New York City’s claim is paving the way to an enormous black hole in the share value of 5 Big Oil (and other oil companies too). The staggering sums scoping the size of their potential liability from climate-related claims is a warning to asset managers and pension fund administrators. The 5 Big Oil companies should identify this potential liability as Value at Risk (VaR) in their annual reports: failure to do so could be seen by shareholders as a lack of transparency.
As shown in Table 1, the share of each individual oil company of the total claimable against the 5 Big Oil ranges widely, from as low as $194billion (ConocoPhillips) up to $468billion (ExxonMobil). The total is over $1.8trillion, about twice their market capitalization.
Table 1. Potential compensation claimable by major cities with climate change-related losses attributable to the emissions from the 5 Big Oil companies’ gas and oil products from 1880 to 2018 in $billions (2015). Market Cap and claims ratio are shown also.
|OIL COMPANY||Potential Claim|
|Potential Claim / Market Cap %|
|Royal Dutch Shell||321.9||222.0||145%|
New York City’s claim against 5 Big Oil (BP, ExxonMobil, Chevron, ConocoPhillips and Royal Dutch Shell) correctly implies that 11% of extreme weather-related losses to the City are attributable to the climate changing emissions of their oil and gas products. If successful, such a claim might result in between $1.4billion and $6.2billion in damages – the precise amounts being crucially dependent on the date upon which the associated historical losses are deemed to have started as outlined in my blog ‘New York City’s claim on 5 Big Oil: the dates that make the difference to the dollars’.
However, New York City’s claim pales into insignificance compared to the potential claims of many other cities with climate risk, let alone their combined totals. For example, as shown in Fig. 1, the potential claim of New Orleans is about ten times greater than that of New York City.
Fig. 1 The map shows relative sizes of potential claims against 5 Big Oil of some major cities with climate risk. The map key: top cities are named, orange/blue are greater than New York City, the black dot is New York City, blue is less than New York City.
Bruce Menzies, Chairman, Predict Ability Ltd (PAL)
© Copyright Predict Ability Ltd 2018. All rights reserved.
Author: Bruce Menzies
Bruce Menzies is Chairman and co-founder of PAL. He founded Global Digital Systems Ltd that won the Queen’s Award For Enterprise 2011. Bruce is co-author of six books on geotechnics and geology, one of which won the British Geotechnical Association Prize 2002. He holds doctorates from the Universities of London and Auckland, and is a Fellow of the Institution of Civil Engineers.