, there was a street person with all his worldly goods beside him, and as I passed, his mobile phone rang.  And he answered it.  How bad could it be?

Yet still my current view of the USA, is a country at war with itself.  We have all read of the 46 million on food stamps.  The shockingly difficult unemployment figures.  And recently I read that new job creation has a ratio of 1 in ten being a permanent job, and the rest temps or contract.  The average wage is $25,000, and the wealth of the average middle class American has declined by 41 % in the last five years (versus an increase in the top quartile, and mainly because their wealth is held in their home which have declined in value).

Yet as I have written here, one of the few industries with huge growth over the last four years is guns:  “98% increase in Ruger quarterly firearm sales since 3Q08 from $117m to $232m”. 

Another blog dealt with the crash and grab of the legislature as it throws up and sometimes passes the most extraordinary legislation. 

But I am going to again bang on about the out of control law(less?) enforcement being used to target its citizens by the USA.  I just don’t get why more people are not commenting on this in the international press.   The country is simply heaving with cities or suburbs in lockdown with an occupation style mentality, and people all armed. Syria, huh!!

Hotel rooms and TV;  watched a documentary the other night about the city of Philadelphia, in north eastern USA.  It reputedly (at the time of the show) had the highest murder / gun crime rate in the USA.  The show, Louis Theraux:  Law and Disorder in Philadelphia.

The cops were all doing their best in Philli.  The put-upon African Americans who were being constantly harassed by them, also got a little heated about what they believed was racial profiling.  And I have to admit, on several occasions, that’s what it looked like to me.  But African Americans represent 43.4% of the population there, and whites 41%.  So I am not sure that claim can be substantiated.

But a young articulate African American speaking to camera summed up one incident between the police and a group of his friends this way: “This is what you get in America right now”.  Couldn’t have put it better myself.

Peak Oil v Peak Carbon v Giant Carbonised Insects

More on how the rug rats of today are going to live as adults, dodging the gnashing jaws of carbonised giant insects:  is it just me or is the oil peak being pushed out further and further?

Over the last few months, and despite limited interest in the industry (other than to shut it down), there seem to be a plethora of new oil deposits found / exploited.  Big ones.  Some media refer to them as giant fields.  If this observation is correct, then Peak Oil is a thing of the past and we are definitely all going to be gobbled. 

As an aside, with so many giant carbonised insects – such as the meter long centipede referred to in an earlier blog – we will also have a new source of food /protein to feed the masses tipped to hit 10 billion in my [old already] lifetime. 

But back to the new oil sources.  Some months ago I read about BP (and others) making a large find off the northern coast of the UK.  Or was it the end of last year?

Anyway another has been announced only last month.  UPI reports “British energy company Premier Oil announced that it made an oil discovery in the Catcher area of the country's territorial waters of the North Sea.”

And remember a few months ago the announcement of the large oil deposit find off the coast of Ireland;  poor ol’ Ireland that has lost its wealth, its income, and a whole generation to austerity??  Exploration company Providence Resources announced the find off the coast of Cork.  The find was referred to as “major”.  The article went on to say ”The coastal Basins surrounding Ireland have long been known to harbour valuable natural resources. It’s estimated that they could produce 10 billion barrels of oil and an unquantifiable amount of gas. In the past, exploration has been held back by a lack of technology and low oil prices.”

As probably more of a political statement, Kurdistan has started shipping oil to Turkey.  Whilst in east Africa, “Tullow Oil, a London-based explorer with the most licences in Africa, said it planned to accelerate drilling in Kenya after making the East African (Kenya) state’s first discovery earlier this year.  Tullow forecast Kenya has the potential to exceed Uganda, where with Total and CNOOC it plans to invest more than $10bn to unlock an estimated 2,5-billion barrels of oil. $4 per barrel.”

But wait, there’s more.

The Norwegian oil firm DNO International said it is ramping up oil production in Iraq as it confirmed an oil discovery in the country's resource-rich Tawke field and has resumed drilling operations in Yemen. DNO, which explores and produces oil and gas in Iraq and Yemen and plans to expand activities in North Africa and the Middle East

And more.

“Online PR News – 05-July-2012 –PierMax Energy Exploration is pleased to announce that, it has made a significant oil discovery in current onshore Kurdistan oil exploration project.”

And so it goes on and on.

And to crown my paranoia about never reaching Peak Oil (which has been forecast to be occurring around now) and thus never reigning in the carbon problem, I read George Monbiot recent article False Summit (meaning oil summit or ‘peak’).  The great eco campaigner. 

His first sentence is “We were wrong about peak oil: there’s enough in the ground to deep-fry the planet.”  And ends with “But right now I’m not sure how I can look my children in the eyes.”

In between those two emotionally charged sentences, is a great article, and as usual well researched.  Citing various article, he asserts that the recent sustained high price of oil has triggered to new oil resource boom.  That indeed, it is not so much how much oil, but at what price. With US$2.6 trillion spent over this three year period in exploration etc (end 2012).  Some of it extracted using fracking, the environmentally fraught polluter.

Yeah gads!!

So back on the research car and this was found.  Published in 2006, so it overlooks the recent massive investment in oil production and discoveries;  by the way, all of which are found and delivered from very difficult methods / places (fracking, deep sea). These five key points are believed at that time to be irrefutable and the basis of Peak Oil. 

