The fossil fuel industry has gotten a lot of free-ride breaks over the decades. Much of that was necessary in the past to produce the energy we needed.
Today, there are alternatives to fossil fuels. With fears of climate change, alternatives give those who want tighter regulations on fossil fuel development more ability to push for tighter regulations.
In Colorado this week, we are seeing a start to what I believe will be a massive trend.
Colorado Democrats unveil their bill with big changes for oil-gas drilling, stoking industry frustration
The legislation would bring a fundamental change to the way Colorado oversees one of its biggest and most contentious industries
What Is An Externality?
An externality in economic terms is: a side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops by bees kept for honey.
Externalities can actually be positive or negative. Fossil fuels have historically created massive negative externalities, such as, smoke (various impacts from asthma to cancer), CO2, methane, coal sludge, water acidification, mercury pollution, leaks into water, spills during transportation, explosions, etc...
The negative impacts of fossil fuels have not been borne by the fossil fuel industry. Rather, we as taxpayers are usually on the hook. We are also rate payers for electricity and fuel as well, so one way or the other, consumers pay, either as costs are passed on or as tax payers.
At this point in history, if the true cost of fossil fuels is considered including externalities it is easy to start showing that alternative energy is actually cheaper. Consider that solar and wind power are outpacing new fossil fuel power plants. That is an economic calculation.
Soon, this trend will be unmistakable. The political tides are changing and demographics do not support any comeback for fossil fuels. Investors must be aware and accept the coming new reality.
Remember, I was an "oil guy" for over two decades. While I am a bit of a tree-hugger, I am more a realist. The reality is that fossil fuels are trades going forward (likely more short than long the next two or three decades), while sustainability is an investment.