The Conversation: Buy Oil Shares to Combat Climate Change

Guest essay by Eric Worrall

Professors trying to explain the facts of life to their green activist students.

Combating climate change – why investors should keep their shares in fossil fuel companies

June 29, 2020 10.22pm AEST

Adrian R. Bell Chair in the History of Finance and Research Dean, Prosperity and Resilience, Henley Business School, University of Reading

Chris Brooks Professor of Finance, Henley Business School, University of Reading

As we begin to engage with the climate emergency and the impact of carbon dioxide emissions, calls have grown to stop investing in companies engaged in fossil fuel production – a practice known as divestment. 

The University of Oxford became one of the latest institutional investors to pledge to drop all fossil fuel companies from their £3 billion endowment. Enormous pressure from students and staff alike has been put on other universities to follow suit, creating a culture of shame on those that continue to hold these shares.

If more people want to sell shares than buy them, this will affect the share price – but most oil companies are well beyond the situation where it would cause them significant issues. Neither BP nor Shell, for example, are likely to need to raise new financing in the foreseeable future as they have large cash reserves. Both have share repurchase schemes, where they are able to use dips in their share prices to buy their own shares back, allowing investors to benefit without paying taxable dividends. 

Divestment puts shares in big oil into the hands of those who don’t give two hoots about the climate emergency, discourages such companies from taking mitigating steps and does nothing whatsoever to curb fossil fuel usage. If the question is how to tackle climate change, divestment is not even part of the answer.

Read more:

I have a confession.

I have been aware that divestment puts money into the pockets of fossil fuel investors for years, but I decided not to make a fuss; it didn’t seem right to interrupt all that green sincerity.

Having said that, it is doubtful anything the professors or I say will make any difference to the climate hypocrisy and irrational divestment rhetoric of green activists.

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Joel O'Bryan
June 29, 2020 10:15 pm

When Bill McKibben and ilk starts cooking their meals with dried animal dung and making clothes from grass straw and animals skins… then we’ll know the Climate Idiots have decided to walk the talk. Till then, its just virtue signaling hypocrisy for a fat pay check.

Reply to  Joel O'Bryan
June 30, 2020 12:15 am

Grass skirts and coconuts … no animals will be allowed to perish under the Greenie regime. Full vegan diet of course.

Bryan A
Reply to  Bulldust
June 30, 2020 7:55 am

Divestment puts shares in big oil into the hands of those who don’t give two hoots about the climate emergency, discourages such companies from taking mitigating steps and does nothing whatsoever to curb fossil fuel usage. If the question is how to tackle climate change, divestment is not even part of the answer.

There’s only one way to curb fossil fuel use and that is for all the hippycrites out there to stop complaining about it, stop trying to legislate it and simply Stop Using It.

Reply to  Bryan A
June 30, 2020 8:26 am

If all the people who are demanding an end to oil would voluntarily live the lifestyle that they are demanding for others, then all countries on the planet could easily make their Paris “commitments”.

Reply to  Joel O'Bryan
June 30, 2020 5:11 am

my Bamboo socks are very nice ,
my leather Barker shoes are even nicer
my cotton shirt is really cool
but best of all my likes is the high density of whizzy little electrons needed to create them
time for a B-B-Q !

Joseph Zorzin
Reply to  Joel O'Bryan
June 30, 2020 8:12 am

I periodically love watching McKibben get smashed by Alex Epstein: bill mckibben alex epstein debate

June 29, 2020 10:15 pm

I bought some of the highest quality oil stocks near their lows in March, and am already up 50%. Of course, a near equal number of lower quality companies got smashed and are in Chapter 11, so am still up but stay away from the Jrs at least until the demand is back to par and climbing. This is only temporary.

What are these professors thinking thinking to try and lower the fossil stock prices? That just means I and everyone else who owns them buys more on the dip when they are selling probably at a loss. Since there is no replacement for fossil fuels yet, and there won’t be until we wake to the fact that only advanced Gen 4-5 nuclear are the solution for a high density energy source, FF’s are the only real game in town and will be for many years to come. And when they come to tell us we won’t be using them because ‘climate emergency’, then there will be a real civil war, by everyone because no one will willingly give up what it has taken our ancestors generations to fight for and develop. Time to divest society of these cultural Marxist Professors, with extreme prejudice.

Joel O'Bryan
Reply to  Earthling2
June 29, 2020 10:39 pm

Urging people to buy stock in a company to then use share holder activism to urge the company to fail could only come from the same People who also want those students to go into $100K student loan debt for a worthless degree.

Bryan A
Reply to  Joel O'Bryan
June 30, 2020 7:51 am

Not all degrees are Worthless…
Some are worth less than others though

Vincent Causey
Reply to  Earthling2
June 30, 2020 12:21 am

I also bought some BP shares (not enough) at the March lows. When people divest and the share price falls, value investors will just scoop up the bargains, and like the article says, wealth is transfered.
The other irony is that “renewal energy” is the most destructive form of energy there is. When will they realise this? Even Moore’s documentary hasn’t red-pilled most of them.

