Guest post by David Middleton
In my previous posts regarding the lawless inquisition of ExxonMobil and its supposed climate cover-up, I’ve pretty well demonstrated that ExxonMobil (then Humble Oil, later Exxon) knew exactly what we know today: The AGW models always forecast about 4 times as much warming as actually would occur. In any science other than government/academic climate “science,” this is known as a failed hypothesis. ExxonMobil was fully aware of this failed hypothesis long before it failed.
Well, the latest spin coming from the commissariat of State attorneys general is that ExxonMobil has misled investors about what the government might do in the future. Yes, I know, George Orwell couldn’t even have imagined this. The most successful energy company in the history of “life, the Universe and everything” is being accused of misleading investors about things that our Federal government (AKA Mordor-on-the-Potomac) might do in the future:
Is ExxonMobil Actually Only Worth A Fraction Of What It Says?
By Charles Kennedy – Aug 22, 2016
[…]
The investigation by a handful of attorneys general into ExxonMobil has much more to do with the oil major misleading investors than it does about covering up climate science.
[…]
As The New York Times recently noted, Schneiderman emphasizes that the probe is focused on securities fraud, which hinges on recent statements that Exxon has given to shareholders and securities regulators, not on the company’s alleged cover up of climate science decades ago.
Schneiderman’s argument is straightforward: forthcoming policies to address climate change will severely limit Exxon’s ability to produce all of the oil and gas in its possession. Nobody knows this better than Exxon, Schneiderman alleges, since the company has been at the forefront of climate research since at least the 1970s. If Exxon cannot produce all of its oil reserves because they become either legally off limits or so regulated and/or taxed that they are uneconomical to produce, then the company itself is actually worth a lot less than shareholders think. And if Exxon knows this, then they are committing securities fraud, Schneiderman says. “If, collectively, the fossil fuel companies are overstating their assets by trillions of dollars, that’s a big deal,” Schneiderman said, according to the NYT.
He is looking at an Exxon report from 2014 in which the company told shareholders that climate action from the U.S. government and the international community would not prevent Exxon from producing oil, even decades into the future.
Exxon dismisses the allegations, saying that if it ends up with so-called “stranded assets,” it will because it simply misjudged changing market conditions, which is not a crime. “If it turns out to be wrong, that’s not fraud, that’s wrong,” said Alan Jeffers, an Exxon spokesman, referring to its 2014 forecast. “That’s why we adjust our outlook every year, and that’s why we issue the annual forecast publicly, so people can know the basis of our forecasting.”
And of course, if the world fails to implement climate policies that might hold back oil production, Exxon might still be able to extract its reserves unencumbered, which means its original forecast was not wrong about the value of its assets.
Since when has it become the fiduciary responsibility to accurately predict the future actions of government? While every responsible corporation has a fiduciary duty to analyze the effects of proposed and implemented government policies on their business and to communicate this to shareholders and corporations even have an obligation to try to influence how these policies are crafted and implemented through the employment of lobbyists… No corporation has a legal obligation to forecast government malfeasance. And any “leave it in the ground” climate policy would be government malfeasance on a scale not seen since Nero was fiddling. Furthermore, there are no impending regulations or legislation which would force ExxonMobil to abandon proved oil and gas reserves. While some regulations, like the new offshore well control rules, will make it much more difficult and expensive to produce proved reserves and exploit resource potential, none of these would force ExxonMobil to “leave it in the ground.”
I have a hunch that this cabal of left-wing attorneys general and Warmunist activist groups might just find themselves on the receiving end of a RICO lawsuit. Chevron has already paved the legal path for this.
References
What did ExxonMobil Know and when did they know it? (Part 1)
What did ExxonMobil Know and when did they know it? (Part Deux, “Same as it ever was.”)
What did ExxonMobil Know and when did they know it? (Part 3, Exxon: The Fork Not Taken
“Smoke & Fumes”… The dumbest attack on ExxonMobil evah’
Perhaps the legal proceedings should be moved to Salem, Massachusetts where the leaders of the day would initiate trial by fire…… If the “witches” burned to death, then it was the will of God….. If they survived….. it was the will of God….. God help us all!
