In only a few quick weeks we will find ourselves looking back on the chaotic, emotional roller coaster that was 2020. Jobs, homes, and savings collapsed for many Americans and our government did next to nothing to support those in need, forcing us to fend for ourselves in the ceaseless economic nightmare. Our consolation prize, at the very least, is to watch the oil and gas companies collapse in their own right (albeit with more government stimulus money than we got).
The energy sector has been performing poorly for about a decade, but over the last few years oil and gas companies have kept a tight grasp on last place in the market. In fact, the energy sector is shrinking so significantly that it only makes up 2% of the S&P 500 Index now (luckily, as that 2% is doing enough damage as is). In April, the US energy industry was worth roughly half as much as Microsoft; in October, it had officially reported a 50% total loss since January.
Celebrating the death of an industry still feels wrong even if you are a climate activist and the industry is fossil fuels. The bitter taste could be that, in true American fashion, these losses usually affect everyone but CEOs who walk out of a bankruptcy with a million dollar paycheck. Yes, it is good for the planet to see that Exxon’s debt has shot up 80% to a whopping $45 billion, and that dozens of companies spewing greenhouse gases into our delicate atmosphere are going bankrupt each year. I am genuinely pleased BP is making such little money that they are actually funding wind energy and reevaluating their business plan — even shying away from the idea of relying on oil alone. But when prices drop as quickly as they did in the beginning of the pandemic, investors and employees lose just as much.
BP suffered billions in net losses and severe write downs and 10,000 employees lost their jobs; in 2022, Exxon plans to follow suit, cutting 15% of their global workforce. In the first quarter of 2020 crude oil prices saw the largest quarterly oil price decline since 1983, going from $61.06 per barrel to $20.48. The price of oil futures went negative in April, causing investors to pay $38 per barrel just to have it taken off their hands. In May when the futures expired, investors only squeezed out a mere $10.01 per barrel, hitting 10% of what a barrel of oil would have sold for in 2014. This crash is fatal for fossil fuel companies, promising for the planet — and as for those of us who trust in pension funds or asset managers to handle our savings? Soon enough we will be left high and dry, waiting on dividends that can’t pay out.
Like nature has often demonstrated, we must adapt, evolve. Let the fossil fuel industry succumb to karma and transition to an energy grid that won’t kill our grandchildren. Renewable energy options are cheaper anyway: unsubsidized, levelized prices per megawatt hour of electricity from wind range from $28 to $54 next to coal’s $65 to $169, and both wind and solar energy costs continue to drop as technology improves. Leading global index provider MSCI found that the MSCI ACWI Climate Change Index, which has no investments in fossil fuel companies, outperformed the MSCI ACWI index (a benchmark for global equity funds) by 1.1% in total return from 2013-2020, offering higher return at lower risk. If we want to be good investors, we have to divest from fossil fuels and start choosing industries that we can actually trust.
Here’s how you can take action now:
- Tell Colorado PERA to protect their fiduciaries from negative returns and stranded assets and take all pension fund investments out of fossil fuel companies.
- Add your name to the growing list of PERA members, beneficiaries, and Coloradans in support of PERA assessing climate-related financial risk and fossil fuel divestment.
Katie Orton is a 350 CO Intern and excited to be learning more about climate change and the ways we – often unknowingly – let our planet slip away. She lives in a tiny house she built with her partner and is always looking for ways to reduce her carbon footprint. Until November, you can find her in the North Denver and Boulder areas knocking on doors for the Progressive Turnout Project and talking with voters about why they vote. Below is her guest blog post focused on pension funds and fossil fuel investments, including ways to begin taking action.