Say NO to Divestment from Fossil Fuels

Tomorrow, the ASSU Undergraduate Senate plans to vote on a revised resolution that presses Stanford to divest from fossil fuel companies. Since only 7% of Stanford’s endowment is in “Natural Resources,” supporters claim that divestment would not affect Stanford’s return on investment. This is probably true. However, any benefits that divestment may create are far outweighed by its costs.

Many claim Stanford’s divestment from companies that invested in South Africa during apartheid provides a model for action on fossil fuels. Things are different this time. Fossil fuels are widely used in the global economy. They provide energy for machines that produce a wide array of consumer goods: shirts, cans, computers, food, furniture, etc. Even if a product does not require a fossil fuel in its production, it is highly probable that it will be transported by machine that uses petroleum. Fossil fuels are also used in less evident ways, such as in plastic. The apartheid was a political problem concentrated in one region; fossil fuels are utilized throughout the global economy.

Even if universities were to divest from energy companies, demand for fossil fuels would not be affected because of this widespread usage. In a 2006 report, the IMF found that the price elasticity of demand for oil is between -0.03 and -0.09. This low value indicates that, whatever happens in the oil market, demand will remain relatively the same since there are few substitutes for oil. Therefore, instead of changing behavior, energy companies would simply seek new investors to take Stanford’s place. Divestment would have little effect on demand for oil.

If demand for fossil fuels were to decrease from divestment, then it would disproportionately harm low-income people. Many poor regions, ranging from the Middle East to South America, rely on fossil fuel production for their livelihoods. What happens to these regions without significant demand for oil? These regions, many already mired in poverty, would lose a vital source of income. Less demand for fossil fuels may seem benign in the abstract until real people with families to feed, homes to maintain, and dignity to uphold slide further into poverty as they lose their jobs. Grandiose utopian visions often have disastrous consequences. The effects would not be limited to one industry. Sectors around the world would be affected from a decrease in oil supply: ranging from the auto-mechanic in Detroit to the clothing factory in Pakistan to the airline maintenance worker in England.

The ASSU Senate has many serious issues to consider that directly affect students. Unused special fees suffer from a dangerous lack of oversight. Mental health issues continue to be stigmatized on campus. There are serious problems with the judicial review process. If proponents of divestment want to advance their cause, then they can abstain from products that use fossil fuels and advance their cause through student groups. In the meantime, the Senate should focus its attention on pertinent issues affecting the student body and abstain from participating in a utopian experiment with dangerous consequences.