Monthly Archives: November 2015

Oil Industry Investments Rapidly Becoming Uneconomic

My letter to The Southland Times published in today’s paper:

OIL INDUSTRY INVESTMENTS

I heartily agree with Richard Soper [October 29] that Environment Southland is “not a green pressure group”.

Clearly that label cannot apply either to the Rockefeller Brothers Fund, the Norwegian Sovereign Wealth Fund, etc.

Oil is rapidly becoming an uneconomic option and divestment is actually the prudent economic decision.

Responsible institutional investors globally are weighing the evidence and making the choice on an economic and moral basis.

Right now, the oil industry is being driven to a crisis point by the combination of restricted cash flow due to depressed oil prices, and declining return on investment from (ever harder to access) new reserves.

Well before the current low prices prevailed, oil majors were issuing profit warnings, and performing desperate accounting manoeuvres such as share buy-backs to sustain their investor’s yields.

BP, Shell, ConocoPhillips, Saudi Arabia, are all in major trouble, with investors calling for capital restraint. Witness also the fracking ponzi schemes unravelling in the USA, where investors promised high returns have been continuously disappointed.

Additionally, the global economy appears to be sinking further into a deflationary spiral, which may well serve to depress oil prices further, worsening the crisis as noted recently by Goldman Sachs.

The coming oil supply crisis that this inevitably leads to is a major risk to our entire economy here in New Zealand. Investing in risk reduction in this context, preparing our community for an energy and capital constrained future, would be a far better use of our capital.

This would show they are taking the welfare of our children, and our children’s children seriously.

Nathan Surendran

Here’s the fully referenced version: http://bit.ly/1XNyPFt

Here’s hoping Environment Southland and Venture Southland take note…

And here’s an image to accompany the letter which reinforces my case that any industry cannot do well with declining productivity of capital on the scale the oil industry is currently seeing, making it a BAD INVESTMENT…

oil - capex vs production

We desperately need to get serious as a community, nation and species, about the need to leave oil before it leaves us!

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