June 29, 2020 10:44 pm

The greenies should actually buy Big Oil controlling interest rather than divest. Then they can plug the oil and gas wells and fire all their evil employees.

San Francisco is doing something like this. A benefactor left some oil properties near Bakersfield which they have used revenue to pay for things like fancy libraries for years. They are going on a green frenzy now and do not want to be associated with carbon production. However, instead of selling the properties and make some money washing their hands of dirty oil, they want to plug all the wells, keep oil in the ground, and make a park on the land. Spending taxpayer money for green symbolism. Hmm, maybe they should buy XOM and do the same thing with their wells…?

Reply to  RelPerm
June 30, 2020 6:17 am

“However, instead of selling the properties and make some money washing their hands of dirty oil, they want to plug all the wells, keep oil in the ground, and make a park on the land. ”

Those wells haven’t cash flowed for many years. And do you think it’s ok that there are next to no $ available for P&A’s and surface restores, from the operators who willingly assumed these ARO’s?

But I agree that we shouldn’t have to rely on the kindness of strangers. The sad fact is that, since the operators have already poor mouthed and pulled rabbit ears, , most of these costs will either be communized on the rest of the Californicate, and/or the work will be skimped on and/or shirked altogether. Bako and it’s environs will end up being the same trash can as W Va and parts of the FSU….

Chris Hanley
June 30, 2020 12:18 am

The Conversation article has one comment (so far) and it echo’s Josh’s cartoon above, well done ‘john rattray’.

June 30, 2020 12:24 am

As Napoleon is supposed to have said, “Never interrupt the enemy when he is in process of making a mistake”.

Coeur de Lion
June 30, 2020 12:32 am

I must get this to the Bishop of Salisbury with whom I have had a prolonged interchange as he leads for the Synod of the Church of England in their barmy fossil fuel disininvestment policy. FFCompanies have to conform to the Paris Agreement but the Synod has not specified how.
The Synod has not discussed with their threadbare priestly pensioners about removing the most profitable elements of the portfolio. The good Bishop witters on about a carbon free future, revealing unplumbed depths of ignorance. The Synod of course knows nothing about the outside world and the desperate need to get reliable electric supply to the poor. Nor could they care less. No wonder the C of E is in such a mess with such leadership.

Reply to  Coeur de Lion
June 30, 2020 7:40 am

Most of the so called mainline churches stopped preaching the Gospel of Christ and started preaching the Gospel of Marx back in the 70’s and 80’s.

Ed Zuiderwijk
June 30, 2020 12:40 am

Ai! The secret’s out! What a pitty. The sight of institutions gouverned by cowards running themselves into oblivion by mucking up their finances is just so delicious to watch.

But there’s hope. Activists are activists because they either ignorant or stupid, or both. They won’t understand the learned professor. He will remain alone shouting in the desert. The sillies will continue signaling virtue and the cowards will comply.

Abolition Man
Reply to  Ed Zuiderwijk
June 30, 2020 3:14 am

You left out one other category of activist; the insane! Climate alarmists, like the cultural Marxists that indoctrinate them, must be ignorant, idiotic or insane. We seem to be at a point in history where the insane are temporarily running the asylum for the rest of us. While it can be very entertaining, the long term damage to civilization ought to preclude us from allowing the spectacle to carry on too much longer!
Just as our society needs a police force to protect against the forces of crime and anarchy, we NEED fossil fuels to provide freedom and prosperity to billions around the globe. Developing advanced nuclear power will allow us to use our fossil fuel resources more sedately, but use them we will until we develop new technology that does not require them! If you wish to argue the point, please send pictures of the yurt or tepee where you live, and your horse-drawn contraption for commerce and travel. Without these as proof of your sincerity I have to assume you are speaking out of the wrong orifice.

June 30, 2020 2:29 am

I was buying into oil like crazy in march and april. The dividends on that money invested was in the 23% range. How can anyone be so stupid as not to take advantage of that.

John Endicott
Reply to  Jamie
June 30, 2020 6:19 am

As Warren Buffet says “be fearful when others are greedy and to be greedy only when others are fearful.” With everyone in a panic in march/april it was a good time to be greedy – there were lots of bargains to be had across pretty much every sector (not just oil) due to that fear. Picked up a number of good solid dividend paying stocks (include a few of the stronger oil companies) during that time as well.

Tom in Florida
Reply to  John Endicott
June 30, 2020 6:55 am

Don’t overlook REITs. Many are trading at half their normal price.

John Endicott
Reply to  Tom in Florida
July 1, 2020 3:51 am

Indeed. Picked up a good number of those as well. It was a good time for bargain buys.

Reply to  John Endicott
June 30, 2020 7:43 am

The best way to make money in investing is to figure out what the crowds are doing, and do the opposite.

Who was it who said that the average intelligence of a crowd is inversely proportional to the number of people in the crowd?

Reply to  MarkW
June 30, 2020 2:09 pm

It also helps to avoid wrong articles that claim divestment is good news for an oil company.

Shareholders who sell and will never buy oil shares again make oil share prices lower than they would otherwise have been.

Share buybacks tend to offset the shares given away to ececutives as bonuses, offsetting that earnings dilution.

