Are fossil fuels an ethical investment?

By Merrill Matthews – January 14, 2020

Saudi oil giant Aramco — the world’s most profitable company — issued its first public offering in December. The IPO has reenergized debate around whether it’s ethical to invest in oil and natural gas companies.

Green activists say no. Their organizations have worked for several years to encourage companies and individuals to “divest” from fossil fuel-producing companies.

As green site Go Fossil Free puts it, “Divestment is the opposite of an investment — it simply means getting rid of stocks, bonds, or investment funds that are unethical or morally ambiguous.”

Divestment efforts have gained some ground. In September the University of California system divested its $150 million in fossil fuel assets. And the European Investment Bank, the “lending arm” of the European Union, recently announced, “We will stop financing fossil fuels and we will launch the most ambitious climate investment strategy of any public financial institution anywhere.”

To be clear, that’s a political decision. But is it an ethical one? Not if we consider the economic, environmental, and national security value fossil fuels afford.

First, fossil fuel companies provide millions of high-paying jobs — and not just for C-suiters, as liberal activists claim.

The average salary in the U.S. oil and gas industry was about $102,000 — nearly twice the national average. These salaries ranged from $78,000 for pipeline workers to $162,000 for those working in oil and gas extraction.

Second, capital investments that funded the fracking boom have made natural gas the most abundant and affordable energy source for electricity generation — and it’s the cleanest burning fossil fuel. Natural gas releases about half as much carbon dioxide as coal, and about two-thirds that of gasoline and heating oil.

Transitioning to natural gas is one of the primary reasons U.S. energy-related carbon emissions declined from roughly 6,000 million metric tons a decade ago to about 5,000 today — even with more people and a larger economy.

If companies and individuals invest in natural gas and oil, gas supplies will remain plentiful and prices will remain low. The use of coal and other carbon-intensive fossil fuels will likely decline even more.

The truth is green activists’ renewable energy dreams are unrealistic. We are a long way from wind and solar power being able to supply most of a developed economy’s energy needs.

Investment managers have a fiduciary responsibility to maximize the investments they oversee. They have no obligation to invest in fossil fuels, but they also should not be barred from investing if oil and gas companies look like good investments.

America has become the world’s leading energy producer. That fact has improved both our lives and our economy.

Investing in the companies that make prosperity and national security possible isn’t just ethical, it’s commendable.

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow him on Twitter @MerrillMatthews.

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