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'Carbon Bubble' Could Spark Global Financial Crisis, Study Warns (theguardian.com)
An anonymous reader quotes a report from The Guardian: The existence of a "carbon bubble" -- assets in fossil fuels that are currently overvalued because, in the medium and long-term, the world will have to drastically reduce greenhouse gas emissions -- has long been proposed by academics, activists and investors. The new study, published on Monday in the journal Nature Climate Change, shows that a sharp slump in the value of fossil fuels would cause this bubble to burst, and posits that such a slump is likely before 2035 based on current patterns of energy use. Crucially, the findings suggest that a rapid decline in fossil fuel demand is no longer dependent on stronger policies and actions from governments around the world. Instead, the authors' detailed simulations found the demand drop would take place even if major nations undertake no new climate policies, or reverse some previous commitments. That is because advances in technologies for energy efficiency and renewable power, and the accompanying drop in their price, have made low-carbon energy much more economically and technically attractive.
I've read that a mix of lower Energy Reruns On Investment (EROI) I.E higher energy inputs to extract carbon fuels (one barrel of light crude equivalent) and lower ore grades for mining raw materials (more energy to move more rock for less ore) will cause the bubble to burst eventually.
But the true wildcard is the adoption or non carbon energy sources and how much of a market share it will take from carbon fuel sources.
Worse case scenario, carbon fuel EROI will be very low I.E high extraction costs. In a market where carbon fuel prices are trending lower due to drop in market share to green energy!
In a situation like this investors won't put money into oil/gas or mining companies!
Which means a surplus of used ICE cars. Combined with cheaper oil, that makes it an attractive option for people with small budgets.
* Venezuela began struggling when oil was at 110$ a barrel.It's the incompetent regime that is at fault (incompetent because even other 'socialist' dictatorships manage to have toilet paper available).
* Middle East oil-based countries already survived 8$ a barrel in the 1980s.
* No ME country has nukes save for Israel, which is not an oil exporter.
* ME countries cannot be modernized from outside. But we can stop the nastier countries from doing (more) trouble and getting nukes, which would be really bad for us.
There's still a lot of cheap oil with low extraction cost, but the market price of oil is determined by the most expensive barrel, not the average. As demand drops just a little bit, these expensive barrels are taken out of the equation, and price will drop quickly.
You expect a collapse in energy prices and the massive availability of cheap energy to negatively effect industrial economies ?
No. He expects it to negatively effect the financial world which has a lot riding on the traditional energy users. Too big to fail is such due to the impact the failure itself has on the economy. Industry itself will be doing just fine as will the general economy. The fewer job prospects isn't really anything to do with the number of jobs as much as the competition.
Also your comparisons to the switch to coal and oil isn't quite fair. The coal and oil for its most part provided new opportunities rather than replacing existing ones. Buggy whip manufacturers aside the world economy wasn't propped up by people selling horses and hay. The same can not be said for the trillions of of dollars sitting in the oil industry. We are talking about active replacement / destruction of industries as the end goal now. Expect it to be quite different from the steam age.
> sunk costs and investments like cars will switch over when it makes economic sense
That will make sense circa 2022. look at how many car companies are investing heavily in EV's.
"The kingdom has proven reserves of 266 billion barrels according to government estimates submitted to the Organization of the Petroleum Exporting Countries (“Annual Statistical Bulletin”, OPEC, 2015). If these numbers are correct, Saudi Arabia’s reserves will last for another 70 years at the average production rate of 10.2 million barrels per day reported for 2015." https://www.reuters.com/articl... That's JUST Saudi Arabia. We are not even close to peak oil.