There is one thing above all that is currently restraining fossil fuel companies from launching large new extraction projects, and it’s not a piece of legislation that Obama introduced and Trump can reverse. What’s holding them back is the price of oil and gas. As I write this in 2017, the price is much lower than when Obama took office, because there’s an oversupply—more oil and gas is available than consumers want.
The reason price is such an issue for new projects is that the cheap and easy-to-access fossil fuels have been steadily running out, particularly in the US. So what’s left? Stuff that’s hard and expensive to get to. It costs a lot of money to drill in the Arctic, or in very deep water, or to dig up and refine the semisolid oil found in Canada’s Alberta tar sands. When the price of oil was soaring, as it was as recently as 2014, fossil fuel companies were making multi-billion dollar investments in order to go after those expensive fuel sources. With oil at $100 a barrel, they could still turn a hefty profit even with the high costs for extraction. And the development in this sector did spur economic growth, and it did create a lot of jobs. But the environmental costs were enormous: the Deepwater Horizon disaster in the Gulf of Mexico was intimately connected to the fact that these companies are drilling deeper than they ever have before. The reason the tar sands in Alberta are so controversial is that Indigenous lands and waterways have been badly contaminated by the invasive and carbon-intensive process of mining for that heavy crude.
Rex Tillerson’s ExxonMobil went wild buying up high-cost heavy-oil reserves; it reached the point where fully one-third of the company’s reserves were located in the Alberta tar sands. When the price of oil collapsed, it came as a major shock. Oil prices began to crash in 2014, with Brent crude—the global benchmark for oil—plummeting from $100 a barrel to $50 in just six months, and the price has hovered at around $55 a barrel ever since. As a result, we’ve seen a lot of companies pulling back from extreme energy projects. Fracking for oil and gas in the United States has cooled off, with devastating human costs: an estimated 170,000 oil and gas workers have lost their jobs after the 2014 price collapse. Investment in the Alberta tar sands dropped by an estimated 37 percent in the year following, and continues to fall. Shell pulled back from the Arctic and has sold most of its tar sands reserves. The French oil company Total has retreated from the tar sands as well. Even ExxonMobil has been forced to write off nearly 3.5 million barrels of tar sands oil because the market considered these reserves to be no longer worth extracting at current oil prices. Deepwater drilling is also in a lull.
For the big oil companies—particularly those that gambled on the price of oil staying high—all of this has been a disaster. And no oil major has suffered more than ExxonMobil. When prices were high, with Tillerson at the helm, the company broke the record for the highest corporate profits ever reported in the United States, earning $45 billion in 2012. Compare that to 2016, when Exxon’s profits fell well shy of $8 billion. That’s a more than 80 percent drop in profits in a span of just four years.
What does all this mean? It means that oil majors like ExxonMobil, and the banks that underwrote their bad bets, desperately want the price of oil to go back up—to get their super-profits back and to get the fossil fuel frenzy back on. So a very big question that needs answering is this: what is the Trump administration—aka Team ExxonMobil—going to do to achieve that?
We are already seeing some policies that appear designed to drive up oil prices. For instance, Trump moved to eliminate the Obama-era requirement that vehicles become more fuel-efficient—which means more trips to the gas station for consumers. Trump’s budget plan, meanwhile, aimed to completely eliminate funding for new public transit projects, and kill funding for long-distance train services.
So far, though, the market isn’t responding, at least not by much. The price of oil got a little bump after Trump was elected but has held pretty steady since. From a climate perspective, this is good news: cheap gas may encourage short-term consumption, but it discourages a lot of the long-term investments that lock us into a disastrous future. The concern—and it is a real one—is that Trump and Co. may well have more tricks up their sleeves to try to push up oil prices and realize their goal of setting off a fossil fuel frenzy.
The reason we need to have our eyes firmly fixed on this dynamic is that nothing drives up the price of oil quite like war and other major shocks to the world market—a scenario we’ll dig into in Chapter 9.
What Conservatives Understand about Global Warming—and Liberals Don’t
For many years, I wondered why some people were so determined to deny global warming. It’s strange at first glance. Why would you work so hard to deny the scientific facts that have been affirmed by 97 percent of climate scientists—facts whose effects we see all around us, with more confirmation in the news we consume every day? That question led me on a journey that informed my book This Changes Everything—and I think some of what I discovered when writing that book can help us make sense of the centrality of climate vandalism to the Trump administration.
What I found is that when hard-core conservatives deny climate change, they are not just protecting the trillions in wealth that are threatened by climate action. They are also defending something even more precious to them: an entire ideological project—neoliberalism—which holds that the market is always right, regulation is always wrong, private is good and public is bad, and taxes that support public services are the worst of all.
There is a lot of confusion around the word neoliberalism, and about who is a neoliberal. And understandably so. So let’s break it down. Neoliberalism is an extreme form of capitalism that started to become dominant in the 1980s, under Ronald Reagan and Margaret Thatcher, but since the 1990s has been the reigning ideology of the world’s elites, regardless of partisan affiliation. Still, its strictest and most dogmatic adherents remain where the movement started: on the US Right.