|Climate Science 101|
1. It's warming
2. It's us
3. We're sure
4. It's bad
5. We can fix it
(@billmckibben comment: "When scientists
protest, their picket signs have footnotes")
Donald Trump is packing his cabinet with people who stand for the proposition that climate change is a hoax and we can go on ransacking our environment forever.
Capping off a week that saw him nominate a known climate skeptic to head the U.S. Environmental Protection Agency and put forth a fossil fuel CEO as potential secretary of state, President-elect Donald Trump said in a Sunday interview that "nobody really knows" if climate change is real. (See "Stacking Cabinet With Deniers, Trump Says 'Nobody Really Knows' on Climate")
But what happens when he changes his mind?
All it is going to take is one briefing -- the right briefing -- to send him off in a new direction.
What will he do then? Tell them, "You're fired"? Or make a deal with them . . . ?
(And what about the federal employees who have been persecuted by that time for their conscientious efforts to combat the climate crisis?)
* * * *
I'm particularly fascinated by the choice of the head of ExxonMobil to head the State Department.
Many people are focused on Rex Tillerson's role in the efforts by XOM (as ExxonMobil is referred to, after its stock symbol) to subvert the science on climate change. I'm more interested in Tillerson's handling of the company in the months since people started to realize that the jig is up with the oil companies.
|XOM stock performance over past five years|
(Source: Google Finance)
This is material for a more extended treatment in an upcoming blog post, but the short story is: XOM has had to figure out a way to convince people to continue holding its stock even after it became apparent that the old formula would soon become obsolete. After all, holding stock that represents the value of oil that is stuck in the ground (a "stranded asset") isn't worth much; better to unload it on someone else (quickly). From what I've been able to detect, XOM's immediate answer has been to say, in effect, we'll stop spending money on finding more oil, and start handing out bigger dividends. (Cash covers a multitude of sins, and XOM has plenty of cash.) (See, for instance, "ExxonMobil Confronts the 'Carbon Bubble'" and "Chevron, Exxon Cut Spending on Oil Price Slide")
|How much is just froth?|
One thing is for sure: when XOM craters -- together with the other fossil fuel companies -- it will not be a slow, gentle ride down. The disappearance of buyers tends to be instantaneous.
* * * *
Which brings me back to Rex Tillerson. If, as an ordinary "insider," he dumped his XOM holdings, the market would take it as a signal -- a very bad signal -- for XOM. However, if he is compelled to divest his holdings, to avoid conflict of interests as Secretary of State, that's a different matter . . . .
So which will it be?
Far more important than the historic performance of fossil fuel stocks is the future correlation of fossil fuel stocks to generalized, systemic risk in the market, and their negative correlation to the few sectors of the market that stand apart from that risk.
(See The Feel-Good Folly of Fossil-Fuel Valuation )
We need a zero-carbon USA and a zero-carbon China. Anything less is planetocide.
(See #chinaEARTHusa - Radical Change? or Planetocide? )
Oil companies are valued by the market based on their reserves. The problem with this approach is that the total reserves claimed by the oil companies is FIVE TIMES what can possibly be burned without driving up the temperature of the atmosphere up by a catastrophic amount and, as McKibben puts it, "breaking the planet." How can the value of oil companies be a function of reserves that can never be used?
(See The REALLY Big Short: The Jig is Up with Oil Companies)