The current near-record low price per barrel of oil has weakened one of the last arguments against divestment. Although prices have begun to climb slightly, profits will likely remain low through 2016, as a decrease in demand intersects with overproduction in the market. At present, the student-led divestment movement has so far stalled with only around 60 colleges and universities agreeing to sell all or part of their stocks in fossil fuel companies. Since these stocks clearly no longer guarantee increased value, the divestment movement should take this opportunity to press administrations and college boards to withdraw their investment in fossil fuels.
One of the challenging issues for the divestment movement is the claim that fossil fuel stocks represent a financially sound investment. Indeed, this belief that the value of fossil fuel stocks will continue to climb explains the resistance from college administrators and boards to student-led divestment efforts. By arguing that selling off stocks is a bad economic decision, opponents have attempted to handicap the movement by claiming that divesting represents a breach of the fiduciary responsibility of their respective institutions. At the very least, the recent market volatility illustrates that, at least in the short term, this is not necessarily so.
But the declining profitability of the industry, even if temporary, also provides an opportunity for deeper reflection about the impact of fossil fuel extraction on our political systems. It is clear that in this age of modernity, high profitability in the fossil fuel industry brings with it tremendous sociopolitical and environmental costs. Part of the reason that oil prices and profits are so low is that increases in energy efficiency among vehicles and homes has depressed demand, which has led to some 68 oil and natural gas exploration projects being deferred worldwide. From a social and environmental perspective, the less oil and gas exploration, the better.
First, as the IPCC, and climate activists like Bill McKibben, and others have pointed out, we cannot continue to extract and use fossil fuels at current rates if we hope to keep the warming of the Earth below an additional 2° Celsius. Declining demand for fossil fuels is therefore a net environmental good. Second, the actual process of extracting fossil fuels is tremendously costly in the immediate term to marginalized populations: blue-collar workers, racial and ethnic minorities, and low-income communities. The reason the fossil fuel industry has been able to post record profits in the past is because they have been demonstrably willing and able to keep costs of production low by externalizing the risks and burdens of extraction to these vulnerable populations.
The blowout of the Deepwater Horizon was caused by BP, Halliburton and Transocean cutting costs on safety equipment. In turn, 11 workers from “one of the last great blue-collar jobs” were killed in the explosion. Further, despite the settlement, the after-effects of the spill have harmed or ruined the livelihoods of middle-and low-income fishermen, tour guides and workers in the Gulf Coast service industry. In gas extraction, the overzealous and underregulated use of toxic chemicals in either drilling or hydraulic fracturing (“fracking”) has contaminated groundwater in extraction sites, such as Dimock, a rural town in the Appalachian area of Pennsylvania, and in other areas in Ohio, West Virginia and Texas. In countries such as Ecuador, Nigeria and now Canada, the fact that oil-rich land is held by disenfranchised ethnic and tribal minorities has empowered oil corporations to raze traditionally held land, destroying local livelihoods and economies. Finally, global warming has led to record declines in ice cover in the Arctic. While most people would see this as a catastrophe for indigenous people and the environment alike, oil companies have seen this as another potential opportunity for mineral extraction and exploitation: Since 2008, Royal Dutch Shell has aggressively pursued drilling permits in the Arctic Sea.
The divestment campaign is in part based on a moral argument: By investing in fossil fuel companies, colleges and universities are giving license to these practices. To be sure, opponents have argued that divestment is the wrong strategy for challenging the industry. Having followed the movement and participated in meetings on divestment, I can summarize the arguments against divestment as based around the following claims: first, divestment is an ineffective way of changing policy and practice, since it will not affect the economic bottom line of fossil fuel companies – if universities and colleges sell stocks, some other actor will simply purchase them. Second, fossil fuel companies are in the business of energy and, as such, are best positioned to develop alternative energy. Third, divesting from fossil fuel companies while keeping stocks in industries that use fossil fuels (and continuing to use fossil fuels) is hypocritical.
However, these criticisms are unconvincing. Divestment will certainly have little effect on the bottom line of fossil fuel companies, and treated in isolation, it is primarily a symbolic gesture meant to show solidarity among environmental movements. However, the divestment movement has never been about treating divestment as an isolated campaign. Indeed, environmentalists have consistently linked divestment with other targeted efforts that do have an effect on policy and practice. Most crucially, relentless lobbying by indigenous rights groups and 350.org among others has contributed to President Obama’s shutdown of the Keystone XL Pipeline extension. Opponents of fracking have also lobbied for bans on the practice, as seen in recent campaigns in California. Certainly, as illustrated above, there is no indication that fossil fuel companies have any interest in seriously pursuing alternative energy.
Finally, accusing supporters of divestment of hypocrisy for continuing to use fossil fuels, or investing in companies that use fossil fuels, is grossly unfair. Our modern reliance on fossil fuels is a product of deliberate policy decisions that have shaped the human geography of the United States, effectively limiting less energy-intensive patterns of behavior. For instance, political obstructionism and a lack of interest have systematically undermined attempts to develop high-speed rail services in the United States, which, along with urban sprawl and spotty mass transportation, has increased local reliance on private cars. In comparison to countries that have invested in high-speed rail, the rail system in the United States is woefully inadequate. As a result, supporters of divestment, like everyone else who lives in America, are constrained by the structures of the transportation system to depend on fossil fuels. This is certainly not the fault of the movement.
In conclusion, a sober accounting of the fossil fuel industry reveals a very troubling relationship with the American political economy. High industry profits and corresponding oil and gas exploration mean greater sociopolitical and environmental problems, particularly for marginalized populations. Of course, it is in the best interest of fossil fuel companies to pursue profits and fight regulation. But by supporting these practices through continued investment, colleges and universities are giving moral license to inequitable and short-sighted behavior. This seems frankly at odds with the mission statements of institutions that want to “best serve the nation and the world,” or claim to be “integrating environmental stewardship” into institutional practices. Now that oil prices have fallen, the last argument behind continued investment – the expectation of continued profits from oil exploration – is on shaky ground. The time to divest is now.