Home' Trinidad and Tobago Guardian : July 2nd 2015 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt JULY 2 • 2015
They have chained themselves
to the White House fence,
blockaded Australian coal
ports with dugout canoes
and mooned the offices of
a British minister. However,
protesters from a green pressure group called
350.org have had their greatest success doing
something far duller: petitioning institutional
investors to "divest" from stocks and bonds
issued by companies that peddle fossil fuels.
Opponents of divestment marshal argu-
ments from theory and practice to pooh-
pooh such campaigns. However, when they
do so they both misunderstand the goals of
the activists and dodge hard questions about
how best to serve the interests of their
Denigrators of divestment point out, right-
ly, that selling a security does not materially
reduce the price if there still are lots of
buyers out there. Any buyer is likely to have
fewer qualms about the company or country
concerned than the seller, so the pressure
for immediate change may actually dissipate
as divestment proceeds. That is why some
fund managers, such as Hermes, argue that
engagement with polluting firms is better
than walking away.
In the case of fossil fuels, the skeptics
add, divestment has the wrong target: State-
owned companies, not listed ones, control
the bulk of reserves.
The critics are right that it is hard to
detect much impact on firms cost of capital
from divestment campaigns. The first
recruits to the fossil-fuel campaign were
charities and universities with relatively
small investments. Its biggest coup came
earlier this year, when Norway s vast sov-
ereign-wealth fund resolved to sell its invest-
ments in coal and the dirtiest forms of oil
production. A few big pension funds, such
as PFZW of the Netherlands, have promised
to reduce the carbon footprint of their hold-
ings. The consequences for the share prices
or bond yields of the spurned firms, if any,
are not discernible. however, amid the far
bigger swings attributable to changes in the
price of oil, gas and coal.
Much the same is true of other such cam-
paigns. The shares of cigarette-makers have
performed brilliantly in recent years, despite
a big divestment drive. The falling price of
gold and growing popular unrest probably
had more to do with South Africa s rising
borrowing costs in the dying days of
apartheid than divestment did. Israel s bor-
rowing costs have fallen and its stock market
has boomed despite the BDS (Boycott,
Divestment, Sanctions) movement, which
is intended to press it into making peace
with the Palestinians.
Advocates of divestment do not really
expect to raise their targets cost of capital,
however. Rather, they want to create the
sense that a business or a country is a pari-
ah.If you believe that global warming is a
mortal threat to all humanity, and that the
world s attempts to ward it off are inade-
quate, then it makes sense to do more or
less everything you can to bring about
change. Campaigners use divestment not
as a tool of corporate finance, but as a facet
of free speech - part of a broader push,
involving boycotts, protests, lobbying and
public advocacy, to sway opinion and influ-
Good luck to them. They have every right
to make their case.
Whether campaigners should prevail is
less clear. Individual investors can settle the
matter on their own. The complication with
divestment campaigns is that investment
committees are looking after the money of
other people. Discerning their preferences
often is hard and sometimes is impossible.
End-investors frequently want to have things
both ways, demanding that funds be both
green to a fault and deeply in the black.
University-endowment funds can heed the
views of today s students, but not those of
Occasionally, as with smoking, the moral
issues are sufficiently clear-cut for managers
to act on unambiguous instructions from
their investors. Many issues are more com-
plex, though, and, even in the days of instant,
cost-free communication, money managers
cannot spend their time polling investors
and expect to get a useful response.
More often, therefore, they should be
conservative and set themselves clear aims.
That means maximising returns.
@2015 The Economist Newspaper Ltd.
Distributed by the New York Times Syn-
Saudi Arabia lost its spot last month
as India s top oil supplier to Nigeria
for the first time in at least four years,
according to ship tracking data com-
piled by Reuters, as the world s top
crude exporter struggles to maintain
market share in Asia.
The OPEC kingpin also fell behind Russia and
Angola as the biggest crude supplier to China last
month, official data showed this week.
The Middle East country s failure to maintain its
position in some markets comes despite it leading
a strategy by the Organisation of the Petroleum
Exporting Countries (OPEC) to keep output high to
drive out competitors.
In India, refiners have been switching out of long-
term contracts with Middle East suppliers in favour
of spot purchases, often African oil.
A glut of African cargoes has emerged as the US
shale boom cuts American demand and accelerated
as OPEC keeps output high.
The share of African oil, mainly from Nigeria and
Angola, jumped to 26 per cent of India s total imports
in May, up from around 15.5 per cent in April and
the highest in more than four years, according to
tracking data on tanker arrivals.
At the same time, the Middle East share fell to 54
per cent in May from 61 per cent, with Saudi Arabia
supplying some 732,400 barrels per day (bpd) com-
pared with Nigeria s 745,200 bpd.
The shift comes as the gap between the international
benchmark Brent and the Middle East price marker
narrows. The premium for Nigerian crude over Brent
has plummeted in recent months, making it more
"This gives advantage to the complex refiners like
Reliance to buy superior grades of oil like those from
Nigeria at discounted rates," said Ehsan Ul Haq,
senior consultant at UK-based consultant KBC Energy
Reliance Industries got about a quarter of its oil
in May from Africa, the highest in at least three years.
Indian Oil Corp aims to get 70 per cent of its oil
needs through term volumes compared to 80 per
cent last year, including a deal with Kuwait halved
to 100,000 bpd.
Another refiner, Bharat Petroleum Corp, plans to
cut its dependence on term contracts to 75 per cent
this fiscal year from 82 per cent a year ago, according
to a source.
Head of refinery operations at Hindustan Petroleum
Corp, BK Namdeo, said purchases of West African
oil make sense when Brent s premium over the Middle
East price marker, known as Dubai swaps, is less
than US$2 per barrel.
The spread has mostly hovered below that since
oil prices crashed in the second half of last year and
hit its lowest in two months this week at US$1.32.
KBC Energy s Haq estimates West African oil s
share to India could average as much as 25 per cent
this year. Reuters
Is it time to divest
from fossil fuels?
loses spot as top
to India, China
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