What if we burn the lawyers to see who’s right?
How much light would a burning lawyer put out?
If they burned, they were innocent. If not, they were guilty (and then were executed).
These Leftwing AG’s have nothing concrete they can blame on Exxon Mobile. They are misusing their offices for partisan political purposes. They will eventually have to give it up, if reason and the law prevails.
The chart below, thanks to David Middleton, shows oil prices from 1946, to the present.
Note that the highest spikes in oil prices also correspond to the beginnings of two deep economic recessions. The last estimate I saw was that for every 80 cent drop in the gasolone prices, the U.S. economy grows by one percent, and an increase of the same magnitude decreases U.S. GDP by one percent. Gasoline and oil prices are the control knob of our economy.
http://inflationdata.com/Inflation/images/charts/Oil/Inflation_Adj_Oil_Prices_Chart_650.jpg
Prices are never the ‘control knob’ for anything. Price merely reflects the relationship between supply and demand – it is a DEPENDENT variable. The independent variables are Supply and Demand. More demand at the same time as less supply equals higher prices. If, just before the beginning of the 2 latest recession/depressions, oil (ie energy) prices spiked it was because the markets perceived more demand and/or less supply. If energy use dropped sharply as the recession took hold the price should, and did, decline sharply also. The price didn’t change the supply, the demand did.
That was until Obama destroyed that relationship, forcing the economic books to be rewritten. 8 years of relative peace, falling oil prices and 0% interest rates and all we got was the weakest post War recovery in history and his greatest supporters the blacks are rioting is the streets. I would never have thought someone could have done so little being given so much. Truly a completely failed administration and a wasted 8 years.
It’s been wasted, only if his goal was economic development.
“Wasted” is too benign a term. “Destructive” is closer.
“Is ExxonMobil Actually Only Worth A Fraction Of What It Says?”
It doesn’t work that way.
ExxonMobil is a publicly traded company with thousands of investors, and the stock is worth exactly what people will pay for it.
The company doesn’t set the price, the market sets the price.
XOM’s market cap is determined by investors. However, it’s underlying value is heavily influenced by its booked proved and probable reserves. These reserves are booked according to SEC rules and indepenedently audited. Unless ExxonMobil is aware of future changes in the SEC rules, changes the SEC is unaware of, the Lysenkoist AG’s don’t have a case.
A company is “worth” what it’s parts can be sold at on the open market.
In general, a company’s stock will reflect this value with an additional factor for expected dividend payments.
There is another element to this – companies are not tied solely to the US and no matter what the US decides to do about fossil fuels, developing countries have no onus to stop using them. Exxon just changes its customers. Problem solved. By that point Exxon will have had the opportunity to warn investors that the situation will change and who knows, its shares might be more valuable because the developing countries might then be the rich ones.
TinyCO2:
Unless Hillary puts in a droconian “EXIT TAX” that prevents US companies from moving offshore. Then what? Many Reverse Takeovers in the offing.
They claim to be concerned about the
interests of shareholders, yet now want to penalise Exxon, in which case who will lose? The shareholders.
Q. E. D.
It’s redistribution of wealth, donchaknow…
Counter suits and a robust PR campaign are the correct answers to this assault on liberty. Although the victim in this case is a large corporation ultimately individuals will suffer. Political prosecutions abuse the most basic tenants of our laws.
We should not take them lightly.
This type of risk comes under the category of Political Risk aka Banana Republic Risk. It tries to quantify the risk of doing business when the government can suddenly change the rules. (The US used to be considered a good place to do business, because it was relatively immune to such changes).
@jim Yushchyshyn August 23, 2016 at 10:14 am
“Eventually, oil will be too expensive to compete with renewable energy.”
Jimbo, I am losing count of the the number of clueless and foolish individuals like yourself at this website whom I have to keep educating whenever one of you makes the statement like the one above.
Why do I say that? Because, so far as I know, renewables are primarily used for electricity generation in the U.S., and we DO NOT use crude oil in this country to generate electricity (except for a paltry 1% of it). Don’t belieive me? Check the federal govt’s Energy Information Agency website yourself:
http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3/
Crude oil is used for refining into surface and air transportation fuels, petrochemicals, and artificial materials like plastics (just to name just one of many). So, if you will, explain to me how crude oil supposedly competes with renewables to begin with.
