It is very interesting that Norway is now having a painful relationship with oil. It now wants to divorce oil. Yes, Norway wants to dump its oil and gas stocks. The nation with $1 trillion wealth fund, built mainly on oil wealth, plans to sell about $35 billion in equities, including Royal Dutch Shell Plc and Exxon Mobil Corp., to help make it less vulnerable to energy shocks, Bloomberg reports.
Norway’s proposal to sell off $35 billion in oil and natural gas stocks brings sudden and unparalleled heft to a once-grassroots movement to enlist investors in the fight against climate change.The Nordic nation’s $1 trillion sovereign wealth fund said Thursday that it’s considering unloading its shares of Exxon Mobil Corp., Royal Dutch Shell Plc and other oil giants to diversify its holdings and guard against drops in crude prices. European oil stocks fell.
Take this from me: in the next ten years, the activists in the society will put oil in the same bucket as cigarettes. I am not here to decide if that is good or bad; I am simply making an observation. Once that happens, the global pension funds will run away from ALL oil stocks. With that, the fate of oil price will be permanently low, because investors have moved. Sure, you can argue that cigarette maker, Philips Morris, is not bankrupt. That is correct, but it is also obvious that the cigarette maker would be doing better if not for the global efforts to take cigarettes, rightfully, out of this earth (that one I support 100%).
The trajectory is evident on big oil, and over time, other funds will join. At the end, buying oil stocks like Royal Dutch Shell Plc and Exxon Mobil Corp. will be seen as a dirty way of accumulating wealth. Most activist brokers may not even offer them, so you may be unable to buy the stocks when you want!
As the Big Oil struggles to find big time investors in their stocks, they will experience massive erosion of values. Besides whatever Elon Musk and other renewal innovators are doing, this morality angle will be extremely fatal to Big Oil. Forget that Norway has framed this as a way to mitigate the cyclical boom and bust in oil, this is a morality play, anchored on climate change, as the piece below noted.
Norges Bank Investment Management would not be the first institutional investor to back away from fossil fuels. But until now, most have been state pension funds, universities and other smaller players that have limited their divestments to coal, tar sands or some of the other dirtiest fossil fuels. Norway’s fund is the world’s largest equity investor, controlling about 1.5 percent of global stocks. If it follows through on its proposal, it would be the first to abandon the sector altogether
And abandoning that sector means countries that depend on oil will see dislocations as I have noted in this long piece titled Nigeria in the Post-Petroleum Era. The world is changing, and Nigeria certainly needs to move fast in the diversification of the economy.