Any way you slice it, the burning of fossil fuels is damaging to life on Earth – damaging to the planet by upsetting the delicate carbon balance in the atmosphere that has kept the Earth within a temperature range capable of supporting life, and damaging to ourselves not only because we, too, are intimately connected to the Earth but also because the toxins and byproducts released during the combustion process cause a rash of diseases and cancers now prevalent throughout society. We also know that fossil fuels are finite in nature, that we are on the down slope of production of traditional oil sources that have a high energy return on investment (EROI), and we now need to obtain much more costly (both in terms of dollars and environmental impact) extreme energy in the form of offshore oil, tar sands, mountaintop removal, and hydraulic fracturing. Why do we do this?
It All Comes Down To Money
In today’s capitalist culture, the object of the game is to make profit. Actually, it is to maximize it. The oil industry has been the most profitable human endeavor ever. Six of the top seven companies (in terms of revenue) in the world are oil companies. Saudi Arabia says it costs just $2 to produce one barrel of oil, which will fetch upwards of $100 on world oil markets, a profit margin of 5000 percent. Not bad.
While the tar sands aren’t as profitable as Saudi Arabia’s oil, they still cost just $27 per barrel to produce, which leads to a profit margin (using today’s price of $93.07/barrel) of 344 percent. Yes, this profit gets divided among many different players from producers to refiners to distributors to retail outlets, but the fact remains that oil and gas production is an extremely profitable enterprise, economically speaking. Why is this?
The reason it is so economically advantageous to produce oil and gas is because the industry gets away with externalizing huge environmental, social, and health costs on society. The scale of the environmental devastation of the Tar Sands is breathtaking. Have you seen the pictures? The tar sands are not your typical oil well. The process of extracting oil from tar sands first requires the scraping away of entire forests. All of the wildlife, all of the carbon-absorbing, oxygen-giving trees, all the biodiversity…gone, indefinitely. The Earth is then excavated and fed through processes that use and pollute massive amounts of water and burn natural gas. The oil is then piped thousands of miles through delicate habitats and aquifers to be refined and distributed to global markets. But this is just the local environmental externality.
There are other global environmental externalities such as the effect of unleashing millions of tons of greenhouse gases into the atmosphere intensifying natural disasters and fueling the rise in sea levels and ocean acidification. There are social externalities on indigenous tribes who have lived on the land for generations and whose communities are being destroyed through environmental pollution. There are the health costs that we have lived with for generations in the form of asthma, cancer, and many other immune system disorders.
Add up all of these external costs and it becomes abundantly apparent that oil is not as profitable as their valuations would indicate. The trillions of dollars of “wealth” represented by carbon reserves in the ground and visible through the value of their stocks is really a mirage – one that will become increasingly apparent as intensified climate disasters wreak havoc on the rest of the economy.
What Is Preventing Change?
These oil stocks are part of portfolios owned by nearly all the major wealth funds, college endowments, mutual funds, and 401ks. Millions of people are dependent upon these funds for their retirement or college education. If the true costs of oil production is incorporated into its price, the value of these stocks would plummet, as millions of barrels of oil suddenly become uneconomical to extract. Many other related industries would also lose their value if it became uneconomical to mine the Earth for extreme oil. And even though the number of people with investments in oil stocks is larger than one might think, they still comprise less than one percent of the Earth’s population.
In America, people champion the free market. One of the requirements of a free market is that producers of goods and services pay for the costs they impose on others and the environment. Extreme energy is only made possible because of this failure for the market to enforce its rules. And this failure has resulted in a self-reinforcing profit loophole so large that it can easily corrupt government, mislead the public, and make alternative forms of energy economically infeasible at scale.
Lets Just Give Them The Sun
The odds that the oil companies will read this article and change their minds about extracting their reserves are about as likely as McDonalds agreeing to swap out their hamburgers for veggie burgers. Bill McKibben, author of last years’ viral Rolling Stone article “Global Warming’s Terrifying New Math,” and his non-profit, 350.org are promoting a divestment campaign to ask fund managers to divest from companies that are profiting from the Earth’s destruction. We can engage in civil disobedience as many are doing in Washington D.C. and on the front lines in Texas and other states where the Keystone XL pipeline is being built. We could also enact a carbon tax-and-dividend scheme that could go a long way towards alleviating poverty. But our options are limited.
So here’s another idea – let’s give energy rights from the sun, wind, and waves to the fossil fuel companies in exchange for transitioning energy production away from fossil fuels. Yeah, I realize it is a crazy idea, but think about it. The main reason why it is many times more profitable to sell oil is because there is no way to sell the fuel source for wind, solar, and other renewable energies. The sun shines and the wind blows abundantly and you simply can’t sell anything that is abundant. You can make money selling the equipment to capture renewable energy, but profit margins for technical equipment are modest compared to the vast profits attainable in selling the fuel.
So let’s just give them the sun, wind, and waves. Allow them to charge a fee for the solar rays that hit the panels, the waves that spin the turbines, and the wind that turns the windmills. Giving the sun, wind and the waves to the fossil fuel companies won’t solve inequality or social justice issues as a true shift to a system based on distributed, lateral power might, but it will buy us more time for humanity to grow up and embrace the understanding that we are all intimately connected with the Earth and each other, kick start the full scale transition to renewable energy, and probably thwart the worst effects of climate change.
Hey, I’ll admit that it’s a drastic proposal but these are drastic times. We could also decide to demand a sustainable and just economic system, but we seem intent on sticking with our crony capitalism. Our system has been corrupted and atrocities are being committed to maintain the status quo. Usual tools and traditional approaches like petitioning our government are not working. We owe it to future generations to consider all options.
"It's not that we have a philosophical difference with the fossil fuel industry - it's that their business model is destroying the planet."
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