Reply to  Richard Greene
June 30, 2020 5:46 pm

As to your claim that divestment hurts the price of shares, that’s only true while the shares are being sold. Long term, price is determined by the value of the company divided by the number of outstanding shares. If the price drops below this point, investors buy. When it rises above this point, investors sell.

The number of shares that come up for sale at any given point in time are so small compared to the number of potential buyers, that the fact that a small number of virtue signalers choice to loose money doesn’t amount to a bucket of spit in the ocean.

There is nothing wrong with the above article, it demonstrates classic economic thinking. Unlike your does of wishful thinking.

As to your belief that buybacks merely offset shares given away, once again, that’s just your imagination running wild with you.

John Endicott
Reply to  Richard Greene
July 1, 2020 4:16 am

It also helps to avoid wrong articles that claim divestment is good news for an oil company.

Neither is it bad news for an oil company. As MarkW points out, it ultimately means zip (or as he so colorfully put it: doesn’t amount to a bucket of spit in the ocean)

Shareholders who sell and will never buy oil shares again make oil share prices lower than they would otherwise have been.

Only temporarily. Other investors are buying (otherwise the sellers wouldn’t be able to sell at any price). Investors look at the per share value of the company. When prices are lower than that value, investors buy, when it’s higher they sell. That basic market function doesn’t change just because a relatively few (in terms of the market) shareholders decide to divest.

But even if we imagined that it was true that divesting makes share prices lower over the long term (it’s not true, but for arguments sake we’ll ignore that reality). As far as the oil company is concerned, So what? They’ve already got their money when they sold the shares initially, so what the shares sell for after that doesn’t matter unless:

1) they’re looking raise capital by selling more shares. Which doesn’t happen all that often, and despite current troubles I’m not aware of any oil companies that are currently looking to raise capital in this way (doesn’t mean they isn’t one or two out there that are, just that if they are they’ve very much in the minority). Timing of the sale (during an up market or down one) has more to do with the price they’d sell at then any temporary minor affect divestors could possibly have on the price.

2) They’re looking to buy back shares. Lower prices make it less expensive to buy back stocks, so if anything, that would be a benefit for the company not a detriment. But again, timing of the buyback (during an up market or down one) has more to do with the price they’d buy at then any temporary minor affect divestors could possibly have on the price.

Ron Long
June 30, 2020 3:07 am

Eric, I also confess. Why Greenies/Socialists/Commie wannabees et al can’t figure out that real investment advisors know how to maximize customer wealth is beyond me. The common current advisor commission is 1 to 1.5 % of total account on the anniversary date. Guess what? Maximize customer wealth! Stay sane and safe (and feel good about taking the money out of the hands of idiots hell-bent on virtue signaling!)

Tom in Florida
June 30, 2020 5:13 am

“As we begin to engage with the climate emergency…”

Thank you. I always like to start the day with a good laugh.

June 30, 2020 7:35 am

When the choice comes down to feeling good about themselves vs doing something that will actually make a difference, leftists will choose feeling good about themselves every single time.

PS: Buying shares would involve spending their own money. It is much more satisfying to demand that others do all the work.

June 30, 2020 11:16 am

My Dad put his money where his mouth was, divested in spades, starting 30-0dd years ago. Unfortunately one of my sibs who supported him in this is now looking at a poor old age. Good thing the rest of us got on with out lives and did not need the money.

June 30, 2020 12:21 pm

To lead by example, one must also give up grocery stores. The shelves are stocked by deliveries using those evil petroleum burning trucks and not by magical unicorns.

Reply to  Taphonomic
June 30, 2020 1:47 pm

Down in Cuba, they are encouraging the people to start raising crops in their yards because there isn’t enough food to feed everyone.

Reply to  MarkW
June 30, 2020 2:14 pm
Reply to  Charles Rotter
June 30, 2020 5:46 pm

Castro’s younger brother has recently been given speeches pushing the program.

John Endicott
Reply to  Taphonomic
July 1, 2020 4:30 am

not only are the shelves stocked by deliveries using those evil petroleum burning trucks, most of the products on those shelves are packaged in material made out of evil petroleum (plastic containers, plastic shrink wrap, etc) and when you check out your purchases are then often placed in carry containers made from evil petroleum (plastic bags) that make it convenient to carry your purchased back to your own personal evil petroleum burning car or SUV (because let’s face it, many of those pushing for divestment haven’t divested themselves of fossil-fuel vehicles or any other petroleum products that they rely on daily).

June 30, 2020 3:17 pm

Those idiots have as much effect on fossil fuel companies stock values as they have on the climate :

A gnat’s poop in the ocean.

June 30, 2020 6:00 pm

Well when you have a natural Anthropause as distinct from the man made Anthropause you’re continually advocating naturally you have to cook up some make work programs for yourselves to keep the good oil flowing-
As you were in lockdown Anththrodeplorables.

John Endicott
Reply to  observa
July 1, 2020 4:21 am

Um, you do realize the term “anthro” refers to “man” any “Anthropause” is by definition a “man made Anthropause”

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