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The Almighty Buck Earth Power

'Carbon Bubble' Could Spark Global Financial Crisis, Study Warns (theguardian.com) 283

Posted by BeauHD from the impending-doom dept.
An anonymous reader quotes a report from The Guardian: The existence of a "carbon bubble" -- assets in fossil fuels that are currently overvalued because, in the medium and long-term, the world will have to drastically reduce greenhouse gas emissions -- has long been proposed by academics, activists and investors. The new study, published on Monday in the journal Nature Climate Change, shows that a sharp slump in the value of fossil fuels would cause this bubble to burst, and posits that such a slump is likely before 2035 based on current patterns of energy use. Crucially, the findings suggest that a rapid decline in fossil fuel demand is no longer dependent on stronger policies and actions from governments around the world. Instead, the authors' detailed simulations found the demand drop would take place even if major nations undertake no new climate policies, or reverse some previous commitments. That is because advances in technologies for energy efficiency and renewable power, and the accompanying drop in their price, have made low-carbon energy much more economically and technically attractive.
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'Carbon Bubble' Could Spark Global Financial Crisis, Study Warns More

'Carbon Bubble' Could Spark Global Financial Crisis, Study Warns

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  • Not so fast (Score:5, Interesting)

    by Waffle Iron ( 339739 ) on Monday June 04, 2018 @10:46PM (#56728928)

    Crucially, the findings suggest that a rapid decline in fossil fuel demand is no longer dependent on stronger policies and actions from governments around the world.

    This dangerous trend can and will be stopped: We will use a combination of tariffs, executive orders and obscure WWII-era federal statutes to nationalize the energy sector and stamp out this "change" nonsense, ensuring that fossil fuel jobs in key voting districts will endure for decades to come!

    • Or more likely individuals and companies with sunk costs and investments like cars and power plants will switch over when it makes economic sense, which will take decades.

      • Re:Not so fast (Score:5, Informative)

        by dehachel12 ( 4766411 ) on Tuesday June 05, 2018 @04:14AM (#56729610)
        > sunk costs and investments like cars will switch over when it makes economic sense
        That will make sense circa 2022. look at how many car companies are investing heavily in EV's.

    • Peak Oil (Score:3, Funny)

      by thesupraman ( 179040 )

      Dont worry, peak oil should cancel it out nicely ;)

      (for the idiots, yes, joking, get a sense of humor.....)

      • Re:Peak Oil (Score:4, Insightful)

        by religionofpeas ( 4511805 ) on Monday June 04, 2018 @10:57PM (#56728978)

        I don't think it's a joke, really. There's been no lack of demand for oil, and it's doubtful that this is going to change any time soon. Peak oil may well hit us first.

        • Re:Peak Oil (Score:4, Interesting)

          by ITRambo ( 1467509 ) on Monday June 04, 2018 @11:53PM (#56729116)
          Fear is still a major motivator of the news. The slide will be a slow one, as it has been for many years, and unlikely to be a bubble that bursts quickly, by itself, as we transition away from fossil fuel. We're not all moving to electric cards until they are cheaper and can easily and quickly recharge when traveling, and not until our old gas burners die on us. Power companies have been moving to wind power for years. Coal burning power generation is the only real loser here.

          • I don't expect there to be a sudden transition either. Even if demand for oil starts to drop, prices will drop even harder, and that makes it less attractive to switch to electric.

            • Re:Peak Oil (Score:5, Interesting)

              by taiwanjohn ( 103839 ) on Tuesday June 05, 2018 @01:51AM (#56729360)

              The problem is volatility. These things don't happen in nice, smooth supply/demand curves. Even a 2% drop in demand would wreak havoc on the market... as some suppliers go offline (or bankrupt) the price spikes again, and you get a yoyo effect that could spiral out of control. The "light tight" oil coming out of these fracking plays is not a drop-in replacement for West Texas crude, it's a different product with very different economics -- with EROEI [wikipedia.org] in the single digits, and most producers leveraged to the gills, not covering much more than their operating costs, even at $60/bbl. The whole business is a house of cards.

