Emily Pickrell, UH Power Scholar
A lorry will drive past an oil storage facility next to the Phillip 66 oil refinery on April 21, 2020. … [+]
AFP / AFP through Getty Images
In some circles, the growing question is whether, among many victims of the COVID-19 virus, the major multinational oil and gas companies.
Indeed, 2020 reductions in travel and the work of energy companies have hit hard. At the same time, a growing awareness of the potential devastation of climate change – think fires in California, freak storms in Texas – has drawn attention to the importance of ‘reducing our reliance on fossil fuels.
Both have meant a 2020 sour baseline for Big Oil.
ExxonMobil, for example, once reported as one of the most powerful companies in the world, a staggering $ 22 billion loss in 2020. BP, Shell and Chevron were not far behind, with $ 20 billion, $ 22 billion and $ 5 billion in show losses for the year.
These findings, coupled with growing U.S. recognition of climate change and the need to address it, have questioned some energy conditions about the future of Big Oil.
“The largest oil companies in the world appear to be reduced and humiliated by the oil body with a pandemic,” Paul Takahashi wrote in an article on February 26, 2021 for the Houston Chronicle. “They have an uncertain future, with pressure from governments seeking to ban greenhouse gases, investors seeking a better return and others wanting both. ”
Additional forces, such as a growing market for electric cars, could cut into Big Oil revenues, reducing global oil demand by 25% according to Columbia University’s 2019 study on trends electric vehicles. Meanwhile, some pundits have pushed President Joe Biden’s attempt to back down the Paris Agreement as bad news for Big Oil, not to mention the recent one-year moratorium on contracts new oil and gas rents on federal land.
Certainly, the companies themselves have seen a sharp decline in maintaining the same oil reserves that they once did, even if it is their main product. ConocoPhillips, for example, averaged between 15 and 20 years ’supply of reserves up to around 2015. Now it has enough resources for about 10 years. Shell has been even more aggressive about losing investment resources, holding around seven years of production at the end of 2020.
“The decline in petroleum reserves is a sign that even Big Oil is declining to its main output,” wrote David Fickling, product writer for Bloomberg. “If you still think that raw people will see clear opportunities in the 2030s, you should explore and develop the oil fields to provide it.”
Many energy writers have taken a small look too, one writing last spring about how the staggering price crash – down to a staggering and certainly unsustainable $ 20 per barrel – could be a foregone conclusion. view of the collapse of the industry.
Move on a year later and that forecast doesn’t look so positive.
“It’s absolutely optimistic to think that fossil energy is going away and that Big Oil is going to lose its place,” said Ramanan Krishnamoorti, chief energy officer at the University of Houston. “Big Oil, with or without industry unions, is likely to control the US energy landscape, with oil prices likely to exceed $ 100 in three years and gas prices likely to rise above $ 4 in less than a year. ”
It’s a calculation based in part on the slow pace of global transition to electric vehicles: They make up about one percent of the U.S. light vehicle fleet, despite Tesla’s unstoppable ability to stop. appearing in the news. And while brand-name companies like GM have announced plans to phase out gasoline vehicles in the coming decades, major improvements to the electric grid will be needed to do so.
It’s not impossible, but despite a recent collapse on the Texas grid it has made clear the kinds of problems that could create more reliance on a shared infrastructure.
Even if we are bullish on the global desire to move away from gas transportation, the uncomfortable fact remains that cars only make up about 25% of oil consumption. It may be more difficult to replace the other 75% – including lorry and airline transport, petrochemicals and other industrial uses.
And while oil exploration has slowed in recent years with less profitable prices, this move has already encouraged price increases – all of which will benefit the big oil companies. In fact, on March 15, Texas West Intermediate crude traded just under $ 60, more than double the $ 25 per barrel price at this time last year.
But as prices begin to recover, energy analysts like Pavel Molchanov point to a weak future price for oil, saying it mirrors the lack of oil companies’ investment in stores- future investment. Molchanov goes on to imply that while oil prices may eventually recover, he is still unwilling to gamble on the schedule.
“It will be at least another year before the industry gets out of the current way of austerity,” said Molchanov, an equality research analyst with Raymond James. “Even a year from now, it doesn’t really make sense for capital expenditure to return to pre-existing spending levels. It may get closer to those levels but there is so much fear, so much pressure, so much uncertainty and the Big Oil companies are showing this. They need to think about segments and protect the balance. ”
Finally, even as oil prices look healthier than in 2020, the Big Oil companies are trying to play their part in moving to an undisclosed future. These companies could play an important role, as they have the resources and expertise to do so.
“In these policy-making markets and in that general world of progress towards government-led disarmament, you would see a place for big oil companies,” said Ed Crooks, senior energy surveyor for Wood Mackenzie, an energy consultancy. “Large oil companies have a number of transferable skills and capabilities that could work as well in renewable energy as they did in oil and gas. ”
These skills include a keen understanding of energy markets and managing good government relations. In addition, the companies have the equipment and experience to work offshore – helpful for pushing to wind at sea, for example. They also have experience in managing multi-billion dollar projects, and their access to capital.
It will be a game of balance – but changing the situation is what the energy industry does best, seeking new technology, new drilling environments, changing global economic conditions. The deaths of Big Oil have often been seen, but in this time of transition to climate change, they could be one of the best friends who made the transition.
Emily Pickrell a veteran energy reporter, with over 12 years of experience covering everything from oil fields to industrial water policy to the latest on Mexico ‘s climate change laws. Emily has reported on energy issues from across the US, Mexico and the United Kingdom. Prior to journalism, Emily worked as a policy analyst for the U.S. Government Accountability Office and as an auditor for the international support agency, CARE.
UH Energy is a hub at the University of Houston for energy education, research and technology promotion, working to shape the future of energy and to create new approaches in the energy industry.