Energy Financial Analyst On Alberta's "Idiotic Waste" Of Billions On Keystone, Other Oil Projects
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Why should people in Canada take Carbon Tracker seriously?
Bond: We’re finance people more than green people. We’re trying to understand the impact on financial markets of the changing energy mix away from fossil fuels. People should listen to us or at least hear us out because investors across the world for the last 10 years have been losing a lot of money by failing to understand what’s going on.
You write in the ‘Decline and Fall’ report that the fossil fuel system is ripe for disruption. Why is that?
There are three main reasons why it’s especially vulnerable. The first is that like all incumbents the industry is very low growth. So global fossil fuel demand growth in 2019 for example was less than 1 per cent. Secondly, it’s actually very low return, because you have an enormous and highly capital-intensive system. The return on equity of the oil majors hasn’t been above 10 per cent for years. And finally, the industry is extremely complacent. Almost all forecasts within the fossil fuel system are basically saying the same thing, which is that they have nothing to worry about, demand is going to carry on rising to the foreseeable future. Everything’s fine.
These vulnerabilities are not new. And yet the industry keeps growing.
You’re right, these vulnerabilities have been there for a long time. And, so the question is more what’s crystallizing them now. The main reason is the energy transition, and specifically the collapsing prices of technologies like wind and solar. These technologies have fallen to the kind of price level where they can challenge fossil fuel technologies. And then the second thing is that these new technologies have got big enough to take away all, or a very large chunk of, the growth for fossil fuels. For example, BP’s energy outlook calculates that in 2019 solar and wind were 8 per cent of global electricity supply, but 85 per cent of the growth in electricity supply. What matters to financial markets and investors is not size but growth.
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What do you think about Alberta spending $7.5 billion on Keystone XL?
Let me cut to the chase here. Our view would be that expanding the fossil fuel system at the end of the fossil fuels age is an absolutely idiotic waste of capital. That’s throwing good money after bad and it’s like building a canal in 1850 when the railway system is already up and running. It’s like connecting a new city to the gas lighting network in 1920 when someone has already invented electricity or it’s like trying to prop up Nokia after Steve Jobs has put out the iPhone.
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https://thetyee.ca/News/2020/07/09/Alberta-Pouring-Billions-Into-Keystone-XL/