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Wednesday, June 28, 2017

What Happens When The Oil Economy Collapses?

What Happens When The Oil Economy Collapses?

Oil company values — which are currently topping the charts — will collapse. That means that certain investors (many investors) will “lose money,” or see their net worth drop. To put this into a little more perspective, we highlighted recently that Tesla [TSLA] has passed the US “Big 3” automakers in market cap, currently sitting at $60.15 billion (compared to GM at $51.73 billion and Ford at $44.76 billion). Meanwhile, Exxon’s market cap sits at $354.59 billion, Chevron’s market cap is $204.76 billion, and Saudi Aramco’s expected to be valued at $1–10 trillion.

Some of our top commenters have made it clear — the oil bubble could collapse at any moment. What’s holding it together is the prospect of growth, but large portions of the investment community should soon realize that cost-competitive, more convenient, and more enjoyable electric transport; city, state, and national actions to fight air pollution; and broader governmental and corporate action to stop global warming mean that oil is a dead industry walking. As more investors and money managers decide oil & gas is not a smart “investment” for the future, more and more money will pull out of the industry. People, institutions, and companies making early exits will be fine, but the ones who wait a bit too long to understand where things are headed will suffer from the popping oil bubble.

But that’s just the beginning of things. At this scale, certain companies collapsing, a certain number of people losing their jobs and needing to find a new career, and certain investors falling in net worth is all fairly disruptive. However, it’s not that simple.

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