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Fossil Fuels Firing Back

"Disinvestment" of fossil fuels is misguided and unwise.

February 13-14 has been designated as “Global Divestment Day” to demand that universities and other institutions divest their holdings of fossil fuel companies – oil, natural gas, and coal. This is unrealistic and misguided.

First, fossil fuels created (and continue to create) an economic and technological bonanza for the world. Over the past 200 years, largely due to hydrocarbon energy, world population increased eight-fold, incomes rose 11-fold, and life expectancy more than doubled. Hydrocarbons provide 85% of world energy, and the positive relationship between fossil fuels and economic growth is strong – supporting $70 trillion/yr. in world GDP. Extensive research has verified that “Ours is a high energy civilization based largely on fossil fuels.” Importantly, our fossil-fueled society has experienced a dramatic improvement in all environmental indicators worldwide, including a huge decline in climate-related deaths.

The recommendation of the divestment movement – that society stop using all fossil fuels – would jeopardize everyone’s health and living standards. The fossil fuel industry produces almost all of the energy people use to feed, clothe, shelter, heal, comfort, and educate themselves. Such a policy would destroy the quality of life Americans take for granted. Automobiles would not run, planes would not fly, trains would not run, power plants would not function, and refrigeration, indoor plumbing, central heating, AC, plastics, and pharmaceuticals would not be available. This would result in a catastrophic deterioration in public health as people would be forced to endure the living conditions of the 18th century. Fossil fuels are energy, and energy is modern life. Students and others advocating disinvestment currently lead comfortable 21st century lives made possible by fossil fuels. They should ponder that, without hydrocarbon energy, they would not have access to computers, the Internet, smart phones, tablets, iPads, and the ubiquitous social media of email, Facebook, Snapchat, Skype, Twitter, etc. None of these would exist without fossil fuels.

Second, fossil fuels are the most effective anti-poverty mechanism in human history. Over the past two centuries, fossil fuels have liberated most of the world’s population from short, brutal lives of grinding poverty. More recently, over the past three decades fossil fuels have enabled 1.3 billion people to escape debilitating energy poverty – over 830 million due to coal alone. Energy access, especially to electricity, is the key to reducing poverty: “Energy use is essential for conquering poverty.” Dr. Amartya Sen (Nobel Laureate in Economics); “Access to energy is absolutely fundamental in the struggle against poverty.” Rachel Kyte, vice president, World Bank.

Electrification was identified as the world’s most significant engineering achievement of the 20th century, and was ranked as the 2nd most significant innovation of the past 6,000 years, after the printing press. Fossil fuels provide more than two-thirds of the world’s electricity.

Billions of people seek to achieve modern living standards, and increasing energy is required for this. The scale of energy demand in a world approaching 10 billion by 2050 will be unprecedented and more than 80% of this energy must be provided by fossil fuels. Eradicating energy poverty is a primary challenge of the 21st Century, and for this vast quantities of fossil fuels will be required.

Third, there are no scalable alternative fuels available to replace fossil fuels. “Scalable” is the key. The divestment movement ignores the enormous size of current and future global energy needs and fails to understand the inability of renewable technologies to meet it. According to IEA and EIA, renewables currently comprise less than 15% of world energy, and by 2040 they will account for only about 15%. Global energy demand will increase 35% by 2040 and only fossil fuels can meet this demand. However, this is ignored by divestment advocates, who merely say “no” to fossil fuels. But to not use fossil fuels is tantamount to not using energy, which is economic suicide.

Finally, divesting a portfolio of fossil fuels is financially imprudent. Fossil-fuel stocks have provided good returns in institutional and university investment portfolios, and such investments are among the best for yielding a solid, risk-adjusted return. One analysis found that a 2.1% share in fossil fuel companies in 2010–2011 by colleges and universities generated 5.7% of all endowment gains. Further, retirees, including school teachers and public safety workers, have experienced similar results. Of the top five state pension funds operating in 17 states, fossil company shares significantly outperformed other investments.Tufts University determined that divesting its endowment of fossil fuel companies would result in a loss of at least $75 million over the next five years.

In sum, all major forecasts predict that, for decades to come, there will continue to be a close link between energy and the economy and that fossil fuels will continue to provide at least 80% of world energy. Fossil fuels are the energy of the future and will continue to be for the remainder of this century. The benefits of fossil fuel utilization will continue to outweigh – by orders of magnitude – any conceivable costs. The divestment movement refuses to recognize, let alone educate students about, the enormous, irreplaceable benefits we derive from these fuels. The economic and environmental benefits of fossil fuels far outweigh any costs, and it is a moral imperative to utilize the most productive, life-giving energy sources available. If the world is serious about modern energy, economic growth, poverty reduction, living standards, and affordable energy, fossil fuels are essential. Disinvestment initiatives can only undermine progress in these areas.


Dr. Bezdek is president of Management Information Services, Inc. in Washington, D.C. He is an internationally recognized energy economist with 30 years’ experience in academia, the Federal government, and private industry. He is the author of six books and over 300 papers in scientific journals.

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