            • Re: (Score:2)

              by Sique ( 173459 )
              If the prices for oil are falling, prices for electricity will also fall, because generating electricity from oil will be cheaper too.

              • Re: (Score:2)

                by jbengt ( 874751 )
                No, because generating electricity from oil will still be one of the most expensive, and rare, ways of doing it. Might help out some isolated islands, though, if they don't switch to renewables first.

        • Re:Peak Oil (Score:4, Insightful)

          by swb ( 14022 ) on Tuesday June 05, 2018 @05:42AM (#56729750)

          The stone age didn't end because we ran out of stones, the oil age won't end because we run out of oil.

        • There's been no lack of demand for oil, and it's doubtful that this is going to change any time soon.

          In fact (as a later item on the slashdot front page today notes):
          The World Set a New Record For Renewable Power in 2017, But Emissions [of oil and gas sourced carbon dioxide] Are Still Rising [slashdot.org].

          This is because energy demands rose faster than deployment of renewable energy sources to supply them, and fossil fuel energy is still cheap.

          I expect renewable energy generation to catch up with demand gr

    • Crucially, the findings suggest that a rapid decline in fossil fuel demand is no longer dependent on stronger policies and actions from governments around the world.

      This dangerous trend can and will be stopped: We will use a combination of tariffs, executive orders and obscure WWII-era federal statutes to nationalize the energy sector and stamp out this "change" nonsense, ensuring that fossil fuel jobs in key voting districts will endure for decades to come!

      What an odd conclusion. Maybe it's because you accidentally forgot to quote the next sentence:

      That is because advances in technologies for energy efficiency and renewable power, and the accompanying drop in their price, have made low-carbon energy much more economically and technically attractive.

      If that's true, then you have nothing to worry about. The economic incentives will win out.

    • No, but CONgress (both GOP and Dems) will make certain that we bail out coal, oil, and even car makers again.

  • Something seems wrong here... (Score:5, Insightful)

    by fuzzyfuzzyfungus ( 1223518 ) on Monday June 04, 2018 @10:59PM (#56728982) Journal
    It seems as though our vaunted financial indicators must be...a trifle off...in some way if a combination of cheaper energy efficiency measures and increase in availability of energy sources cheaper than the current low cost options would have negative effects on the economy.

    How do you do that? The cost of a fair amount of energy(and often a lot of petrochemicals that will presumably be cheaper if less demand for using them as fuel means lower cost for purchasing them as feedstocks) is baked into pretty much every good and service imaginable. What sort of ghastly mistake does it take to turn "basically everything has become cheaper to produce" into a financial crisis?
    • if you want to see the effects of dropping oil prices look at Venezuela. Yeah, some of those wounds were self inflicted, but the big issue was the sudden drop in oil prices pulling the rug out from under them (plus a drought shutting down their hydro electric dam, folks forget how small they are, that was a big deal).

      Now, imagine what's gonna happen when the price of oil gets low enough that the middle eastern countries can't afford to keep up their militaries and their social welfare programs. Don't fo

      • Re:Because people aren't rational (Score:5, Insightful)

        by religionofpeas ( 4511805 ) on Monday June 04, 2018 @11:29PM (#56729058)

        The sane thing to do is to provide aid to modernize these countries.

        You can't modernize an old mindset of tribal warfare with aid.

        • people mellow out once they've got enough food/shelter/healthcare. It's not like we don't have plenty of evidence of this either. Look at Europe. The problems they're having right now are mostly from Muslim refugees being forced to migrate because of bad economic conditions in their countries. They're a problem because they're being forced to move, so they're not integrating into their new countries. It'll be 3 generations until they do.

          TL;DR: It's cheaper to drop food than bombs.

      • Maybe the aforementioned countries' rulers should spend some of their petrodollars on something other than super-yachts and building decorative islands at which to moor them?

