Monday, March 14, 2022

Why aren’t oil companies drilling more? Look no further than the ESG goals in their corporate annual reports

The largest oil producers in the U.S. do not appear to have major plans to increase production through 2025, a review of U.S. Energy Information Agency (EIA) data and corporate reports of U.S.-based oil companies reveals, despite oil prices being over $100 per barrel and inflation raging at 7.9 percent the last twelve months.

According to EIA, U.S. oil production will reach 12 million barrels per day in 2022 and 12.6 million barrels per day in 2023, a return to pre-Covid production levels that peaked at 12.9 million barrels per day in Nov. 2019.

But what about over the long term? A look at top U.S. oil producers reveals that these companies have been pivoting away from carbon-based energy for years. In short, they’re going green.

Last year, ExxonMobil, the largest producer in the U.S., announced that it would produce about 3.7 million barrels of oil a day — about 18 percent of all U.S. consumption — from its facilities throughout the world, a level which would remain relatively unchanged through 2025. This year, the estimate for 2022 was up slightly to 3.8 million barrels a day, expected to rise to 4.2 million barrels a day by 2027.

Long term, ExxonMobil reports in its 2020 corporate annual report that it is “Positioning for a Lower-Carbon Energy Future” by “working to develop breakthrough solutions in areas such as carbon capture, biofuels, hydrogen, and energy-efficiency process technology that can help achieve the Paris Agreement objectives. In early 2021 ExxonMobil announced the creation of a new business, ExxonMobil Low Carbon Solutions, to commercialize low-carbon technologies.”

According to ExxonMobil President Neil Chapman, speaking on March 2 to investors, “we will reduce the emissions in our existing operations. We’re aiming for net-zero Scope 1 and 2 emissions at our operated facilities by 2050.” And in the U.S., Exxon’s net zero plans will be attained on the Permian basin by 2030.

As for Chevron, the second largest U.S.-based producer, it currently produces about 3 million barrels a day, expected to rise by just 500,000 barrels per day by 2025 to 3.5 million barrels per day.

In Chevron’s 2020 corporate annual report, it promised “higher returns in a lower-carbon future” by “reducing the carbon intensity of our operations and assets, prioritizing the projects that return the largest reduction in carbon emissions at the lowest cost to customers and society… increasing renewables and offsets in support of our business…. [and] investing in low-carbon technologies to enable commercial solutions while leveraging our capabilities and operations to advance technologies such as carbon capture and hydrogen.” Chevron also has similarly set a goal to be a net-zero carbon emitter by 2050.

These are explicit Environmental, Social and Governance (ESG) goals being pursued by the largest oil companies in the U.S., particularly goals to support the Paris Climate Accords and to reduce carbon emissions to zero.

In both companies’ cases, the strategies short-term include deploying carbon capture technologies as well as reducing onsite carbon emissions on existing production facilities, and more investment in green energies. Long term, however, they are sealing the fate of carbon-based energies, by embracing an investment model that calls for their extinction.

Ultimately, that will mean almost no oil production or consumption, a goal that would be contrary to an oil company’s continued existence and profitability.

ESG investing has increased dramatically the past decade via private retirement funds regulated under the Employment Retirement Income Security Act (ERISA) thanks to a regulation by the Obama Labor Department in 2015.

In addition, the $762 billion federal Thrift Savings Plan (TSP) for federal employee retirees will begin investing in ESG funds in 2022, following state government employee retirement funds in California, New York, Colorado, Connecticut, Maine, Maryland and Oregon.

The combination of these incentives and subsidies has led to an unprecedented rise of ESG investment: $38 trillion out more than $100 trillion global assets under management, will grow to $53 trillion by 2025, according to Bloomberg News. That’s about one-third of all assets under management, not necessarily seeking profitability, but to save the world.

BlackRock, a hedge fund with more than $9 trillion of assets under management, have placed green activists onto the board of Exxon to make it a “not-oil” company, thanks to ESG. Other hedge funds like Vanguard also make significant ESG investments.

