Bashing Big Oil Won't Save the Planet

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Forcing the world's big publicly-traded oil companies to go green won't save the planet from the impact of the climate crisis.

Sure, they’re perfect targets for anger. They’re huge companies and household names. Their logos are on filling stations around the world. They pump millions of barrels of crude out of the ground every day, shipping it in vast tankers and processing it in sprawling complexes of pipes and tanks emitting clouds of who-knows-what into the atmosphere.

Of course they need to eliminate their own greenhouse gas emissions and tackle, or offset, those caused by the burning of the fuels they produce. And they need to use their know-how and deep pockets to help with the green transition. But focusing on a handful of companies that pump about 10% of the crude oil produced on the planet every day isn’t going to reverse the rise in global carbon dioxide emissions alone. Nor those of methane, which has a greater warming effect in the short term.

Bashing Big Oil Won't Save the Planet

The world’s biggest oil producers aren’t susceptible to the sort of shareholder pressure that dealt blows to the managements of Exxon Mobil Corp. and Chevron Corp. last month, or the Dutch court that forced Royal Dutch Shell Plc to revise its carbon-cutting plans. They tend to be state-owned or controlled entities in countries where climate-change activists and ESG investors have little sway.

It is those companies that are most likely to pick up the oil projects sold off by the majors to reduce their carbon footprints, as my Bloomberg News colleagues Rachel Adams-Heard, Laura Hurst, and Kevin Crowley wrote here.

Wherever it is, the oil these companies have discovered will be produced by someone, as long as the demand for it exists and prices are high enough. If they don’t pump it themselves, they can sell it to someone else. Or they can walk away, leaving it to the local governments, which will no doubt find other companies to develop them, ones not necessarily subject to the same sort of environmental oversight either.

That’s why we can’t tackle the climate problems simply by forcing publicly-listed oil companies to pump less of it. As long as there is demand for oil, someone will supply it.

The real change has to come from ending the world’s addiction to oil. There need to be alternatives, and maybe Big Oil can be part of the solution.

The International Energy Agency’s milestone of “no investment in new fossil fuel supply projects” put forward in its  Net Zero by 2050 report — dubbed a sequel to “La La Land” by Saudi Arabia’s oil minister — can only come about if there is a swift reduction in the demand for oil. 

Many of the world’s biggest emitters of carbon dioxide, such as China, India and Russia, are countries where the Western oil majors have little or no presence as producers or sellers. And while it’s important to reduce emissions everywhere, it is in these countries where the biggest inroads can be made. A 10% reduction in China’s emissions would cut the volume of carbon dioxide being pumped into the atmosphere by almost as much as halting them completely in the U.K., Italy and France.

Bashing Big Oil Won't Save the Planet

If we try to crimp supply without tackling demand, we will simply push up prices and incentivize others to pump more.

Until reliable and affordable electric cars, vans and trucks are available widely, along with the infrastructure to charge them, there will always be someone willing to provide the fuel to keep the old stock running. Not to mention our dependence on space heating, industrial heating, shipping and a whole host of other areas that currently depend on fossil fuels.

Bashing Big Oil Won't Save the Planet

That’s not to say we haven’t taken steps to change our old ways. As my colleagues at BloombergNEF note, “We almost certainly hit peak internal combustion engine car sales four years ago.” But there’s still a long way to go before fossil fuels are a thing of the past.

Greening Big Oil is part of the climate solution, but it’s not all of it. It’s not even the biggest part.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.

©2021 Bloomberg L.P.

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