May 29th in what is set to become a defining moment in the history of capitalism; Rex Tillerson, the CEO of the world's most valuable company, Exxon Mobil (NYSE:XOM), in an address to shareholders redefined the meaning of rational self interest for the markets everywhere in a short series of astonishing quotes:
"What good is it to save the planet if humanity suffers?"
"We do not see a viable pathway with any known technology today to achieve the 350 outcome that is not devastating to economies, societies and peoples' health and well-being around the world,"
"So the real question is, do you want to keep arguing about that and pursuing something that cannot be achieved at costs that will be detrimental? Or do you want to talk about what's the path we should be on and how do we mitigate and prepare for the consequences as they present themselves?"
The most interesting things about these statements:
1. No more denial of scientific evidence.
2. No more diversion about whether human activity or something else is to blame.
3. No more disingenuous claims that NG or Hydrogen are clean fuels.
Just an honest and straightforward macroeconomic outlook: We are on a collision course with the consequences of rising CO2 levels, we cannot afford to stop it, and so there is nothing Exxon can offer but a warning to prepare for the worst.
For any that missed the relevance of Mr. Tillerson's reference to the "350 objective" here is the explanation:
The image above contains two graphs from the Keeling Curve at 300 year and 800,000 year resolutions side by side. I have expanded the Y axis of the 300 year plot downwards to put both plots on the same 150ppm to 400ppm scale. It can be seen from the raw data that background CO2 concentrations have been running for a very long time in the range of roughly 200-275ppm, heading upwards from around 1800 and from around 1950 they have been going up on a solidly exponential tear to the currently recorded May high of 400ppm.
Looking at more recent data (1960-2013 corresponding to around 320-400ppm), it looks like every year the Keeling curve has gone up by averagely 1.5ppm annually. Based on 1ppm CO2 equalling 2.12 Gigatons, we can say that there remained about 3.18 Gigatons annually in the atmosphere every year, the rest presumably removed by natural processes.
The good news, if we can call it that, is that the combined Fossil Fuel Use (gas, oil, coal) produces around 5 Gigatons of CO2 annually, which simply means that escalating CO2 levels (no matter who or what is to blame) are within the scope of human control. Simply we could theoretically reduce our output by an amount equal or greater than the excess. The fact that 3.18/5.00 = 63% of the exhaust from a vehicle or a power station remains in the atmosphere indefinitely would appear to be sufficient incentive to look at alternatives (at the very least).
However, having said that 3.18/5.00 = 63% of fossil fuel burning would need to stop now in order to produce two years in a row of CO2 at the same level, albeit at or around the current million year record of 400ppm. Naturally it would be easier to bring it under control if we also put a full stop to burning forests (1.7 Gt CO2 / year). I would suggest that on this basis alone that policing an immediate halt to slash and burn deforestation is probably one of the better justifications for the threat or actual use of military action in connection with protecting the interests of the Oil industry abroad. Forests, especially giant forests, are good for scrubbing CO2 from the atmosphere, forest clearing is bad, CO2 from burning giant tracts of forest is exquisitely counterproductive.
So at last we find ourselves at last in a rational conversation with the Oil industry.
An immediate reduction in Fossil Fuel use of 63% would be an economy-ending, probably civilization-ending event, at least for civilization as we know it. For example, restricting use of oil to the bare necessities of intensive agriculture, food deliveries, power for refrigeration and cooking. Perhaps a basic clothing industry and some domestic heating under tight allowances. Without replacement for oil and only a restriction on CO2 production for the sake of species survival, one should forget about driving for pleasure and driving to work would be weighed heavily in terms of risk and reward. One might argue that we should instead all have fun while it lasts (with strict contraception).
In order to reduce the CO2 to something less frightening, like 350ppm (still a million year high), would require a cut even greater than 63%.
And so to Mr Tillerson's comment: "What good is it to save the planet if humanity suffers?" Seems to have a logical underpinning. Indeed why not accept that CO2 levels will just carry on upwards and "prepare for the consequences as they present themselves."
Above is a simple extrapolation of the Keeling Curve. It is not deep science. Any reader, or in fact any school child could produce the same thing. It can be seen at a glance that I have attempted to maintain the rate of curve by eye, and in so much as it looks OK then I would hope nobody would argue that I have done a bad job of it.
The results of carrying along this simple-to-produce curve towards the year 2100 are clearly horrific. The finite resource of the free-of-consequence use of atmosphere as a CO2 dump ran out considerably more than one hundred years ago.
This is business as usual and takes into account no step-change event, for example, the Amazon rainforest burning in an abnormal heat wave. Nor does it take into account any complex scientifically-related causes for concern in the form of flooding of the world's coastal cities and high-energy storms, Gulf-Stream reversal and so on.
So it must be said that the party until we drop proposal from Exxon has its limitations too both in terms of feasibility and longevity as a viable option be that economically or existentially. Hence we would appear to be stuck between a rock and a hard place. At around 600ppm, fresh air will become difficult to breathe. When approaching 1000ppm CO2 then symptoms of asphyxia commence. Asphyxia would occur in any enclosed space long before fresh air rose to those levels. I suspect even in the absence of additional destructive effects, some time the next 40 to 50 years the problem will be one of rising concern over resource scarcity, not of peak oil but of breathable air.
Meanwhile, we would seem we have a grand market opportunity commencing now and for a window of around 20 to 30 years for re-investment of the economic wealth that oil has afforded into valid alternatives that can ensure the existing oil companies become the energy companies of the future, or indeed for shareholders to reinvest in the future that is not unsustainable for human civilization. For example enormous solar projects, nuclear, hydro and so on.
Lately I have made a particular study of Tesla Motors Inc. (NASDAQ:TSLA) which alongside SolarCity (SCTY) has made for some fascinating examples of how investors have both welcomed and been rewarded for backing a commercial solution that is firmly aligned to the public will of abandoning fossil fuels for a better (not a worse) standard of living. I believe this model is entirely applicable to the markets generally, and in fact with thought-leadership beyond the very limited scope indicated by Exxon, it would appear hopeful that $billions if not $trillions could be invested with greater rewards in technologies that can be part of the future than perusing fossil fuels down a path towards chronically diminishing and inevitably extinguished returns.
"We do not see a viable pathway with any known technology today to achieve the 350[ppm CO2] outcome that is not devastating to economies, societies and peoples' health and well-being around the world,"
I am in qualified agreement with this statement.
If the markets, including the oil industry or its shareholders (if the management remains intransigent), are not sufficiently encouraged by the far greater rewards than oil, gas and coal can offer, as recently evidenced by the rapid uplift experienced by investors in both TSLA and SCTY, investments characterized by aggressive strides towards better answers than fossil fuels driven by consumer and government demand for solutions.
Unless rational and profit-motivated self interest precipitates aggressive investment commencing now and continuing across the next ten or twenty years and beyond in energy solutions to replace oil, gas and coal, I suspect the technology of choice to answer a threat of an imminent end to breathable air sometime in the next 50 or so years will become apparent.
There is no doubt that we have an existing technology to halt fossil fuel dependency across the globe in order to reach an objective of 350ppm and falling and with it a rapid end to global warming too, that would be Nuclear ICBM. Nature always has a way of restoring balance, and while cooperation is possible, ultimately the call of nature is not a request.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.