        • Re: (Score:2, Interesting)

          by Anonymous Coward

          Iran TRIED to get some nuclear power plants built to reduce their reliance on oil for their power. The US and others all screamed murder and had sanctions put on them after the US, France and Russia had all cancelled contracts to build nuclear plants in Iran and the Iranians decided to just build their own, including processing their own nuclear fuel !
          And yet, a brutal regime like Saudi is apparently "ok" to have nuclear power ?

        • They transformed themselves from a third world hell hole into a first world nation in 50 years. That's incredible when you think about it. A modern miracle they don't get enough credit for. But it was all based on the price of oil. When the petrol dollars dried up they didn't have a 200 year old banking system in place to deal with it.

          The Saudis see this coming, btw. It's why they're letting women drive. They're trying to get them into the workforce to keep their economy growing.

      • Re: (Score:2, Informative)

        by Anonymous Coward

        * Venezuela began struggling when oil was at 110$ a barrel.It's the incompetent regime that is at fault (incompetent because even other 'socialist' dictatorships manage to have toilet paper available).
        * Middle East oil-based countries already survived 8$ a barrel in the 1980s.
        * No ME country has nukes save for Israel, which is not an oil exporter.
        * ME countries cannot be modernized from outside. But we can stop the nastier countries from doing (more) trouble and getting nukes, which would be really bad for

      • Re: (Score:2, Insightful)

        by DNS-and-BIND ( 461968 )
        Send aid to wealthy petro-states? Why? They have plenty of money. What would that accomplish?
      • The big issue in Venezuela isn't the price of oil. With good managememt, Venezuela would be like Norway right now. With moderate managent they could be like Costa Rica. It's been a stunning display of mismanagement in that country.

      • That is the most ludicrous retelling of Venezuela's recent history I've ever heard. Thanks for the chuckle.

        "....some of those wounds were self inflicted..." Some?

    • Re:Something seems wrong here... (Score:4, Interesting)

      by Krishnoid ( 984597 ) on Tuesday June 05, 2018 @12:25AM (#56729174) Journal

      If those financial indicators are predicated on the stability and reliability of the US dollar,

      The petrodollar system elevated the U.S. dollar to the world's reserve currency and through this status, the U.S. is able to enjoy persistent trade deficits, and become a global economic hegemony. The petrodollar system also provides the United States’ financial markets with a source of liquidity and foreign capital inflows through petrodollar "recycling."

      -- How Petrodollars Affect The U.S. Dollar [investopedia.com].

      it could be more than a trifle off. How much, though, I don't know enough to say.

    • Re: (Score:3)

      by AHuxley ( 892839 )
      The USA likes to set aside its own raw materials in "national" parks and other gov controlled wilderness areas.
      No rail to a mine, no new mine, no US citizens finding mineral wealth and exporting the raw materials.
      A car park and a forest is what the USA sets aside.
      That allows a US company to extract the raw materials for cents in the $ from an Asia, Africa, South America.
      No pollution in the USA. No tailings dam. No new rail road up into Alaska to open up new mines.

      The USA never used a lot of its ener

    • Re:Something seems wrong here... (Score:5, Interesting)

      by thegarbz ( 1787294 ) on Tuesday June 05, 2018 @04:03AM (#56729594)

      It's not the cost of the primary energy that will upset the economy. It is the cost of the disposal of assets, the sunk investments, the many jobs supported, etc. It isn't about newer and cheaper, it's about too big to fail actually failing and also being too big to prop up.

    • On the nose. In fact, the economy usually booms when energy prices go down. There is no kind of economic stimulus quite like it. It puts money in the pockets of average consumers AND money in the pockets of most productive businesses. (Not all, of course.)