But it has led to catastrophe. Besides making Europe and the West increasingly dependent on energy from adversaries like Russia, inflation is on fire. Thanks to the energy crisis, even major ESG beneficiaries like Tesla CEO Elon Musk are calling for an increase in oil and gas production in a bid to offset Russia, writing on Twitter on March 8: “Hate to say it, but we need to increase oil & gas output immediately. Extraordinary times demand extraordinary measures.”

Musk is right. It’s time to expand production dramatically. But ESG won’t let us. That’s a big problem.

The net result of these policies incentivizing and subsidizing ESG investments has been to restrict capitalization and financing to carbon-based oil, coal and natural gas energies in favor of green energies such as solar, wind and electric vehicles — and endangering the West. As it turns out, energy security is national security, and with ESG, we do not have energy security.


Road usage fee hits a rock

The city of La Mesa seems on the surface to be as progressive as they come. Registered Democrats outnumber Republicans by a 2:1 margin—and, generally speaking,

It’s the kind of place where someone like Laura Lothian, who is cut from the cloth of conservative cable news, might not be the most popular. In a recent conversation on the patio of her hillside home, she railed against COVID-19 shutdowns and unisex dressing rooms, and told me with delight about her “intimate” meal with “MTG” — Marjorie Taylor Greene, a U.S. Representative from Georgia known for trumpeting far-right conspiracy theories.

But it turns out Lothian is just what progressive La Mesa was looking for. In November, she clinched an unlikely electoral victory, becoming La Mesa’s newest city councillor, by focusing on a single issue: opposing a new road-usage fee, which would charge people for every mile they drive. With gas prices on the rise and inflation reaching the highest level in decades, Lothian gambled that voters would put their pocketbook concerns above their anxieties about climate change. The bet paid off. “This issue brought out everybody— and it changed things,” she says.

The road-usage fee is hardly out of left field. It’s part of a $160 billion plan to restructure San Diego County’s transportation system, spearheaded by the regional planning authority, the San Diego Association of Governments, also known as SANDAG. More than a dozen states are currently considering similar fees, according to the National Conference of State Legislatures. The idea is straightforward: by levying a small fee on miles driven, state and local governments can recoup some of the revenue lost in gas taxes, which are declining as more cars go electric, while simultaneously pushing people to use cleaner methods of getting around, like public transit or rideshares. In San Diego, revenue from the new fee would fund a slew of local, emissionsreducing projects.

At first, SANDAG’s road-usage fee, which is slated to go into effect in 2030, flew under the political radar. But last year, as energy prices crept up, San Diego Republicans embraced it as a potential political gold mine. “We made this issue the singular issue in that race,” says Carl Demaio, a local Republican activist, referring to Lothian’s campaign. “The Mileage Tax being backed by La Mesa City Council members would charge you 4–6 cents PER MILE you drive—costing $600–900 per driver in La Mesa!” read one Lothian mailer.

Lothian’s surprise victory upended politics in San Diego County. Democrats across the region immediately began backpedaling, insisting that they no longer supported the road-usage fee, or demanding more study of it, while Republicans doubled down on the issue, making it the centerpiece of their 2022 campaigns. Thousands of locals responded to a call from a local Republican to flood the inbox of county officials. “This is kryptonite for the Democrats,” Demaio says.

It’s not just San Diego. The political drama playing out in this sunny Southern California outpost is in many ways a microcosm of what’s happening both nationally and globally. As energy prices rise at the same time that many governments are finally getting serious about climate change, lawmakers are facing an inescapable dilemma: effective climate policy requires raising the price of fossil fuels—and, by extension, the price of highcarbon products and services. But raising prices is deeply unpopular among voters, especially when energy costs are already high, and especially during periods of rapid inflation.

Climate-minded politicians are left with no easy choice. Those who raise prices to enact climate action plans risk being thrown out of office; those who refuse to do so undermine effective policy and invite a world in which unchecked, catastrophic climate change levies a much greater, if more diffuse, cost on communities in the long run. Whether democratic societies can enact policies that meaningfully curb greenhouse gas emissions depends on whether elected officials—in San Diego and around the world—are able to navigate this political tar pit.


