BP, one of the largest fossil fuel companies in history, did something unexpected this week. It wrote off $18 billion worth of its assets, significantly reducing the stated value of its oil and gas reserves. “This huge dent in BP’s balance sheet suggests it has finally dawned on BP that the climate emergency is going to make oil worth less,” Charlie Kronick of Greenpeace told Common Dreams after the move was announced. Jamie Henn, director of Fossil Free Media and Stop The Pipeline, added, “Big Oil is finally admitting what we’ve been saying for the last ten years. Their reserves of oil and gas are increasingly worthless because there’s no way to safely, or profitably, produce them.”
Writing for Bloomberg, Chris Hughes said, “The company’s $18 billion writedown acknowledges that the major oil producers are sitting on fields that will never be developed. BP Plc’s potential $18 billion writedown underscores just how significant a turning point 2020 is becoming for the oil industry. It baldly acknowledges that the major hydrocarbon producers are sitting on oil fields that will never be developed — because the pandemic has curbed energy demand and increased the desire for renewables within the supply mix.”
In a statement, BP CEO Bernard Looney cited the likelihood of a reorientation toward the Paris Agreement goals of lowering emissions in the post-coronavirus economic rebuilding as a major reason the company revalued its energy stock. “We have reset our price outlook to reflect that impact and the likelihood of greater efforts to ‘build back better’ towards a Paris-consistent world,” he said.
Jamie Henn warns us not to be fooled by all this happy talk. He tells Common Dreams, “BP is trying to spin this announcement as part of its transition to a ‘green’ company, but so far we haven’t seen any fundamental changes to its business plan. As long as BP is drilling for oil, it’s part of the problem. Save your applause until BP announces its ceasing all exploration and rapidly phasing out existing production. Until then, these vague commitments are about as meaningful as painting an oil rig green.”
Oil In The Rearview Mirror
In an e-mail to CleanTechnica, Quartz points out, “Since the coronavirus struck, oil and gas companies have seen their fortunes (and share prices) plummet. Oil majors like ExxonMobil are staring at a scary future: carbon constraints, electric vehicles, falling prices, oversupply, and forced phase-outs all cloud their future.
“Oil and gas companies now face the possibility of a managed decline, extracting as much money as possible out of existing oil fields and infrastructure, while restricting new investments. For many firms, particularly in Europe, the coronavirus pandemic is a signal that peak oil demand may be closer than they thought—or even in the rearview mirror.”
Some companies like Royal Dutch Shell are pedaling furiously to transition to renewable energy. Ørsted, formerly known as the Danish Oil and Natural Gas company, sold off its oil and gas assets in 2017 and is on track to eliminate fossil fuels entirely by 2025. Today, it has about a quarter of the offshore wind market — the world’s fastest growing renewable energy sector.
Ørsted says sustainable energy systems have been “the key to our growth over the past decade.” After its IPO in 2016, shares in the company have tripled in value — far outperforming every major oil company. Quartz says one company — Apple — now has a market value higher than all the major oil companies combined.
That makes the choice for investors quite simple. If it was your money, where would you put it — in oil or renewables? Answering that question will tell you all you need to know about Big Oil and the future.
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