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Page added on March 13, 2017
Big Oil’s Big Climate Divide
Among other things, carbon dioxide contributes enormously to cognitive dissonance.
Scott Pruitt, head of the Environmental Protection Agency, demonstrated as much last week when he expressed doubts about the role of carbon dioxide emissions in fostering climate change.
Only in January, the then-unconfirmed Pruitt was telling senators that “human activity” had a role in climate change and that the EPA has “an important role” in regulating carbon dioxide. The website of his own agency says the same thing, and in some detail.
The added, and more interesting, layer of dissonance was due to timing.
Even as Pruitt’s remarks were causing a storm on Thursday morning, Ben van Beurden, CEO of Royal Dutch Shell Plc, was giving a speech at CERAWeek, an energy conference hosted by IHS Markit in Houston. His message:
The world needs more energy. But we also need to produce all that energy while emitting much less CO2.
As if to back that up, Shell announced the same morning it was selling virtually all of its Canadian oil sands assets. That probably has at least something to do with shale having upended the economics of investing in higher-cost barrels like those under Alberta.
Even so, it was fascinating to hear the head of an oil major talk about his strategy for dealing with carbon dioxide and climate change, even as a senior U.S. official was discounting the urgency of doing so. It reflects a wider split in the industry, which investors should watch.
Answering questions after his speech, van Beurden issued this warning:
If we are not careful, broader public support for the sector will wane.
He was talking about what is called “license to operate” — essentially, society’s trust in the oil industry to do the right thing. The right thing isn’t a fixed thing, encompassing everything from ensuring adequate energy supply to avoiding spills to, of course, doing right by the atmosphere.
The day before, Al Walker, CEO of Anadarko Petroleum Corp., sounded a similar warning, albeit in less existential way:
We need a common denominator factor, and so the absence of regulation would bother me as much as over-regulation.
Take it from me that such warnings against overreaching in the battle against regulatory overreach were not much in evidence during CERAWeek.
Walker was sharing a stage with Harold Hamm, CEO of Continental Resources Inc., who spoke more about the need to get government off the oil sector’s back. In that, he is apparently more in keeping with the zeitgeist (as well as the new head of the EPA). At a parallel conference hosted by Raymond James Financial Inc., the number one regulatory issue identified by surveyed attendees was easier permitting and pipeline approval.
The discordant messages on carbon, climate and regulation may well reflect personal views. But I think the bigger factor is business models.
For U.S.-focused E&P companies a better slogan than “four more years” would be “12 more months.” Their growth-oriented model necessitates an emphasis on keeping costs down — including regulatory ones — and getting high prices for their oil and gas to bridge persistent gaps between annual cash flow and investment. Here, for example, is Continental’s cash flow:
Recall that Hamm has previously called on OPEC to do its part to raise oil prices and last week also called for moderation on the part of operators in the Permian shale basin to avoid another crash in prices. These sentiments, carrying the risk of a backlash from drivers paying potentially higher prices, are not the sort of thing you generally hear from the likes of Shell.
Big Oil generally operates with a much longer planning horizon. Investment in a liquefied natural gas project, for example, can take the best part of a decade before it generates a cent of revenue. When you live in such a world, you tend to think about what the next few U.S. administrations — with their own mandates — might do, not just the current one.
Geography also plays a part. Shell must keep societies and governments around the world happy, including in its native Europe, not just Washington. The same goes for BP Plc, Total SA and Exxon Mobil Corp., all of which speak openly, to varying degrees, about the risks of climate change and the desirability of a transparent pricing signal such as a carbon tax to aid long-term planning (and help their gas businesses at the expense of coal).
This also holds true within the U.S. Anadarko, for example, last year fought a close-run battle against ballot measures that could have severely limited fracking in Colorado, where the company claims an estimated 1.5 billion barrels of oil equivalent in recoverable resources. Despite winning, Anadarko saw up close what might happen if it loses the trust of locals where it operates.
We will likely see looser regulation of the U.S. oil and gas industry over at least the next few years. Yet it would be unwise to simply assume this means unfettered drilling and a golden age.
Looser standards on things like methane emissions and further deferment of carbon pricing by the U.S., along with more pipelines getting permission, certainly will aid some producers in the near term. Equally, though, freeing up more supply also presents bearish risks to energy prices worldwide (see this). This is before we even get into the implications of things like a border-adjustment tax or other potential disruptions to trade.
Above all, there isn’t a united front in the American energy business — let alone the global one — regarding the right level, and targets, of regulation. Even as policy positions firm up in Washington, expect the dissonance to increase.
20 Comments on "Big Oil’s Big Climate Divide"
shortonoil on Mon, 13th Mar 2017 7:16 pm
[i]”That probably has at least something to do with shale having upended the economics of investing in higher-cost barrels like those under Alberta.”[/i]
So,, what he is saying is that oil is $48.50 per barrel because of Shale: Definitely too much CO2 in his environment!
