The big 10 oil companies
Elba Pareja-Gallagher
Sustainability consultant & Keynote speaker & trainer | Inclusion expert | ShowMe50% women leading 501 (c)(3) | UPS (Retired). I ??getting into good trouble!
We are in the middle of 4Q earnings season. Let’s look at one sector that relates to the E in ESG: big oil and gas.?While in 4Q, commodity prices have come down from prior quarters, on a year over year basis, natural gas and oil prices are up, creating a profit windfall for this sector. Who are the big oil companies and what are they saying about the energy transition??Are they going to use their profit windfall to accelerate investments in lower carbon-emitting technologies?
The biggest oil and gas companies
Do you know who the largest oil and gas companies are? Here they are by revenue size.
Accelerating investment for lower carbon technologies
Are the oil companies investing in the energy transition? A report published in September 2022, cited that the amount of climate-positive messaging used by five major oil and gas companies (BP, Chevron, ExxonMobil, Shell, and TotalEnergies) is inconsistent with their spending on low-carbon activities.
To be fair, many people, me included, believe the energy transition is going to take longer than 2050, that there are many use cases for oil and gas that cannot be met by renewable energy, and that many people can be lifted out of poverty and achieve a better quality of life with low-cost, efficient fossil fuel energy sources. (I also believe that small nuclear can solve a lot of our energy problems simultaneously.) If you want to talk about the challenges and solutions candidly, join my 45 minute Fossil Net-Zero Salon, Tuesdays and Thursdays in Q1. More info here.
While we are working hard to find the power-dense, carbon-free energy we need I am not surprised that the oil companies are still investing in conventional energy. I agree we need them do more and faster to accelerate the transition. We need to them to think about all the stakeholders, not just shareholders.
Stakeholders speak
Today, the purpose of a corporation is to create value for all its stakeholders, of which shareholders are but one. The others can include employees, customers, communities, suppliers, governments and even the planet. Companies need to manage wide-ranging risks.
As an example of risks for companies are government policies. The governments of the EU and the UK will tax oil and gas companies on surplus profits in 2022 and 2023. ?Shell has already disclosed that it expects a 4Q tax hit of $2 billion as a result. Exxon has sued the EU challenging the tax as exceeding its legal authority. Exxon believes it is counter-productive, discourages investments and undermines investor confidence. ??
Bottom line
The largest oil companies in the world stand to make windfall profits as a result of the sanctions imposed on Russia from the war in Ukraine. In allocating their windfalls, it will be interesting to see if they apply stakeholder principles and invest more in the energy transition or revert to the shareholder primacy view of their license to operate.
What do you think? Should the big oil and gas companies invest a larger % of their windfall profits on technologies to transition faster to a lower carbon business model? What % of their windfall profits would you want to see them invest in lower carbon technologies? 1%, 5%, 10%, 20%?
领英推荐
Sources & further learning
10 Biggest Oil Companies
Big oil companies are spending millions to appear ‘green.’ Their investments tell a different story, report shows
Big Oil's Real Agenda on Climate Change 2022
Shell to take $2 billion fourth-quarter tax hit after new EU, UK levies
Do Record Profits Change Oil?
Exxon sues EU in move to block new windfall tax on oil companies
Disclaimer: Sustainability Navigator is Elba Pareja-Gallagher's personal ESG newsletter published every Monday (except holidays). Views expressed are her own. Corrections and respectful feedback are always welcome.
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2 年Thanks for sharing the article, Elba. Provides valuable insights and information that will certainly be of great use.
Climate Solutions volunteer advocate - See tinyurl.com/LHClimateJourney
2 年To release energy from combustion of petroleum products, we currently allow oxygen to be sucked from the air for free and allow combustion waste streams to be dumped in the atmosphere for free. Knowing what we know now, why is this an acceptable business model and not included in the cost and price of petroleum combustion fuels?
Distance Learning Educator~Piano Teacher
2 年Carbon pricing will stimulate innovation. The dividend will help people with the transition. This is the fastest path. Market based. Revenue neutral.
Climate Solutions volunteer advocate - See tinyurl.com/LHClimateJourney
2 年We don’t need a windfall profits tax on oil companies, we need a carbon fee and dividend with border adjustment that many oil majors already support. See https://clcouncil.org/organizational-partners/