1. The biggest oilfields in the world were discovered more than half a century ago, either side of the Second World War.

2. The peak of oil discovery was as long ago as 1965.

3. There were a few more big discovery years in the 1970s, but there have been none since then.

4. The last year in which we discovered more oil than we consumed was a quarter of a century ago.

5. Since then there has been an overall decline.

So anything written since then to confirm this thesis?  Well in May this year, there is a long post on oil and the industry on scepticblog.org by a reasonably senior academic geologist.  It is extremely lengthy, however sufficiently erudite and simplistic (for this oil idiot) for it to be recommended to all.  These are just a few extracts of interest: 

Academic geologists are nearly 50% women now, and they are distributed across all age classes. Oil geologists, by contrast, are nearly all old white guys in their 60s or older, with a lot of young men (and a few women) just recently hired in the business. The entire generation that would now be in their 40s and 50s is missing because of the attrition during the oil busts of the late 80s-90s. [I just thought this was interesting].

As the Time magazine article pointed out, now they’re spending most of their time and money on increasingly risky and expensive operations like fracking, pumping water in old fields to push out the last drops of oil, or mining oil sands with all their environmental costs. The biggest push is in offshore oil platforms—and the 2010 Gulf oil disaster (along with previous oil disasters on platforms around the world) shows just how risky it is to drill so far offshore.

So what about the world discovery rate? That answer has been known for a long time. World discovery rate peaked in 1965, and has been steeply declining ever since, even though more and more exploration is conducted in the farthest reaches of the globe in the past 47 years. The “peak oil” effect has probably already occurred, and we are likely on the slow downward decline in discoveries of cheap, easy-to-pump oil.

……in recent years most of the estimates place the total volume of ultimately recoverable oil in the range of 1.8 to 2.6 trillion barrels, with most estimates around 2.0 trillion barrels.

The booming economies of China and India, along with some other developing nations, are greatly exceeding any increased production due to new discoveries. The numbers are truly staggering. From only 50,000 barrels/day in 1980, world consumption is now almost 100,000 barrels/day. As oil executive Peter Tertzakian pointed out in his book title, we’re nearing the once-unimaginable consumption rate of a thousand barrels a second! Even as the U.S. finds more oil in unconventional places, we cannot keep our domestic prices down because demand outside the U.S. is driving the world price upwards.

So by my calc that is ~55,000 years of oil supply at today's consumption levels if we use the 2 trillion estimate with current consumption at 100k barrels per day.  At that level we are toast!! Something doesn't seem to be adding up here.  Then we look at the next argument, of 1,000 per second.  That equals about 86 million barrels per day; being 60,000 per minute;  3.6 million barrels per hour; etc.   So I think he meant 1,000,000 not 100,000.  Which brings the ~55,000 back to ~55 years of supply at today's consumption level.  Phew!!

There is also the fact that the peak of discovery of major oil fields occurred 47 years ago, and there have been no giant oil fields found in a long time, and most of the world’s older oil fields are nearing their ends.

An acre of corn consumes 80 gallons of oil in the form of pesticides, fertilizers, and fuel for the tractors.  Without [oil], our food supply would collapse, and the world would be looking at a global famine. The end of cheap oil will force everyone to re-examine agricultural practices, since you can’t make most pesticides or fertilizers out of coal. 

And thus cannot replace lost oil with biofuel. 

So rug rats.  There are your choices:  eaten by giant carbonised insects or die of starvation.  Blame the old white guys in the oil industry. 

However, I believe that we can confirm that peak oil has definately come and gone.  So that is hopeful.  Right?

You're Officially Fired

As anyone will tell you, hosting a blog requires frequent posts.  And here is the confession:  it is five weeks since I last posted.  I am sorry.  And especially to the many great people who have been reading this blog regularly from all over the world.  Truly gobsmacking that people do (read the blog).  Thanks.

Since the last post though, absolutely nothing has happened to change the very real major catastrophes around the world about which I have written relentlessly:  Climate and those idiots running the economies into a global depression. 

The recent global intercessional meeting s in Bonn (the Bonn Climate talks following on from Durban last year) ended with a complete and utter failure.  This is how it is reported in the USA site:

"Parties in Bonn eventually broke the deadlock and agreed on an agenda that will guide the Durban Platform negotiations through 2015………. It is now very clear that we have a difficult four years ahead of us of negotiating the Durban Platform, an agreement that will bind all nations to curtail greenhouse gas emissions after 2020.  Scientists warned us again in Bonn that the door to avoiding a maximum 2 degrees Celsius global average temperature rise is about to close."

The emphasis is mine. 

But there was a minor advance at the G20 meeting in Mexico, where:

"Mexico, host of the G20 talks this year, passed a law ratifying their COP15 pledges (namely a 30% pollution reduction below business as usual by 2020 and a 50% reduction by 2050)."

Well goody, but that is of course too late.  The carbon emission peak must be well before 2020.  And most countries haven’t even started. 

One event that did happen during my “break” from blogging, was I watched a documentary called  “How to Grow a Planet”.  Fantastic.  In one section it explored the great Oxidation Event, from which much of life was derived.  This occurred about 2.5 – 3 billion years ago.

To cut a long story short, I have always wondered what would happen to mankind when the oxygen / atmosphere is so carbonised that our bodies cannot work properly.  I mean, I don’t really care, I’ll be dead. 

During the show, it illustrated that when there was substantially less oxygen in the air mix (where we are heading!) at the time lived giant insects relative to our size today.  Centipedes a meter long;  dragon flies with four meter wing spans;  giant ants.  You get the picture. 

And it soon became apparent that the end of mankind may not be from a lack of oxygen, but being eaten alive by giant insects.  There are more of them right?  Anyway good luck with that all you little rug rats. 

And which countries will be safer on a relative basis?  Those where the population have already eaten most of the insects (Asia) or killed most of the birdlife (Italy, say) or the fish (just about everywhere).  Those countries working hard to save biodiversity are in trouble.  So which side are you on?