Hooray for Capitalism

The recent announcement that BPs quarterly profits were down as a result of providing for the Gulf of Mexico disaster hid the fact that BP is still making huge annual profits by anybody’s standards. Following this thought I looked up some financial results for other oil companies.

The top 10 oil companies in the world, on average in 2007/2008, cleared profits of around 0.25% of world GDP! This is even when you allow some adjustment for inaccuracy in reported figures for the Chinese and Iranian state owned oil companies. If you extrapolate these figures to total world oil production and include some guesswork for coal and gas then the global profits from fossil fuels could possibly be around 1% of world GDP. Anyway it is in that sort of region.

Now in his review, Sir Nicholas Stern suggests that the ultimate cost of living with a changed climate could be 5% – 20% of world GDP, but that the cost of mitigating climate change would be of the order of 1% of world GDP. Notice any similarity between these numbers?

From my brief investigation it looks a lot like the cost of paying for remediating the climate damage done by our thirst for fossil fuels is about the same as the profit that the oil companies make from it. So the answer has been there all the time, if we had re-invested the profits from fossil fuels in cleaning up the atmosphere over the last century we might well not be in this fix. Unfortunately the profits of a global resource have not been used to benefit mankind, but have instead lined the pockets of a few – hooray for capitalism.

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