There has been a noticeable increase in efforts to bully big oil into reducing fossil fuel assets and to apply similar pressure on big banks to not finance fossil fuel projects. We discussed this issue in our blog of June 2, 2021 “Fossil Fuels: Big Companies Divest, Small Companies Invest.” Now we have an article in The Wall Street Journal describing the increase in production at one of the world’s dirtiest oil patches. Specifically, Canada’s oil sands, where major oil companies, under pressure from investors and environmentalists, are fleeing the fourth-largest oil reserve in the world, and by some measures one of the most environmentally unfriendly. Investment in existing projects has stalled, and banks are refusing to fund new ones.
Now the pipedreams face reality. Sharp increases in prices have encouraged world leaders committed to reducing emissions to call for more production. Attracted by higher energy prices and bargain investment opportunities, small companies and less prominent lenders have stepped up, and Canada’s oil sands are on track to deliver more oil than ever.
Investors might want to remember that, over time, economics tend to prevail.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA