real-world economics review, issue no. 103 subscribe for free
How to Make the Oil Industry Go Bust Blair Fix [York University, Toronto, Canada] Copyright: Blair Fix, 2023
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Abstract Ca he i i d aff d c ea i e ? If b e e ea f i -fuel-induced c i a e cha ge, he a e i a ce ai .B ha if e ka a e i i ed cleanup scenario, restricted to the remediation of conventional oil and gas wells? Even then, it seems that the oil industry may already be bankrupt. As a case study, this paper estimates the solvency of the (conventional) oilpatch in the Canadian province of Alberta. By law, Albertan oil companies are required to pay for well remediation. To date, however, the oil industry has saved little for this expense. Instead, it has assumed that future oil production will pay for existing cleanup liabilities. But will it? Using cleanup estimates from the Alberta Liabilities Disclosure Project, I estimate the past, present and future solvency of the (conventional) Alberta oil industry. I find that at present, the oilpatch sits on the precipice of insolvency.
The cost of doing business E i e ai f e a g e ha if e acc ed f he e c f he f i -fuel business, the industry would go bankrupt. Whi e I de a d hi e i e , I hi k he idea f e c i d bi . C e i beca e he a e e , b beca e e e ha he e e f ce he . Tha why Apple can impose a 30% commission on everything in its app store (Perez, 2020). It has the power to do so. Back to fossil fuels. Yes, we should make fossil-fuel companies pay for the damage they have wrought. B i ce d i g i i ea e e gg e, e eed be ag a ic. O ha f , he e a clever option: look for under-enforced legislation that if fully enforced, would make the fossil-fuel business go bankrupt. True, this type of law sounds far-fe ched. B i ac a iec . He e why. When fossil-fuel companies extract resources, they are usually required to cleanup their (local) mess. F e a e, he a i c a d ai a e , i ed g he h e a d e he e i e i igi a c di i . Si ce hi c ea i a ega b iga i , d hi k ha i c a ie being law-abiding corporate citizens would have been diligently cleaning up their defunct wells. But for the most part, they let these obligations slide. 1 And so their cleanup liabilities have slowly accumulated. 1 To avoid their cleanup responsibility, oil companies employ a variety of tactics. The most basic is to simply delay.
Thi a eg k beca e i c a ie ge ch e he a e i d e . Much like when you drink water through a straw, when you pump oil from a well, there are always dregs left over. If you want to delay paying for c ea , i kee he a e , c ai i g he e a e a fe e i f i be had.
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