In a recent editorial, Bill McKibben declared that “Big Oil is not so big anymore.” The founder of 350.org attributes this to the recent JPMorgan Chase announcement that Lee Raymond will no longer serve as the lead independent director of the world’s largest lender to the fossil-fuel industry.
Why is that director change significant?
Raymond is the Exxon guy who lied to the World Petroleum Congress audience in 1997 on the eve of the Kyoto climate talks, saying that the planet was cooling, and that it made no difference if we acted then or waited a quarter century to limit fossil fuels. In his retirement, his job has been to help run the board at Chase.
It’s been revealed in recent years that Exxon’s scientists discovered far before it was publicly an issue that climate change was an authentic reality. They willingly engaged in a coverup to sustain profitability margins as long as possible. Advocates have urged Chase to remove Raymond as lead independent director because of his climate-denying past.
What’s important to know about the current trajectory of Big Oil — including what’s practical and what’s symbolic, according to McKibben?
The State of Big Oil — Tenuous at Best
Big Oil was the recipient of recent federal bailouts. Reuters reported in late April that US President Donald Trump asked his cabinet to devise a plan to inject cash into the ailing US oil-drilling industry to help it survive a historic collapse in crude prices. And just this week The Guardian outlined how fossil fuel companies and coal-powered utilities in the US are set to be the beneficiaries for a federal bond bailout, part of the rescue package for the coronavirus crisis.
At least 90 fossil fuel companies — including Big Oil companies like ExxonMobil, Chevron, and Koch Industries — are part of the Federal Reserve coronavirus bond buyback program. So, too, are 150 utilities including coal-heavy firms such as American Electric Power and Duke Energy.
The International Energy Agency released new numbers in its “Global Energy Review 2020,” predicting that global oil demand would drop 9% this year. The demand is not expected to reach pre-COVID-19 crisis levels before the end of 2020. The IEA goes so far as to say that declines in oil demand could be even greater if a second wave of the virus occurs in the second half of 2020, constraining activity and oil demand across most of 2020.
Economists at the Institute for Energy Economics and Financial Analysis point out that the fossil-fuel sector faces long-term solvency problems, not just short-term liquidity woes. The IEEFA update states bluntly that bailouts for the oil and gas sector are:
“… a waste of taxpayer money. If the money were to be channeled exclusively to this sector, the net result would still be an oil and gas industry that is oversupplying the market, pummeled by low prices, and sitting in last place on the stock market.”
Bloomberg Businessweek calls Exxon a “humbled” and “mediocre” company. They suggest that the pandemic isn’t exclusively to blame — “the culprit is just as much the company itself.”
Giant investors such as BlackRock have been leaning toward environmentally-friendlier places to stash their cash. An annual letter delineating the firm’s investment goals and strategies stated that “demand growth had been slowing in recent years, as regulatory pressure began to mount, as a result of all that activism, and as renewable energy got cheaper.” While not entirely stepping away from fossil fuels, the company did announce a new set of priorities, which is a step in the right direction.
According to energy analyst Kingsmill Bond on Carbon Tracker,
“If demand for fossil fuels bounces back in 2021 by half the amount it fell in 2020, and grows at 0.5% a year, it would take 8 years to get back to where the industry started. And in the meantime, the renewable energy revolution has not stopped.”
Bond adds that, if we have seen peak emissions from the energy sector, “there is new hope that we can hit the targets of the Paris Agreement.”
The move to renewables will accelerate in places where governments rebuild their economies with Green New Deals, McKibben forecasts, and lag in places where a move back to private cars combines with cheap gas prices to keep the SUV era alive a little longer.
“But the key point is that,” McKibben reminds us, “as the industry flags, so will its political power.”
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