No interest in change: record profits lead oil and gas majors to reduce their climate goals

Despite professing their firm commitment to fighting climate change and expanding into renewable energy, following record profits from war-spiked high energy prices, global oil and gas majors like BP, Shell and ExxonMobil are now walking back their rhetoric and reducing whatever modest plans they had to invest in clean energy. And investors have cheered these decisions. Though renewable energy generation is expanding faster than ever, Michael Buchsbaum reviews how this is an object lesson in why relying on market forces alone to push companies into doing the right thing has never been more foolish.

Spoils of war

Ahead of Russia’s war of aggression against Ukraine, uncertainties around energy supply security began rippling throughout international energy markets. As fighting started raging across the country, energy prices began skyrocketing, leading to spiraling inflation and energy poverty for millions worldwide.

But this uncertainly also generated monster profits for fossil fuels producers as well as those sectors that serve and are dependent upon it.

To what extent these same industries helped exacerbate this crisis is a matter of speculation. But clearly energy majors, particularly producers and shippers of oil and liquid natural gas (LNG) used whatever influence they had to ensure that despite prevailing climate science, increasing and locking in more diversified suppliers was seen as the best policy response to any feared energy shortfall.

Reviewed broadly, one should never overlook that while the production and supply system is dominated by oil and gas (O&G) majors, so too is the global financial and trading system which serves it – a system that was historically largely constructed by, for and around fossil fuel interests themselves.

One need only look at the long intertwined relationships between John D Rockefeller, founder of Standard Oil, now ExxonMobil, and his descendants with the development of several of the world’s largest fossil fuel investment banks like JPMorgan Chase, Citigroup, and Bank of America.

Additionally, since the dawn of the oil-era, the industry has used their incredible profits to buy and ensure a predominant role in media. Dating from when Rockefeller bought a major interest in the New York Times, to the establishment of international radio and TV networks post-World War Two, big oil’s influence and advertising position across mainstream media has long provided us with a petro-plenty vision, equating consumption with both prosperity and happiness.

And perhaps more insidiously, industry has and continues to use its outsize influence and power to use mass media to sell and secure climate denialism and delay.

Walking backwards

Though last year saw, for the first time since the transition to renewables began, global clean energy investments matching that of fossil fuels – topping USD 1 trillion – O&G’s incredible profits convinced many investors to double down on dirty energy.

In new media campaigns, big oil is now suggesting that last year’s high energy prices were the result of risky investments in renewables and that technological breakthroughs in “clean” hydrogen and carbon capture will solve any potential climate woes.

Engorged with profits, throughout the first quarter of 2023, corporate officers throughout the oil and gas industry announced plans to reduce their commitments to increasing renewable energy development.

First came ExxonMobil which, as Bloomberg reported, decided after advertising its efforts to produce environmentally friendly fuels from algae for over a decade, to walk away from its most heavily publicised climate solution in favour of carbon capture technologies and the promise of “clean” hydrogen (produced from fossil gas).

Then came Shell, which announced plans to reduce their renewables investments and instead focus on expanding fossil gas production.

Delirious after earning more money than at any point in its 115-year history, BP has similarly announced a reduction of its climate ambitions. At its most recent earning call, the company revealed it will be abandoning their once heralded plans to cut oil and gas output by 40% by 2030, saying instead it would now only reduce output by a quarter.

Moreover, going forward, cleaning up BP won’t mean expanding renewable investments, but increased efforts to sell off more polluting, but less profitable assets to less scrutinized companies.

Case in point: cleaning up their carbon footprint by selling off their filthy former Russian operations to even less climate concerned operators.

Costs versus profits

The oil and gas industry’s re-embrace of fossil fuels challenges one of the rather neo-liberal assumptions of the energy transition: that once solar and wind are cheaper than fossil fuels, they will outcompete them.

But central to industry strategy is that, despite renewables costing consumers less or being cheaper to install and produce energy from – in the main, solar and wind don’t generate the same level of profits as oil and gas does.

In her recent article in The New Republic, “Oil companies are finally being honest about their feelings on renewable energy,” Kate Aronoff unpacks the crucial distinction between costs and profits.

Though many readers may see this as yet another example of industry’s moral failings, this overlooks that under established international financial rules, this is both a perfectly rational as well as obligatory reversal. Multinational oil companies are not charitable organizations and do not have a legal requirement to operate for the greater good. Despite all their rhetoric, they exist for one reason alone: to generate shareholder value and last year’s profits are a repudiation of attempts to steer them anywhere else.

As Aronoff reminds, despite any rhetoric about getting to ’net-zero’, O&G companies will stay in this business for as long as they can make money in it, whatever the climate costs.

When news of their shift away from renewable energy investments hit Wall Street, BP’s share price jumped eight per cent and kept rising for days.

Market force revenge

So long as governments avoid strong renewable energy mandates and an unlevel playing field, our future will be held hostage to stock markets and short-term profit maximization — despite us having a wealth of cost-effective, non-planet killing alternatives ready for widespread deployment.

Though at an early April meeting of the G7, ministers agreed, in principle, to speed up the phaseout of fossil fuels and increase the shift towards renewable energy, their commitment lacks a clear deadline and has no teeth.

Unless we find another way, big oil will happily keep running the show. This year’s COP28 climate summit will be headed by Sultan Al Jaber, CEO of Abu Dhabi’s National Oil Company (Adnoc). Also heading the Ministry of Industry for the United Arab Emirates, he claims he’s capable of balancing O&G needs while still overseeing crucial climate negotiations.

But with CO2 and methane levels now higher than at any point in the last million years, can we afford to keep trusting that market forces, incremental change or the setting of higher renewable targets will be enough to prevent us from blowing past 2°C of temperature rise?

The views and opinions in this article do not necessarily reflect those of the Heinrich-Böll-Stiftung European Union.


L. Michael Buchsbaum is an energy and mining journalist and industrial photographer based in Germany. Since the mid-1990s, he has covered the social, environmental, economic and political impacts of the transition from fossil fuels towards renewables for dozens of industry magazines, journals, institutions and corporate clients. Born in the U.S., he emigrated to Germany and Europe to better document the Energiewende. He is also the host of The Global Energy Transition Podcast.

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