The 24th Conference of the Parties (COP24) has failed to adopt its own report, commissioned from the Inter-Governmental Panel on Climate Change, on the impacts of a global temperature rise of 1.5oC.
The move at the Katowice event - convened by the UN Framework Convention on Climate Change - bewildered many participants and observers. It was at the insistence of a power-block comprising Saudi Arabia, the USA and Russia.
It so happens these are the world’s top three oil producing states, with around 40 percent of global production. They could be viewed as having a very direct self-interest in derailing any move towards reducing, or eliminating, fossil fuels and thereby addressing dangerous climate change.
Supply and demand
It is well understood that cheap oil prices crush the development and production of biofuels as a fossil fuel substitute. Cheap oil prices also undermine the development of renewable energy sources and also the introduction of electrified transport.
At the time of COP21, in Paris in 2015, the International Monetary Fund (IMF) stated that low fossil fuel prices were hindering the fight against climate change.
Traditional economic models would have us believe that global oil price is dictated by supply and demand. Demand is influenced by factors such as economic growth, also by weather of course.
However, demand is heavily manipulated by speculators, or futures traders. It is estimated that only 3 percent of transactions result in the purchaser eventually taking possession of the product; every barrel of crude oil is traded multiple times before actually being used.
These intermediaries are very aware of the market psychology that can have a very big influence on manipulating the buy and sell prices at various points in a cycle.
Manipulating the market
Legal cases have been successfully brought in the USA against companies which manipulated oil prices by artificially creating shortages and then using futures and options to push up prices. Overall market sentiment seems volatile and readily distorted.
Supply is in the hands of relatively few very large businesses. There are seven multinational corporations that dominate all stages from exploration, through production, refining and distribution. Russian oil companies are very close to Government and Saudi Aramco is state-owned.
There is also the global cartel, known as OPEC, which controls around 40 percent of market supply. Recently Russia has been joining the regular OPEC meetings as a non-member. These suppliers can turn the taps up or down relatively easily.
Within the past few months, the Saudi energy minister Khalil Al-Falih said that he was optimistic OPEC could reach a consensus on production policy which, in collaboration with Russia, would release more oil onto the market and depress prices.
Supply is also influenced by storage, about which operators are very secretive. Total global oil supply is round about 33 Bn barrels per year, while it is estimated that there is storage capacity of around 6 Bn barrels. Filling or draining of this storage can have significant and rapid impacts on the market price.
Recent reports have revealed that the top seven global corporations that can be shown to be strongly antagonistic to climate and energy policies addressing climate change are respectively ExxonMobil, Phillips 66, Chevron, Valero Energy, Koch Industries, Southern Company, and Berkshire Hathaway.
Six of these are either totally, or very substantially, involved in the fossil fuel industry. More specifically, it has been revealed that, even in the past year, ExxonMobil - the world’s largest publicly traded oil company - donated $1.5M to eleven think-tanks and lobby groups that reject climate science.
So, it appears there are mechanisms available and also motivations to distort the market place for the benefit of fossil-fuel vested interests.
It might, perhaps, be expected that such influence would be brought to bear to undermine and deviate the one global mechanism in place to reduce the world’s fossil fuel dependency and mitigate the growing risks of climate change – that is the annual COP meetings.
The graph below shows two plots (see below for detail of the methodology): one is an indicator of global public interest, and hence of political interest, in each of the 24 COPs since the first in 1995.
This level of interest has, of course, waxed and waned. As expected, a few COPs stand out: Kyoto (COP3), Copenhagen (COP15) and Paris (COP21) particularly. Others have had little public impact, such as Nairobi (COP12), Poznan (COP14) and Lima (COP20). The other plot is of global oil price fluctuation.
It is immediately apparent that the two parameters seem to vary inversely. An increase in public interest in the climate change conference in any year generally results in a decrease in the oil price, while a reduced level of interest appears to result in a higher oil price.
Statistically, this inverse relationship has a correlation coefficient of 0.41, which means it is 98 percent certain that such a relationship is real and not just due to random chance.
This analysis would seem to suggest that various vested interests, either nation-state or global corporation, or a synergistic alliance - working either independently or in collaboration around the world - manipulate the oil price downwards in advance of particularly important global climate change conferences in order to influence the debate.
Such action would serve to undermine the potential commitment of global politicians to fiscal, regulatory or policy interventions to reduce fossil fuel usage and to promote sustainable alternatives.
This would potentially damage climate change action and further escalate the serious risks to every one of us who intends to continue living on Planet Earth.
A fair COP? No, it looks like it certainly isn’t.
Professor James Curran was previously chief executive of the Scottish Environment Protection Agency. He researches, writes and talks on climate change and sustainability.
There have been 25 COP meetings since the first in Berlin in 1995. The latest is happening in Katowice, Poland, and is known as COP24. The numbering anomaly is caused by there being two named COP6, held in November 2000 in The Hague with a follow-on meeting in Bonn in July 2001. Otherwise meetings occur annually and nearly always in November or December.
Google was used to search for on-line interest in each of the COP meetings by undertaking a standardised search – for example: climate change “COP15 ” OR “COP 15 “, followed by using the Google tool to set a date filter comprising the period from one day after the opening, in this case, of COP14 to the opening date of the COP15, which in this case is 2 December 2008 to 7 December 2009. The results returned ranged from only 9 entries for COP1, 117 for COP3 (Kyoto), 6900 for COP15 (Copenhagen), 55100 for COP21 (Paris) and 552000 for the latest COP24 (Katowice). Clearly this is reflective of the exponential growth of information upload and download from the internet. The number of internet users has grown from 16 million in 1995 to over 4 billion in 2017, a factor of 260 times. A log(e) transformation is applied to the number of Google entries to account for this growth factor. Subsequently a linear detrend is applied to remove an underlying upward trend. This allows for a correlation to be undertaken with similarly detrended oil prices taken from: https://www.indexmundi.com/commodities/?commodity=crude-oil-brent&months=300
The oil price is taken from 2 months in advance of the opening date of the relevant COP. So, for COP15, which was held in December 2009, the oil price is taken for the month of October 2009.
The two plots of internet interest in COPs (multiplied by factor 10 simply to ensure the scales are comparable) and 2-month advance oil price are shown in Figure 1.
The correlation coefficient between the two plots is -0.41 which, with n= 25, suggests a p-value of 0.02. This indicates that it is 98% probable that there is an inverse relationship underlying the data. It is therefore very likely that global oil price changes in advance of a particular COP, in relation to how much global publicity there is in the run-up to the COP. Notable COPs, such as Kyoto, Copenhagen and Paris have experienced a significant advance drop in oil price, whereas low-key COPs such as Bali, Poznan and Lima have exhibited maintenance of relatively high advance oil prices.