CTI put stranded assets on the map. “The major analysts were lapping up what energy companies were saying”

“You have got to ask yourself why had this not been done by the major analysts – Goldman Sachs, JP Morgan, Merrill Lynch or analytical firms. To some degree they were lapping up what the energy companies were saying. They’re the ones who do the forecasts.”

The following is an excerpt from an article at RTCC:  Terrifying Math:  How Carbon Tracker Changed the Climate Debate

The 2011 analysis connecting fossil fuel reserves and resources is fairly simple,” Carbon Tracker (CTI) staff said.  “You have got to ask yourself why had this not been done by the major analysts – Goldman Sachs, JP Morgan, Merrill Lynch or analytical firms. To some degree they were lapping up what the energy companies were saying. They’re the ones who do the forecasts.”

series of replies from CTI to fossil fuel companies responses to their critiques branded the oil majors analysis “complacent” and said they understated their risks.

What really gave the CTI credibility was not so much this war of words with Shell, BP and Exxon, but the ruinous state of the US coal industry. Tottering after years of tougher sulphur and nitrogen regulations, coal companies starting going under.  Big names like James River Coal and Patriot Coal Corporation filed for bankruptcy, two of 26 that had gone under in recent years.

“What happened to US coal was the eye opener,” said Craig Mackenzie, senior investment strategist at Aberdeen Asset Management. “Suddenly you realised that the general constraint on fossil fuels could be much closer than we thought.”  At the same time, oil prices were starting to nosedive from around $110 a barrel to their current level of just under $50, placing high cost plays like the Arctic and tar sands under pressure.

Even media groups frequently hostile to green regulations started to pile in against high carbon investments. In the Financial Times, Martin Wolff asked if high levels of oil, gas and coal investments could be a “disastrous waste of resources that could be better deployed elsewhere”.

In the Daily Telegraph, Ambrose Evans-Pritchard said fossil fuel companies were throwing “good money after bad” and were “courting fate” by dismissing the prospects of a global climate deal in 2015. The Economist labelled the debate the “elephant in the atmosphere

Already, there are signs of more of the CTI’s predictions bearing fruit. Shell’s CEO took major shareholders to the tennis at Wimbledon to reassure them their investments are safe, despite what many analysts believe is the company’s high-risk Arctic venture.  Weeks later, it was revealed oil majors had written off $200 billion of new projects due to plummeting prices.

Elsewhere, Peabody coal posted $1 billion second quarter losses while Seaborne thermal coal giant Glencore looks set to announce a “calamitous” profit slump this week.

Mackenzie is full of praise for the quality of the analysis CTI has offered but is keen to observe the wide range of factors affecting fossil fuels – and particularly coal, (which has been declining precipitously)…