      As one factor analysis goes, I do not think you can do better than look at the correlation between average energy prices one year to economic growth in the following year. Better than tax cuts/rises, military spending increases/decreases, which party

  • EROI Will burst the carbon bubble (Score:2, Informative)

    by Anonymous Coward

    I've read that a mix of lower Energy Reruns On Investment (EROI) I.E higher energy inputs to extract carbon fuels (one barrel of light crude equivalent) and lower ore grades for mining raw materials (more energy to move more rock for less ore) will cause the bubble to burst eventually.

    But the true wildcard is the adoption or non carbon energy sources and how much of a market share it will take from carbon fuel sources.

    Worse case scenario, carbon fuel EROI will be very low I.E high extraction costs. In a

  • The authors are a condensed matter physicist and a lawyer. No economists there. So the "global financial crisis" they refer to could be that some countries benefit, others lose, that some companies make higher profits and others go bankrupt. How is that different from today's "crises"? An economist could help.
  • I was under the impression that the oil bubble was finally what pushed the US economy over the edge and into recession back in the summer of 2008. Are we in another oil bubble now? Maybe or maybe not?
  • Price goes down, people can afford more of it, demand goes up.

    Price goes up, people can no longer afford it, demand goes down.

    The price of petroleum products will only ever keep going up (on average). Humanity won't stop burning oil until there's none left to burn.
  • I've been hearing garbage like this for years. The Peak Oil Apocalypse is a similar doomer line of thought by people who don't seem to understand the energy density of liquid fossil fuels. Since we are talking about someone's bullshit cockamamie theories how about we throw this one into the ring? Fossil fuels keep selling until significant amounts of vehicles and equipment becomes electric. At that point, the fossil fuels get cheaper, and as folks transition away jobs open up on the electric side (nowhere d

  • Nope. The bubble is people's interest in climate change. People aren't giving a sh*t about it because they have come to the realization that solving it is too expensive for them.

  • That is because advances in technologies for energy efficiency and renewable power, and the accompanying drop in their price, have made low-carbon energy much more economically and technically attractive.

    There's a basic stupidity here. By implied extrapolation, the PR wonks are trying to lump energy technology in with Moore's law, as it applies to silicon: a die shrink only ever gets better (which itself is barely true any more, though it certainly enjoyed a stellar half century).

    Environmental energy is not

  • A crash in fossil fuel prices will certainly be disruptive, but it takes more than just disruption to cause a major financial crash.

    Certainly many specific areas will face some pretty severe consequences from such a crash. States where fossil fuel exports make up a large fraction of their economy, such as Alaska or North Dakota, will be hit pretty severely. Nations that are doing similar, such as Saudi Arabia, will get it even worse. But most countries and areas are likely to sail through without dire co

    • A crash in fossil fuel prices will certainly be disruptive, but it takes more than just disruption to cause a major financial crash.

      Certainly many specific areas will face some pretty severe consequences from such a crash. States where fossil fuel exports make up a large fraction of their economy, such as Alaska or North Dakota, will be hit pretty severely. Nations that are doing similar, such as Saudi Arabia, will get it even worse. But most countries and areas are likely to sail through without dire consequences.

      What could cause such a crash to turn into something like the 2007-2008 crash is debt: debt magnifies crashes. That's the reason why the housing bubble had such severe consequences: houses are typically debt-financed. The question, then, is how much of fossil fuel investment is leveraged, and where is that debt held? The answer to that question will determine whether there are wider consequences beyond oil-exporting areas.

      Granted, the consequences within oil-exporting areas could be extremely severe if it triggers wars. Which is definitely a possibility in some such areas.

      Historically, low energy prices usually lead to economic growth.

      This is a pretty silly article. As the price drops high-cost producers will stop producing. If the demand outstrips the supply from the low-cost producers the price will rise, making higher-cost production more viable.

      Here's an article on production costs: http://money.cnn.com/2015/11/2... [cnn.com]

      Frackers have a huge advantage in that they can shut down and start up very quickly, certainly much more quickly than deep water drillers.

  • A few dozen billionaires become millionaires, a few millionaires go bust and thousands of employees head for the solar and wind industry.

    It has happened before, the world didn't end.

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