Take care of the climate or get out of the way. Last week was hellish for the oil industry. The culmination of a groundbreaking month that has seen the biggest polluters on the planet take epic slaps in the courtroom, take equally epic slaps in some boardrooms, and finally get a pounding from their own shareholders, determined to reduce emissions from their products.
Are these the first results of the climate turn promised by U.S. President Joe Biden? Quite the contrary, unfortunately: while Big Oil is being forced to accelerate the energy transition, the government of the world’s leading industrial power is taking steps back. The paradoxes of climate geopolitics.
The latest turn for the oil companies came on Friday, May 28: Shareholders of the French company Total decided to change the company’s name and logo. It will be called TotalEnergies, and the logo will be a “Te” in ecological rainbow hues. It seems like a trifle, but this is the beginning of a “rebranding” which aims to be radical: they’re no longer about gasoline, but they will be about energy: that is, life.
“Faced with the climate challenge,” said Chairman of the Board Patrick Pouyanné, “we are moving forward together.” Something similar happened two days before at the hands of the shareholders of the American Chevron, which approved with 61% of the votes a proposal to cut “scope 3” emissions (“scope 1” are emissions caused by production, “scope 2” are those from energy that the company buys, while “scope 3” are those caused by the use of company products, such as gasoline). The proposal does not set out a timeline or any details.
Window dressing for the media? Possibly, but it’s a strong signal: you have to take care of the green turn before the green turn takes care of you. Which is what happened to Exxon. On Wednesday, May 26, the Texas giant had to bow to a small shareholder, the Engine No. 1 fund, which defeated CEO Darren Woods and forced him to oust two directors loyal to the “fossil fuels only” hard line and replace them with two “environmentalist” directors.
Engine No. 1 owns only 0.02% of a company worth $250 billion. Nevertheless, it won hands down, convincing big investors such as some American pension funds, as well as the world’s largest asset manager, BlackRock, to vote for its proposal. Once, Exxon used to be the all-powerful fossil fuel uber-hawk, but now it’s the oil company that lost the most money in the nightmare COVID year: a loss of $22.4 billion in 2020. Perhaps Engine No. 1’s proposal wasn’t taken up to protect the environment, but rather the dividends. But it is another signal: profit cannot come from crude oil alone anymore.
A few hours before Exxon’s drubbing, an even bigger one arrived: a judge in The Hague ordered another crude oil giant, the British-American Shell, to cut its greenhouse gas emissions by 45% by the end of the decade. It was a bombshell for Shell, and a time bomb for Big Oil: there are about 1,800 pending lawsuits against hydrocarbon extractors around the world, all about a single and unforgiving issue: greenhouse gas emissions and compliance with the Paris Agreements, not only by states, but also by mega-companies. The goal is to contain global warming to within 1.5 degrees Celsius compared to the pre-industrial era.
And this is where another fierce blow against Big Oil came from. On May 18, the International Energy Agency (IEA) published a groundbreaking report entitled “Zero emissions by 2050.” Executive Director Fatih Birol called for an immediate stop to investments in fossil fuels, because keeping warming within 1.5 degrees “is the greatest challenge humanity has ever faced.”
During this nightmarish month, the U.S., the world’s record holder for greenhouse gas emissions, didn’t sit idly by. The United States has produced a quarter of all the carbon dioxide released into the air since 1750 (China is second with 12.5 percent). The new president has promised a turnaround on the climate, and on his first day in the Oval Office he stopped any new federal oil leases, brought the U.S. back into the Paris Agreement that Trump had wanted out of, and stopped the controversial Keystone XL Canada-U.S. oil pipeline. However, something seems to have changed in the meantime.
On the same day that Exxon and Shell took those heavy blows, the Biden administration defended the controversial Willow Project before a federal court, involving massive drilling on the northern coast of Alaska. This is a ConocoPhillips project to extract 100,000 barrels a day and create 2,000 jobs, but also a Kafkaesque masterpiece: to extract the crude oil, you have to artificially cool the ground, which would sink otherwise, but if you extract the crude oil, you fuel global warming, which melts the ground, which sinks as a consequence.
A few weeks earlier, Biden had defended Trump’s leasing of 440 federally owned oil fields in Wyoming. Also in May, the administration had fought the blocking of the Dakota Access pipeline in court. The 2,700-mile pipeline would carry 500,000 barrels a day all the way to Illinois, for which a judge ordered the Army to conduct an environmental impact report.
The White House says the environmental compromises are necessary to get the vote of congressmen in those states—especially Alaska’s two Republican senators—and secure a majority in the Senate, which is now in a perfect 50-50 tie. But there are starting to be too many “political” compromises. And disquiet has set in among Joe Biden’s supporters.