Midnight Oil on Mon, 13th Mar 2017 7:30 pm
Shortonoil, right on brother! We be getting dumb down…
The new study, led by Dr. Joe Allen, Director of Harvard’s Healthy Buildings program, and Dr. John Spengler, Professor of Environmental Health and Human Habitation at Harvard, used a lower CO2 baseline than the earlier study. They found that, on average, a typical participant’s cognitive scores dropped 21 percent with a 400 ppm increase in CO2. Here are their astonishing findings for four of the nine cognitive functions scored in a double-blind test of the impact of elevated CO2 levels
https://thinkprogress.org/exclusive-elevated-co2-levels-directly-affect-human-cognition-new-harvard-study-shows-2748e7378941
The Romans had lead pipes, we have elevated CO2….got to go to..get a hit of oxygen.
Rockman on Mon, 13th Mar 2017 8:03 pm
“They found that, on average, a typical participant’s cognitive scores dropped 21 percent with a 400 ppm increase in CO2.” Interesting. That may explain that given all the evidence about climate change the group producing by far the great majority of GHG, the fossil fuel consumers, refuse to curb their destructive activity. Makes sense.
Midnight Oil on Mon, 13th Mar 2017 9:42 pm
You are mistaken, Rockman, more like you are
Mann: As long as fossil fuel interests like ExxonMobil and the Koch Brothers are willing to spend hundreds of millions of dollars on a massive campaign to disinform the public about climate change, there will be many misguided individuals who will believe their propaganda. But increasingly they are irrelevant. We have moved past this now. The adults in the room know better.
Think the $$$ has blinded some CEOs seeing what they wanted and hearing not
Michael Mann: Well, frankly it confirmed things that we had long suspected. …[We knew] that Exxon had really bright scientists, and there’s no way those scientists couldn’t have known what the rest of the scientific community knew, that [climate change] was a real problem.
But nonetheless, it really proves that in some sense, the villainy that we long suspected was taking place within ExxonMobil really was. It wasn’t just a conspiracy theory. It was a legitimate conspiracy.
As I’ve described in my book, fossil fuel interests, including ExxonMobil in particular, have been waging a bad faith assault on me (and on other climate scientists) for decades now. It makes me angry that they would knowingly risk the degradation of our planet for future generations in the name of their own short-term profits
Sissyfuss on Tue, 14th Mar 2017 10:21 am
That’s their MO, MO. I got mine, left some crumbs for you.
Midnight Oil on Tue, 14th Mar 2017 12:03 pm
Sissyfuss, sometime crumbs are more than enough! Ever heard of too much of a good thing? Well, humanity is learning the hard way.
Tell Rex Tillerson that money is like compost, best when spread around.
rockman on Tue, 14th Mar 2017 1:41 pm
MO – The industry doesn’t need to spend a penny to encourage consumers to burn fossil fuels and thus CONTINUE to create the vast majority of GHG. The public DEMANDS the right to consume as much fossil fuels as they can afford.
I can understand why you and the other fossil fuel consumers causing climate change are desperate to shift the blame to anyone else. You can’t acknowledge the effect of increasing the amount of atmospheric CO2 and, at the same time, take responsibility for the bulk of it happening. I do appreciate how that guilt can create such illogical arguments.
Midnight Oil on Tue, 14th Mar 2017 3:18 pm
Rockman…is that so? Can I ask why they do it than? You do not make sense when facing what is actually happening. But that is what I have encountered with Denialists…either paid or “unpaid” trolls..they excell in twist and spin, half truths, and plain lies.
Rex Tillerson, past CEO of Exxon Mobile and current right hand thug of the “Don”, publicly stated such in full disclosure to cover his behind to avoid being sued in the future.
You can not BS me, Rockman, I’ve seen and been through enough to know better.
So, if you want to play, best do it with someone else. Old man, you are not doing anyone a service by your smart asx comments.
https://m.youtube.com/watch?v=q0Cb1Bkibfc
Sure, Rex, we’ll just “adapt”, and change public policy and engineer our solutions…sounds like a lot of tax paying projects to pay for it all. Suppose CEOs continue to keep the profits!
If the citizens had a clear understanding of the crisis we would NOT need peak oil, coal to shut down the industry.
But keep on blowing your PR propaganda here.
Suppose it’s better than actual work.
Ahole. Yes, you are.
