The dawn of 2016 is not a happy time to be an executive in the fossil-fuel industry. Like Gulliver, who awakens to find his limbs and trunk tied down by the tiny but industrious Lilliputians, the industry is under assault on many fronts at once, and it’s not clear whether it can free itself.
Economically, the prices for oil, coal, and natural gas have been falling, even as production costs remain high. Industry stocks are tumbling, and small and large companies alike are going out of business. Arch Coal, one of the largest coal companies in the United States, declared bankruptcy on January 11. Outside investors are wary or fleeing. Many are embracing solar and wind energy, drawn by plummeting costs that have driven stratospheric growth and market penetration worldwide.
The political terrain is no more favorable. At the United Nations climate summit in Paris last December, virtually every nation on earth promised to all but eliminate the use of fossil fuels after 2050—to abandon oil, gas, and coal in favor of renewable energy. In the United States, one of the nation’s most powerful legal authorities, New York State Attorney General Eric Schneiderman, is investigating whether ExxonMobil, the industry’s alpha leader, committed fraud by lying to investors and the public for decades about climate change. Schneiderman’s investigation and the Paris Agreement in turn exemplify a third threat: an increasingly aroused civil society, spearheaded by a climate-justice movement that continues to grow in size, impact, and global reach.
The fossil-fuel industry remains an immensely rich and politically powerful enterprise, and volatility has been a theme throughout its history. This particular episode may yet prove to be a passing storm. Depressed oil prices can also discourage investment in renewable energy and conservation alternatives. But ExxonMobil, Peabody Energy, and their fossil-fuel brethren at home and abroad appear to be in a fight for their lives. And for the moment, at least, the momentum is against them.
On January 15, US Interior Secretary Sally Jewell announced a three-year moratorium on new coal-mining leases on publicly owned land, as well as a comprehensive review of the “environmental and public health impacts” of coal mining. This ranks as perhaps the strongest climate action the Obama administration has taken to date; publicly owned coal in Wyoming’s Powder River Basin alone accounts for 10 percent of the country’s annual greenhouse-gas emissions.
The world’s other climate-change superpower did much the same, two weeks before Obama did. China will halt new coal-mine approvals for three years and close roughly 1,000 existing mines, the head of its National Energy Administration, Nur Bekri, announced on December 29. Together, China and the United States are responsible for about 60 percent of global coal consumption. Their rejection of coal is fresh evidence that the industry is “a dead man walkin’,” as Kevin Parker, former head of global-asset management at Deutsche Bank, first noted back in 2011.