The Berlin wall was a symbol of the Soviet era like no other. When it was finally dismantled in 1989 it signalled the end of a system that had stood for nearly 70 years. A system that shaped the political landscape of the 20th century symbolising a lack of freedom and a source of fear.
It is now 25 years since the Berlin Wall came down. As the bricks were shattered and families were reunited, the world rejoiced the end of the Cold War and looked forward to a better existence. It was a turning point in modern history.
Now another system is showing signs of falling.
A couple of weeks ago an iconic name (if not the iconic name) for the oil industry’s wealth and power over the past century, announced they were divesting from fossil fuels. The Rockefeller’s said, oil no more.
If one moment could be said to mark the end of the all-encompassing era of petroleum – this may be it. While the Rockefeller Brothers Fund is only a part of the Rockefeller wealth, “This is like a snowball, and it’s going to get more and more mass as it rolls forward,” said president of the fund Stephen Heintz.
At the time the Berlin wall came down most people knew the significance what it meant. But the Rockefeller’s plan to divest from the oil gas and coal industries seems to have barely registered in New Zealand media yet it has reverberated through the global investment community.
To give some context. John D. Rockefeller was to oil what Elvis was to rock n roll.
The company he founded, Standard Oil, went on to define the shape of oil dependency for in the 20th century.
The infamous Seven Sisters oil cartel was supposedly conceived at a meeting in a Scottish castle in 1928. Three barons of the business including Walter C. Teagle of the Standard Oil Company, founded by Rockefeller in 1870 – the future Exxon, agreed to stop competing on price for the benefit of them all.
John D. Rockefeller died with wealth equivalent of 1.5% of the GDP of the entire US economy – a greater relative wealth than any modern American billionaire. He largely had oil to thank for that wealth but his descendants and inheritors are moving on.
The Rockefeller Brothers Fund claims a “deep commitment to combating climate change” as one of their reasons. The move is part of a 50 billion divestment campaign to coincide with the UN Climate Summit in New York.
But there are other not so noble reasons why it’s a good time to get out of oil as Valerie Rockefeller also put it to the BBC, “We think fossil fuels are increasingly risky.”
This reality must be deeply troubling to the industry. One reason oil is risky is that the easy to get oil is pretty much gone. The oil majors are now spending more money on trying to find oil (capital expenditure) than what they are making from the oil they find (production). That is the definition of an unsustainable business. In it’s article, Toil for oil means industry sums do not add up, the UK Financial Times said: “The economics of oil have become completely dislocated from historic norms, with the industry investing at exponentially higher rates for increasingly small incremental yields of energy.”
This is why we see increasing belt-tightening from oil companies. Despite reports of a rosy future from woefully ill-informed Minister of Energy Simon Bridges – even the latest venturer into the jaws of the kiwi passion for oil free beaches – Norwegian oil giant Statoil – have just announced a cut of 500 jobs.
The global picture of high investment for poor return is mirrored in NZ with $2.98 billion spent on exploration and development-related activities over the past two years but by Bridges’ own admission, “most of the exploration activity has not yet yielded discoveries”.
Further to that there is a looming price war that could see the oil price drop.
Oil prices going down is bad news for explorers because it squeezes the possible profit margins on unconventional sources like Arctic oil, tar sands and deep sea oil. That means New Zealand becomes a less viable financial risk for foreign drillers.
While the law of finite resources (they run out) won’t save us from the fact that climate change means we can’t afford to burn even the reserves we have, the end of easy oil is messing with the economic viability of the industry itself.
In short, we are witnessing the collapse of the global oil industry. At the same time the economics of oil and gas are going up, the cost (and economic viability) of cleaner, safer, more distributed energies such as solar, wind and electric transport are coming down.
The crucial complement to the Rockefeller’s taking their money out of oil is they are putting it into renewables. As one industry is abandoned another is backed.
“John D. Rockefeller, the founder of Standard Oil, moved America out of whale oil and into petroleum,” as Heintz, put it in a statement. “We are quite convinced that if he were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.”
We could only wish Steve Joyce and John Key had the Rockefeller foresight. But for those of us defending coastlines and climate, this all helps put the odds in our favour.
Take your sledgehammers to the wall.
These are good times for being a thorn in the side of oil explorers.
Steve Abel is a Climate Campaigner with Greenpeace New Zealand.
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