Price action, page-3195

Contrary to general belief - or the pious certitudes of Extinction Rebellion and those protesting outside the COP26 perimeter - high finance has already slashed fossil funding. That is why we now have a global energy crunch, and why it will become progressively more serious over the next two years.

Upstream and downstream investment in oil, gas, and coal peaked at $US1.3 trillion in 2014. It has since collapsed to nearer $US350 billion, and has not rebounded in the usual cyclical fashion with rising prices. Nor have the shares of oil majors such as Shell or Exxon, still languishing far below even pre-pandemic levels despite the oil rally. Markets are pricing in terminal run-off.

But renewable growth has not been enough to pick up the slack. Total energy investment is running at $US700 billion, half the maintenance funding needed to power the world’s $US86 trillion economy when it is in full expansion mode. We have a colossal mismatch.

Carney said that vastly greater sums are required in any case to come close to cutting emissions 50 per cent by 2030, the UN’s “red alert” target and the relevant date at this juncture (2050 is so passé). Those funds will flow of their own accord once obstacles are removed.

“We need to scale up dramatically by an extra trillion a year. It means 2 per cent of GDP every year for decades, in every corner of the world,” he said.

Janet Yellen, the US treasury secretary, breezily floated a figure of $US100 trillion to $US150 trillion to reach Net Zero, but with equal breeziness in Glasgow described this as a jolly good thing, the “greatest economic opportunity of our time”. A Keynesian speaks. Ten trillion here, ten trillion there, peanuts to Croesus. Yet that is broadly the orthodoxy of the world’s economic establishment today.

It is hard to get your head around, but yes, the money is there.