Regardless what you think of Jim Cramer and his antics on CNBC’s Mad Money, his comments today provide one more indicator that big seismic shifts are underway in energy investment. Fossil fuel companies are the new tobacco, Cramer says, rapidly losing social license and increasingly shunned by a new generation of fund managers.
In the exchange today, CNBC host asks Cramer, “What about the two big oil companies, Exxon and Chevron, today, both of them drags on the Dow right now?”
“I’m done with fossil fuels. We’re done. They’re just done. We’re starting to see divestment all over the world, big pension funds saying ‘listen, we’re not going to own them anymore.’ The world’s changed. There’s new managers. They don’t want to hear whether these [stocks] are good or bad. Look at BP. It’s a solid yield, very good. Chevron buying back $5 billion of stock. But nobody cares. This has to do with new kinds of money managers who frankly just want to appease younger people who believe you can’t ever make a fossil fuel company sustainable. Mike Wirth [CEO of Chevron] is trying everything he can, but in the end, they make fossil fuels.
“We’re in the death knell phase. I know that’s very contrary, but we’re in the death knell phase. I think the issue is sustainability. Look, this is the other side of Tesla. These stocks don’t want to be owned by younger people. Their dividends are great. These companies are doing better than even four years ago when oil was at $26, $27. But you can tell the world’s turned on them, and it’s actually happening very quickly. You’re seeing divestiture by a lot of different funds. It’s going to be a parade that says, ‘Look, these are tobacco and we’re not going to own them.’ I think they’re tobacco. We’re in a new world. Some of us will be dragged kicking and screaming to even believe that that could be the case. But they’re tobacco.”
All of this reminds me of Carbon Tracker’s observation that “fossil fuel demand destruction equals climate stability.” (See their excellent 2015 report, “Lost in Transition: How the energy sector is missing potential demand destruction.”) While Cramer was focused on demand for stocks, the broader story is that we’re beginning to see demand for the actual commodity—fossil fuels—be destroyed. Coal consumption is in free fall in the US, UK, and elsewhere. Fossil (aka “natural”) gas has been growing, but as clean energy gets cheaper and cheaper, renewable energy generation is eating into that growth and will bend the curve downward. Oil consumption is widely expected to peak this decade.
What does any of this have to do with Passive House? When we design, build, and retrofit to make super-energy efficient buildings, especially if we take care to reduce the upfront emissions (aka embodied carbon) of construction, we are, all things equal, destroying demand for fossil fuels. As more and more demand is destroyed economy-wide, fossil fuel price drops, increasingly undercut by ever-cheaper renewables, and eventually falls below the break-even price point—the price below which a fossil fuel company would lose money extracting a given fossil fuel resource.
In the big picture, Greta’s climate strikes, big investment funds’ fossil fuel divestment decisions, and the work we do to drive a shift to zero carbon Passive House buildings are all working toward the same goal: climate stability through fossil fuel demand destruction.
And Cramer’s telling a bunch of CNBC viewers that the world is turning away from fossil fuels. That’s a signal in the noise.
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