For this reason, the war by the Green movement and the political Left on crude oil and the the oil companys is an idiotic and ignorant one to put it bluntly. Technological advances and/or breakthroughs will be the only thing that will replace crude oil someday, and I’m NOT talking about today’s so-called “renewables” when I say that. If and when that day comes, my guess is that it will be the private sector and not govt that comes up with the eventual replacement for crude.
Oops, misspelled “companies” in the last paragraph.
LPPFusion.com
Schneiderman et.al would love to have their case be accepted by the courts requiring discovery. That allows them to a) entangle Exxon into a mega litigation lasting years and years b) require Exxon to hand over years and years of internal management presentations where the subject was discussed and debated. Think of the number of closed door boardroom with powerpoint presentations and discussions and researcher notebooks that would involve. The chose Exxon as a target because they know Exxon has studied climate change very deeply. Brave new world we live in.
Daniel, in that circumstance XON will destroy any records older than the time required by law, which I believe is 7 years. That’s likely happened already.
Sorry Danley, wrong reading glasses. And it should have been Exxon.
It seems the most reasonable explanation for this endeavor is simple stock market manipulation since there’s no evidence ExxonMobile has or had any more information on the subject than the rest of the world. It’s already been pointed out assets are valued using a standardized method overseen by the SEC.
As a former (and likely future) XOM stock holder it will be interesting to see if a class action suit and investigation by the SEC is in the near future. Market manipulation is a crime.
If there is any fraud, it is on the side of the IPCC and the climate alarmists. Their models prove they are promoting a failed hypothesis. If CO2 is truly a threat, it is up to the Gov’t to regulate it. If anyone is to blame it is the Government for not acting. If they truly know CO2 is a threat, it is there responsibility to act. It isn’t Exxon’s responsibility to understand the social and political consequences of CO2, that is what we have all these highly paid climate “scientists” for. If they can’t make their case and win an honest debate, then that is their fault. Don’t blame Exxon for the failure of climate “scientists.”
their
I don’t disagree the UN has played a role in lending undeserved legitimacy to the entire charade, but I haven’t seen evidence to indict that group for potential stock manipulation, whereas I think there is reason to investigate these people (State AG’s) on those grounds.
Publishing unsupported allegations of securities fraud is a method that has been used in the past to drive a stock price down and allow short sellers to profit. All of the folks in this cabal should be carefully investigated to make sure they haven’t directly or indirectly profited from making those allegations.
These AGs are complete idiots. Stranded assets would take oil off the market. The shortage would drive the price of oil higher. Taking production off line would simply make Exxon far more profitable as they make much more per gallon on their existing oil. The higher price of oil would eventually force the Government to relax restrictions and allow for more drilling and those stranded assets would once again become productive assets. Supply shocks usually benefit the producers. Oil companies benefited greatly in the 1970s when OPEC reduced the global supply of oil. Also, much is not most of Exxon’s oil production comes from outside the US. Exxon would simply relocate to the UK or the Middle East like Halliburton did. Exxon doesn’t need the US, the US needs Exxon’s oil and gas.
All the points you make are good, and why I’ve long thought if there was an under the table link between Big Oil and AGW, it’s with the promoters of AGW and the environmental activists who demonize nuclear energy. If you use a simple “follow the money” approach, t seems clear hydrocarbon energy producers benefit from suppressing all other practical forms of energy. Hydro an nuclear on on the list. Enforced scarcity is also a clear benefit to those organizations.
“Mordor-on-the-Poromac”
Should that be Potomac ?
I’ll fix it…
http://www.cbtcsocal.com/wp-content/uploads/2013/07/HomerSimpson.png
So, it was all really about securities fraud. Why, then, were scores of non-profits swept up in Schneidermann et al’s subpoenas?
Very good question!
Immortal words of John McEnroe? I’ll bite, who is John McEnroe and what are his immortal words?
Our near-future AI master(s) will not condone such illogic.