Davy on Tue, 14th Mar 2017 3:40 pm
MO, Rockman is correct. Our culture is one of hypocrites. All of us on this board are hypocrites. We use modernism and then condemn it. WTF, get a clue and quit looking ridiculous. Sure we have the horrible fossil fuel bosses that are guilty of more but that does not take you off the hook.
onlooker on Tue, 14th Mar 2017 4:45 pm
Absolutely, we are hypocrites. But, at least we recognize it along with the destructive trajectory which is better than those wanting to live in guiltless wishful comfy delusions
Midnight Oil on Tue, 14th Mar 2017 5:41 pm
Davy and Onlooker, Here we go again with the displaced accountability in which when asked why no financial CEO served a conviction for the crisis of 2008, the President simply brushed it off saying, “There is plenty of blame to go around”. Suppose that is where the concept of ” original sin” came into being.
Sorry guys, your argument does not fly with me in this regard. It’s one thing for the general public be complacent, that is the general demeanor of the “rabble”, as referred by the elites. It is another for ” statesman ” and leaders of Industry and Commerce to undermine valid scientific evidence. There is the principle of “social responsibility” that is taught to graduates of higher learning in Universities. We witness the failure in Germany during the Der Führer regime.
This is on par to the corruption of that era.
All three of you can attempt to rationalize your reasons…”All are quilty, so no one is quilty”. Sorry, those in leadership position are hold to a higher standard for their actions. Of course, the average citizen must act, but they need avenues to do so.
This current Administration is outright obstructing any of that from being possible.
Davy on Tue, 14th Mar 2017 5:59 pm
So, MO, what is your plan then? Bitch, moan, whine and point fingers and believe that will fix the earth? Then what, lynchings and immolations of the guilty CEO’s? You are missing the point. The point is we are a fossil fuel culture and you are not going change that with a few lynchings. We are the problem and you are fooling yourself thinking much can be done. Any major changes will throw this civilization into a collapse. You have no plan B because there are none that are effective.
onlooker on Tue, 14th Mar 2017 6:07 pm
I second totally what Davy is saying.
Midnight Oil on Tue, 14th Mar 2017 6:11 pm
What is my plan? Are we living in a dictatorship, Dave? Have you read my comments?
Obviously not…
Some never get it…
Hint…for one do not undertake a massive, obscenely funded orchestrated undertaking to hint the truth for personal gain.
That’s a start….trails? We’ll leave that for Trump when he gets his hands on Snowden.
makati1 on Tue, 14th Mar 2017 6:26 pm
MO, I agree. Lynching ALL of the CEOS would be a good start. Then the Federal Reserve Mafia. Then a few warmongering Senators, Congressmen and most of the upper military staff (Generals/Admirals,etc.) And lets not forget the people like Soros.
Would it change anything? Well, it would throw the “fear of god” into those who survived and might make a positive change in the world. I’m all for it. When no
one paid for 2008, the devils of hell were let lose to destroy the world. Time to put the devils back where they belong. We shall see if the people still have a backbone in America.
GregT on Tue, 14th Mar 2017 6:49 pm
MO,
“Here we go again with the displaced accountability in which when asked why no financial CEO served a conviction for the crisis of 2008, the President simply brushed it off saying, “There is plenty of blame to go around”.”
Collapsing the big banks would have led to “blood in the streets”. The same thing that will happen when we no longer have access to enough oil. We are all to blame, simply by living the lavish lives that we do.
I also second what Davy said:
“Any major changes will throw this civilization into a collapse.”
makati1 on Tue, 14th Mar 2017 7:32 pm
Fear of collapse is why we are still throwing wood on the fire that will consume us in the end. All we are doing is making the future pain worse and the death of our way of live total. I’m for crashing now and moving on.
Midnight Oil on Tue, 14th Mar 2017 7:59 pm
Makiti, please do not agree to something that I did NOT endorse.
Seems readers here interpret comments to what they wish to present as a reply.
It’s one thing to recognize and face the actual and attempt the course of action that can be feasible. It’s another to outright undermine and deceive and have others suffer the repercussions.
To come out and state there is only collapse and no solutions ends the inquiry to finding a way.
Right now, those in leadership positions know better and chose to fail in their duty to have integrity and live up to their role that they undertook.
makati1 on Tue, 14th Mar 2017 11:10 pm
Perhaps, MO, you are NOT clear in your intentions? Perhaps your writing skills are lacking? Be more specific and maybe no one will misunderstand you.
GregT on Tue, 14th Mar 2017 11:18 pm
“To come out and state there is only collapse and no solutions ends the inquiry to finding a way.”
The only choice to our predicament that makes any sense, is collapse. All of the others merely continue us down the same path for a while longer, with even worse consequences in the end. There are no solutions to predicaments.
“Right now, those in leadership positions know better and chose to fail in their duty to have integrity and live up to their role that they undertook.”
Right now, those in power positions are doing the same that they always have, feathering their nests, their friend’s and families’ nests, and the nests of those above them.