Some thoughts and updates on the financial situation as it relates to the Carbon Bubble, and what it means for the divestment movement and divestment campaigns.

Not all bubbles pop in the same way – that is, not all bubbles are created equal. We may not see a steep and dramatic drop in the stock market, precipitated by a large chunk of fossil fuel reserves being stranded. The carbon bubble could pop gradually, cutting into the portfolios of pensions and endowments bit by bit. In fact, I think this is happening now (and so does the UN Climate Chief).

Let’s review.

The stock price or value of fossil fuel companies is, in part, a reflection of the reserves (or supply) they hold on their balance sheets.

As we know, those reserves are based on a business-as-usual equation — ignoring climate change, oil price volatility, alternative energy competition, and other market forces. Now, oil prices have dropped to a six-year low – somewhere in the mid $40s – and the fossil fuel sector is falling rapidly in value.

In reaction to low oil prices, oil companies have recently announced large cuts to their capital expenditure (or the costs of maintaining or increasing the scope of their operations). BP cut development expenditures by $2 billion, Shell cut spending by $9 billion (and abandoned a $6.5 billion petrochemical plant), Exxon cut spending by $5.5 Billion, and Gazprom cut spending by 50%! The list goes on and on.

What do all of these billions and trillions (almost $10 trillion if oil prices stay below $60) in spending cuts mean? One answer can be found in indicators like the number of active oil and gas drilling rigs. Some analysts consider “rig counts” an important barometer for the drilling and oil service industry. In the US, 101 rigs were shut down over the last year, with the vast majority of those rigs being shut down over the last few months.

The other big indicator is the jobs numbers: Chevron announced plans to cut 225 jobs in Aberdeen; Suncor (Canada’s largest energy firm) expects to cut 1,000 jobs in 2015; and BP expects to cut thousands of jobs worldwide. For comparison, the solar industry added 31,000 solar jobs in the U.S. between November 2013 and November 2014. In fact, the solar industry created almost 50% more jobs than crude oil and natural gas extraction in 2014.

Some smaller companies like Apache Corp and Goodrich Petroleum are feeling this slow pop even more acutely, cutting spending 26% and 50% respectively. As carbon risk pressure grows, we may see an increase in industry consolidation (and if we’ve learned anything from the financial crisis, it’s that hyper-consolidation is a bad sign).

What does this mean for the divestment movement? For starters, it has serious implications for trustees and other fiduciaries who refuse to engage in the conversation around the moral implications of fossil fuel investments. For those exclusively willing to respond to the financial discourse, the current financial situation by itself should have fiduciaries looking at their coal, oil, and gas holdings skeptically.

If trustees aren’t looking at the current state of fossil fuel markets as a red flag, divestment campaigners should be doing all they can to point out the dangers. Because the carbon bubble is popping — gradually but surely.