Biden Urged to Invoke Cold-War Powers to Blunt Energy Price Hike

Here we go again! Wartime emergency powers for the executive branch to battle a "crisis" without the messiness of market forces or democracy. Can anyone say more Chinese-style one party rule?!

President Joe Biden is under pressure to invoke Cold War-era powers to force more domestic oil production as the war in Ukraine strains supplies, raising gasoline prices and fueling inflation.

Lawmakers and labor activists have urged Biden to compel deployment of drilling rigs and solar panels using the 1950 Defense Production Act, the same authority wielded by Harry Truman to make steel for the Korean War and Donald Trump to spur mask production to battle the coronavirus.

So far, the Biden administration has shown little enthusiasm for the move. “It would basically be providing money to oil companies to do something that they already probably have the capacity to do,” White House Press Secretary Jen Psaki said Thursday.

Nevertheless, Russia’s invasion of Ukraine is rapidly shifting the window of what’s possible. The administration is already weighing a narrow use of the 72-year-old law to jump-start production of electric heat pumps that can help Europe curb its reliance on Russian gas.

And in Washington, lawmakers eager to tame gasoline prices and combat Russia’s energy dominance are pushing the Defense Production Act as a prescription for supply-chain bottlenecks and languished gas projects.

Senator Joe Manchin, an influential Democrat from West Virginia, has urged Biden to wield the DPA to force construction of the Mountain Valley Pipeline to send gas to the East Coast, though the act wouldn’t overcome all of the pipeline’s legal and environmental obstacles. Separately, four senators, including Manchin and Lisa Murkowski, an Alaska Republican, on Friday asked Biden to use the act to accelerate production of lithium-ion battery materials needed to power electric vehicles.

Invoking the DPA to steer energy production seems radical in times of peace, said Kevin Book, managing director of research firm ClearView Energy Partners. “It’s not so radical when you’re actually in a war that is washing onto American shores as gasoline prices and could potentially mean acute shortages in Europe for American allies,” he said.

The federal law empowers the president to essentially nationalize private industry to ensure the U.S. has resources that could be necessary in a crisis. It even singles out energy as a “strategic and critical material,” giving the president wide latitude to prioritize contracts and force businesses to supply the government with materials and services.

The power isn’t only for wartime. Shortly before leaving office, President Bill Clinton invoked the law to steer natural gas to California utilities and prevent blackouts during the 2001 power crisis. The Trump administration considered using the DPA to force coal plants to keep running.

The statute is a powerful tool to help stabilize markets and forge “an industrial policy that makes sense for the 21st century American economy,” said Alex Williams, a research analyst at the labor advocacy group Employ America that published a blueprint for using the DPA to accelerate oil production.

The Biden administration has so far resorted to imploring the oil industry to increase production, casting it as a patriotic duty in wartime. Lawmakers on Thursday suggested Biden should stop asking and use the DPA to intervene directly, since energy companies and their investors are wary of cranking up drilling to generate crude a year from now, when prices are expected to have fallen well below current highs.

“You can help reduce domestic energy prices and further our nation’s energy independence while blunting the impact of President Vladimir Putin’s efforts to use Russian energy exports as leverage in the face of European and American sanctions,” lawmakers, including Representatives Jared Golden, a Maine Democrat, and South Dakota Republican Dusty Johnson, said a letter to Biden.

Like the Employ America proposal, their plan would not directly mandate drilling. Instead, the president could guarantee oil demand at consistent prices by loaning crude from the U.S. Strategic Petroleum Reserve today with drillers required to pay that back in a year or more using production from new, domestic wells.

The Treasury Department’s Exchange Stabilization Fund, used to avert currency crises, could be tapped to fund oil drilling that Wall Street now shuns. And the president could invoke the Defense Production Act to ease supply chain problems that are holding back crude production, by ensuring supplies of low-cost pipes, sand and other essential equipment.

It’s a novel option in Washington, where policy makers are used to grasping for the same limited set of options to confront high gasoline prices, said Benjamin Salisbury, director of research at Height Capital Markets. “There is a growing understanding that any one of these tools is inadequate.”

Beyond gas, the DPA is being considered as a tool to combat climate change.

