The Green world is abuzz with the current ‘annihilation’ of big oil going on in the boardroom and in the courts.
Specifically, Exxon Mobil lost a proxy war for two additional seats on their board – both from the ‘activist’ Engine One group. Their goal is to move the behemoth – and iconoclast – US mega-cap oil company onto a more environmentally active agenda.
On the other side of the ocean, Royal Dutch Shell was “ordered” by a Dutch court to plan for an emissions cut of 45% by 2030, instead of the 20% they have already planned on. The court responded in a civil case brought by Dutch citizens, sponsored by many environmental groups, including Greenpeace and Friends of the Earth. Respondents complain that the targets set by one of the EU’s largest oil majors is not in keeping with their country’s commitments under the Paris Climate Accords. This was the first successful use of the courts to mandate a corporate adjustment in emissions targets and certainly opens the door to dozens of others all around the world.
Hang on a second, though – let’s have a look at each of these.
First, from my perch, while I’ve got a personal (and liberal) interest in seeing these initiatives succeed, I have a bigger role to play in dispassionately assessing what these initiatives actually DO. When I can see what’s really being accomplished, I’m much better equipped to assess the Energy markets going forwards (and the investment opportunities in them).
Let’s be frank – I worry about the planet at night. During the day, I worry about my money (and hopefully yours!)
Exxon kinda asked for this – they’ve been a prime activist target since being the defendant in the case brought by the NYS attorney General, Letitia James (YES THAT ONE). In their internal documents, Exxon showed knowledge of climate altering carbon emissions, despite public pronouncements and policy denying all such connections. Exxon won that case in 2019, by the way – not that it matters.
In addition, they’ve been at the center of two of the worst investment decisions in the history of big oil (and the reason their stock has lagged all other majors for years): The XTO buy (WAY overpriced natural gas assets) and the Bass Permian acreage purchase (WAY overpriced shale oil assets). Combine the two and you’ve got some very unhappy shareholders all goosed up for a change – ANY change.
Whether this mini board shakeup will have any real-time affect on Exxon’s focus is questionable, however. As it is, they are investing heavily in carbon capture tech (CCUS) as their ‘answer’ to climate pressures – and those investments are for decades in the future. Admittedly, these efforts are more about Exxon’s natural gas holdings in terms of benefits as opposed to the environment, but, heck – they can sell it as green as grass and will sell it that way, too.
I don’t think two board seats are going to get Exxon to suddenly abandon CCUS efforts that benefit core natural gas holdings – not for solar farms, do you? Nah………
As for Shell, that’s even less impactful to their plans. Whatcha’ gonna do, wait for 2030 to find out that, wow – surprise – Shell didn’t comply with the court ordered 45% reductions in emissions. Then, whatcha’ gonna do? Sue them? Show me the damages, that’ll be a good one – and take a good 2 years in court alone.
NO – the bottom line is that these efforts are again spinning up the green hype, increasing the public awareness and getting people excited about the green future – ALL GOOD THINGS, NO DOUBT.
But not any of it makes much of a difference in terms of actual movement of majors in any more committed way towards renewable tech and abandoning of fossil fuels.
And here’s the MOST IMPORTANT TAKEAWAY for your ENERGY INVESTMENTS:
In any way that that these DO restrict oil and gas drilling/procurement/marketing/sales is ALL THE BETTER for fossil fuel prices, adding to an already growing deficit of supply that’s about to hit the market LIKE A TON OF BRICKS later in 2021, going into 2022. That means higher oil and gas prices and higher oil and gas STOCK prices.
That’s what I see. That’s the takeaway that will find you great energy investments for TODAY – forget about 2030, or 2040.
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