Capitalizing a future unsustainable: Finance, energy and the fate of market civilization

ABSTRACT

Liberal capitalist polities are being held up as the ultimate civilizational achievement precisely at a point in time when the energy-demanding built environments and growth imperatives of these societies are threatened by global climate change and the coming end of cheap and abundant carbon energy. Throughout the twentieth century, this pattern of energy-intensive social reproduction was largely shaped by the oil and gas sector creating what I call a petro-market civilization. However, given the challenges presented by peak oil and global warming, transitioning to a low-carbon or green energy future has gathered increasing attention and investment. In this paper, I use a power theory of value approach to offer a preliminary assessment of whether this transition is likely given the entrenched power of the oil and gas sector in the economy. Although the twenty-first century may bear witness to a renewable and sustainable energy paradigm, current evidence suggests that investors are continuing to capitalize an unsustainable future premised upon non-renewable fossil fuels.

KEYWORDS:

• Capitalization
• green economy
• energy
• peak oil
• global warming
• power theory of value

ACKNOWLEDGEMENT

I would like to express my gratitude to the three anonymous reviewers whose comments helped strengthen the paper, Sandy Hager for research help, Hanna Kivistö and the Center for Excellence in Global Governance Research at the University of Helsinki for generous research funding.

Notes

1. Anne-Britt Dullforce (2009) ‘FT Global 500 2009’, Financial Times, May 29. Dullforce notes that ‘the total market capitalization of the Global 500 companies’ fell ‘by 42 per cent from $26,831bn to $15,617bn’, within the span of one year. By May of 2010, the capitalization of the top 500 global firms bounced back to $23,503 billion. Anne-Britt Dullforce (2010) ‘FT Global 500 2010’, Financial Times, May 28.

2. I do not address the literature on state theory here because it is vast and beyond the scope of this paper.

3. Two authors have already penned a book advising investors how they can profit from peak oil and suggest that oil may reach $480 a barrel in the near future (Hicks and Nelder, 2008).

4. Of course during the downswing in production, many investors may run for the door since many have argued that the capitalization of oil and gas firms depends upon their reserves. Dwindling reserves may mean that these firms will experience a drop in capitalization. But escalating prices and high earnings relative to other firms may lead to the opposite trend – escalating capitalization – if only for a set period. As the IEA noted, ‘a supply-side crunch in the period of 2015, involving an abrupt escalation in oil pices, cannot be ruled out’ (IEA, 2007: 41).

5. FT Global 500 2010, http://www.ft.com/reports/ft500-2010.

6. http://www.exxonmobil.com/corporate/energy_issues_globaloil.aspx (accessed 30 September 2010).

7. For example, it is by now well known that the oil industry lobbied California's Air Resources Board to overturn its legislation that encouraged the production of electric cars. See the documentary, Who Killed the Electric Car. http://www.whokilledtheelectriccar.com/