More than 200 environmental, indigenous and progressive groups asked the president to use the DPA to rapidly scale up the production and deployment of electric-vehicle chargers, weatherization equipment and other clean energy technology.

And environmentalist Bill McKibben has pitched government officials to invoke the DPA to manufacture electric heat pumps that can help wean Europe off Russian gas.

Climate activists warn the administration risks forfeiting the campaign against global warming by propping up fossil fuels.

“This would do nothing to help Ukraine” but would “make us more dependent on volatile fossil fuels, on this boom-bust cycle and on energy price spikes,” said Collin Rees, U.S. program manager for Oil Change International. “It’s incredibly short-sighted and cynical.”


Ignore climate twerps, fossil fuels coal, gas and oil still rule

Don’t we have enough twerps in Australia that we have to import one like the former hapless and hopeless Bank of England governor turned climate-boondoggle main-chancer Mark Carney?

Carney, who is now vice-chairman of Canadian investment group Brookfield, was ‘in’ Australia – be thankful for small mercies, only virtually – to lecture Australians on two topics.

The first was our tardiness in embracing ‘going dark’ with so-called full-on renewable energy.

The second was to berate the board of AGL specifically for knocking back the opportunistic takeover bid Brookfield had launched for it in partnership with ‘Mr Harbourside Mansions Version 2.0’, got-lucky, once, tech billionaire Mike Cannon-Brookes.

Brookfield and Brookes wanted to buy AGL, abandon its proposed de-merger into two companies, and accelerate the closure of its coal-fired stations which are currently keeping Australian lights on, especially, when the wind don’t blow - and you know the rest. Last weekend the partners had upped their bid to $8.25 a share. It was promptly – and sensibly – rejected by the AGL board.

The central point that AGL holders should understand is that if the duo were prepared to pay $8.25, AGL shares are worth more, much more. Bidders don’t go around offering to spend $9bn just to play Father Christmas.

They want to make big bucks on their billions outlaid. The central point that the other 25m Australians should understand is that those ‘big bucks’ would be made by ripping more dollars out of their pockets, either directly as consumers or indirectly as taxpayers, while taking them into an increasingly – real, not virtual – dark future.

Indeed, with surprising – utterly unknowing? – ‘honesty’ Carney said as much out loud. “The scale of the net zero transition (read: destroying cheap, reliable power generation) is such that this is a target-rich environment (read: there are trillions of dollars to be made from hapless governments and suffering consumers),” he said.

You could not have asked for more exquisite timing for Carney’s comments, as the events in and out of Ukraine prove the absolute, utterly critical, centrality of coal, gas and oil – fossil fuels all – in our every-day 24/7 energy needs and indeed our very existence. Despite the trillions of dollars already wasted around the world on useless wind and solar, 85 per cent of global energy still comes from coal, gas and oil.

Just 5 per cent comes from so-called ‘renewables (not including the real renewable, hated by Dark Greens, hydro) after all those trillions. The trillions more that Carney talks about will barely take it up to 10 percent. And people like Carney never talk about China, pumping one-third of global emissions today and yet more tomorrow, other than to make fatuous and false claims China is ‘taking action on climate change’.

Go coal, gas and oil to keep the lights on; go renewables-woke, go broke and go dark. Talking of twerps, there was opposition leader and wannabe-PM Anthony Albanese Wednesday saying in a speech that he would be a PM like John Howard (and Bob Hawke). So, was that Albanese saying he intended to emulate the “petulance, pettiness and sheer grinding inadequacy” that he judged Howard as PM?

I’m indebted to blogger Michael Smith for highlighting a speech Albanese gave back in 1998 where he described Howard as a worse PM even than Billy McMahon. Is it Albanese’s intent to ‘match that’? I was particularly taken with Albanese’s reference to Howard – nicely highlighted by Smith:

“You can trim the eyebrows; you can cap the teeth; you can cut the hair; you can put on different glasses; you can give him a ewe’s milk facial, for all I care; but, to paraphrase a gritty Australian saying, `Same stuff, different bucket’.”

Looked in a mirror recently, Anthony?




No comments: