Citigroup dumps Arctic oil
Climate activists targeting financial institutions notched another victory into their belts on Monday.
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This polar bear is stoked about Citigroup’s latest announcement about financing Arctic drilling. Photo by Dennis Fast/VWPics/Universal Images Group via Getty Images. Illustration by yours truly.
A no good, very bad day for oil
Remember when I joked that a 30-rack of Bud Light Lime cost more than a barrel of oil?
Oil traders are now dreaming of the good ol’ Bud Light Lime days.
Yesterday, for the first time in history, U.S. oil prices fell below zero—all the way to a whopping negative $37.63 per barrel.
Does that mean traders literally paid people to take away their oil contracts yesterday? No, but only because no one would sell their oil contracts at that price. However, if you did want to offload an oil contract yesterday, it indeed would have cost you 37 dollars per barrel. This CBC article does a good job explaining how that works, and why it’s happening.
But does this price crash mean that the oil industry as a whole is going to die? Also no. As I reported last week, the oil industry is resilient. As long as we demand oil-derived products, the industry will survive. The price drop might mean a wave of bankruptcies for smaller oil companies, though—and that’s good news for the big guys. You know, the ones who already have all the power and money in America.
This price crash is still a nightmare for Big Oil, though—the latest in a long line of recent setbacks to its 100-year-old business model of finding, extracting, and selling as much fossil fuel as humanly possible.
And it wasn’t even the only setback the oil industry experienced yesterday.
Another bank disavows Arctic drilling
Amid the chaos of the oil crash on Monday, climate activists targeting financial institutions notched another victory into their belts. Citigroup—the third largest bank in the U.S.—announced a commitment to never invest in new oil and gas projects in the Arctic.
The commitment came in the form of an updated energy policy. In it, Citigroup says it will not provide project-related financial services for the following:
New thermal coal mines or significant expansion of existing mines;
New coal-fired power plants or expansion of existing plants;
Oil and gas exploration, development and production in the Arctic Circle;
Projects that negatively impact the Outstanding Universal Value of UNESCO World Heritage Sites.
This is a big deal from a climate perspective. The coal part is important, of course—but coal is already dying pretty rapidly. In other words, it’s already not a great investment for a bank. Arctic drilling, however, is a bit different. As global warming melts the Arctic, the region is becoming more accessible to mineral exploration—and oil companies, aided by the Trump administration, want to reap the benefits.
But benefits for them would amount to nightmares for the rest of us. The Arctic is an extremely ecologically sensitive region. The climate consequences of new Arctic drilling would be severe; as would the consequences for indigenous people and wildlife.
Oil companies can’t get drilling projects started, however, without financing from a bank. So if banks stop financing projects, boom. We good. That’s why so many prominent climate activists like Bill McKibben and Jane Fonda have been targeting financial institutions. As McKibben once wrote in a great piece for the New Yorker: “Money is the oxygen on which the fire of global warming burns.”
Citigroup’s announcement on Monday was in part the product of years pressure from the Sierra Club and the Gwich'in, a group of indigenous peoples who live in Canada and Alaska, and for whom the Arctic National Wildlife Refuge is sacred.
It also follows similar decisions by Goldman Sachs, JPMorgan Chase, and Wells Fargo, “as well as more than a dozen global banks,” the Sierra Club noted in a statement Monday.
Related Reading: Sierra Club campaigner Ben Cushing talks about the activism that pressured Goldman Sachs to drop Arctic drilling
As Sierra Club notes, Citigroup and others haven’t done everything they want from a climate perspective. The banks’ energy policies, for example, fail to rule out funding for fracking or tar sands projects.
And not all big banks have made commitments to avoid drilling in the sensitive Arctic region. The only two big U.S. banks that don’t have an exclusion on funding Arctic drilling are Bank of America and Morgan Stanley.
“The fight to protect this place is far from over,” said Bernadette Demientieff, executive director of the Gwich’in Steering Committee, “and we will continue to hold accountable any bank, oil company, or politician that seeks to benefit from its destruction.”
Will Big Oil learn its lesson?
As demand for oil continues to plummet because of the coronavirus, and financial institutions back away from new projects left and right, it’s clear Big Oil’s business model of finding and extracting as much oil as possible isn’t going to be financially viable in the long run.
That’s not according to me. That’s according to pretty much everyone who writes about the future of the oil industry—especially lately.
Justin Worland wrote about this in an illuminating piece for TIME yesterday. “In recent years,” he wrote, “the oil industry has crept slowly toward an existential challenge everyone knew was coming with a growing crop of analysts predicting that demand for oil would flatline sometime in the coming decades before declining.
Coronavirus has made those concerns even more urgent for the industry. While the world economy will continue to burn oil after the coronavirus pandemic fades, some analysts now say that the world may never consume as much of the commodity as it did last year. The companies that survive will need to figure out a game plan to manage that change, either by investing in cleaner energy sources or winding down their assets.
What’s that, you say? Investing in cleaner energy sources as … gasp … a solution that both benefits the climate and the financial interests of the industry as a whole? 😲
Related Reading: BlackRock, which manages $7 trillion in assets, is changing how it invests in response to climate change. Conservative publications are ignoring the development.
This concept, of course, has been around for quite a long time. But oil’s recent price crash just might be the thing that makes the industry realize it—and Worland isn’t the only one who thinks so. Over at Fortune Magazine, Jeffrey Ball argues the biggest lesson that will come from this is that Big Oil will accelerate the shift to clean energy.
“Long before this spring’s epic oil-price crash, the energy sector was struggling with a longer-term existential threat,” he wrote.
Gone were the good old days, when oil consumption grew inexorably and the nations and corporations that controlled the most juice minted the juiciest profits. A scary new world had arrived, one in which oil demand was projected to peak in the next couple of decades even as external pressure surged—not just from environmental activists and regulators, but also from central banks and hedge funds—for Big Oil to diversify into lower-carbon energy sources.
That pressure already had begun to reshape the industry’s business strategy. Today’s energy-market carnage shows every sign of intensifying that low-carbon shift.
It the recent climate action from banks show anything, though, it’s that these shifts don’t happen on their own. They happen with the help of sustained, unrelenting pressure from outside forces.
And if Citigroup’s recent announcement shows anything, it’s that such pressure can have an impact, even when we’re all quarantined in our homes.
On that note, here’s an Earth Day event you might be interested in:
“We can’t be on the streets right now,” Bill McKibben writes in the Nation today. “So we’ll do what we can on the boulevards of the Internet. Join us for Earth Day Live, three days of digital activism beginning April 22.”
That’s tomorrow. Ya dig?
And now, for something completely different:
A literal treehugger meme
Welcome to the meme section. HEATED is the only publication on the internet that has an “editorial memeist,” the modern-day version of an editorial cartoonist. We do this because climate change is generally depressing. We need a little lolz.
This one cut a little too deep.
Believe it or not, this is a real story, equal parts adorable and depressing. Because so many folks lack physical touch these days (🙋♀️), Iceland’s Forest Service is recommending nature’s embrace as a temporary alternative.
Park ranger Thor Thorfinnsson, which is this person’s real name, explains:
When you hug [a tree], you feel it first in your toes and then up your legs and into your chest and then up into your head. It’s such a wonderful feeling of relaxation and then you’re ready for a new day and new challenges. …
It’s also really nice to close your eyes while you’re hugging a tree. I lean my cheek up against the trunk and feel the warmth and the currents flowing from the tree and into me. You can really feel it.
Follow @climemechange on Instagram for all your climate/COVID-19 crossover meme needs.
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Watch our wonderful Federal Government offer to fund the Arctic drilling. Or, maybe our EPA will take charge of it (Under this Administration, the EPA should more appropriately be named the "EDA", Environmental Destruction Agency).
Small progress, but I still don’t trust Citigroup. They have still funded a lot more fossil fuel projects than most other banks.
Also, no investment in new coal or expansion of existing - isn’t that like pledging to not have a Dodo as a pet?
Okay, maybe there are some expansions and new builds happening in the US but given the oft-reported “death of the coal industry” and plants shutting down it seems like a pointless promise?
I also recall a major oil company not wanting to drill in the Arctic because it’s too risky and costly. Seattle kayak protests also gave Shell the middle finger a couple of years ago and said they aren’t welcome and should not use the Seattle port for Arctic rig and equipment movements.
Citigroup seems to be doing some major greenwashing here, it’s saying it won’t fund things that aren’t likely to happen anyway because they aren’t financially smart, if at all feasible.
Maybe I’m in a shit mood but I’m not about to cheer on this news.