The oil divestment disaster, coming soon to a country near you

[Ward Smith + 6,615]

Oilprice has an excellent piece about the unintended consequences of oil divestment. Mr. @Cyril Widdershoven lays out a compelling case why this is a very bad idea. Needless to say, the chattering class will not understand the implications, until the disaster is of truly epic if not biblical proportions. The Exxon's of the world were able to operate as they have by their very economic heft. With capital markets effectively shut off to them, their ability to carry on the very difficult and capital intensive work of replacing reserves will simply stop. The NOC's have no such limitations and it is only a matter of time until these "National Champions" of their respective countries, thoroughly immune to the vagaries of investment managers and activist investors create the kind of oligopolies Rockefeller could only dream about. OPEC will die, but the Phoenix that rises from its ashes will be monstrous indeed. 

[Enthalpic + 1,496]

Lots of Canadian oil is available with basically no exploration.

[Jan van Eck + 7,558]

48 minutes ago, Ward Smith said:

The Exxon's of the world were able to operate as they have by their very economic heft. With capital markets effectively shut off to them, their ability to carry on the very difficult and capital intensive work of replacing reserves will simply stop.

The suggestion by Mr. Widdershoven that the IOCs are somehow going to be excluded from the capital markets is a bit silly.  The capital markets are amorphous creatures, they can and will allocate capital to projects based in anticipated rates of return (and safety of capital). Sure, some investment funds will not be participating in debt or equity offerings from the oil industry;  that should not be read to imply that all funds will exclude such projects.  Does some dentist in New Jersey really care if his retirement fund invests in a refinery, or a tanker, instead of a solar-panel field?  Possibly, for a very few; for the most part, not really. 

The capital will always be there.  That is the nature of the capital markets.  It might end up demanding a higher rate of return, but that will translate into higher retail prices.  The product, gasoline and heating oil, is going to be furnished to the market. The money will be there to make sure it does.