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Are Fossil Fuels an Ethical Investment?

The opinions expressed by columnists are their own and do not necessarily represent the views of
AP Photo/Keith Srakocic

Last week, Saudi oil giant Aramco -- the world's most profitable company -- issued its first public offering. The record-breaking IPO sparked debate about whether it's ethical to invest in oil and gas.


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. That’s well above the left’s “Fight for $15” minimum wage campaign. And most of those jobs include excellent benefits.


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, according to the Energy Information Administration.  

In fact, 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.

Moreover, the EIA predicts that carbon emissions will continue to decline, dropping below 5,000 mmt before 2025. Incidentally, most of the countries that signed on to the Paris climate accord will likely see their carbon emissions rise over that time period.

If companies and individuals invest in natural gas and oil -- including extraction and transmission of these fuels -- 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. For anyone concerned about carbon dioxide emissions, that is a step in the right direction.


Third, eliminating fossil fuels would also undercut our military. Jets and rockets don’t fly on solar power and battleships and aircraft carriers can’t sail under wind power. Fossil fuels are the only way to secure our national security.

The truth is green activists’ renewable energy dreams are unrealistic. Anti-fossil fuel activist Greta Thunberg may have taken a sailing ship from Europe to the U.S. so she could scold the world in her United Nations speech, but that’s not how the modern world operates.

Almost everything we do today requires electricity and almost everywhere we go requires gasoline or other petroleum products to get us there.

A small fraction of our electricity is powered by what have become favored renewable energy sources (i.e., wind and solar power), but the large majority still comes from fossil fuels. Thus, even electric cars are primarily, in indirectly, powered by fossil fuels.

There are major efforts, like the European Investment Bank’s, to expand renewable resources. And those efforts may pay off—eventually. But we are a long way from wind and solar power being able to supply most of a developed economy’s energy needs.

As we continue to enjoy the benefits, conveniences, and improved quality of life that comes with modern society, we cannot shun the energy sources that make this lifestyle possible—even if the goal is to use less.


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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