The Slippery Future of Oil: The Blame Game

With the world’s rapid acceleration towards carbon neutrality, it seems Big Oil will be left trying to fit the cast of a former self. The United Kingdom included, several countries have expressed desires to attain net-zero emissions, most before 2050. But it has to be wondered, just how scared is Big Oil?

Unfortunately, any terse answer is difficult. Whilst governments have been keen to express lip-service to the retreat from fossil fuels, it remains an unsettling fact that hydrocarbon still remains a lucrative market, and big companies, such as Shell, are not entirely finished in leaving their print – both economically and environmentally, that is, on the planet.

However, it is hard to assign the entire blame to companies, who like any other company, seek to continue competing in a competitive market. And it is equally not clear that companies are always guided by moral principles, even if they should be. More unequivocally, the subject of blame can be attributed to consumers. During the peak of COVID-19, oil consumption expectantly fell by around a quarter, and yet by the beginning of 2021, this had already increased by 50%. Coupled with OPEC’s recent hopes to increase oil barrel production by 400,000 barrels a day, Big Oil can perhaps be identified as merely a medium for the expression of toxic consumer habits. To this extent, Roger Cox’s comments that corporate strategy is on a ‘collision course with global climate targets’ can be taken with some severity.

Nonetheless, it seems almost absurd that companies should be left to harmonise independently with global carbon targets. Inherent in an effort to eliminate a global toxic habit is some active coordination between States and companies. And thus, it is difficult to imagine without any stringent punitive repercussions for companies moving towards a breach of international targets, that there can be any sincere effort to engage more renewable energy. As is perhaps characteristic of judiciaries in instances of governmental complacency, the burden of eliminating that potential ‘collision course’ has fallen on their shoulders. As such, in a district court in the Netherlands, it was ruled in favour of climate campaigners that Royal Dutch Shell would need to slash its carbon emissions by 45% by 2030 from its 2019 levels – notably much sooner than its initial plans. It is this harsh requirement to reformulate corporate strategy which is needed. More importantly, this case indicates a shift from liability suits to human rights-based cases against corporations. As such, human-rights is no longer some abstract moral regard companies have to take into account, but a serious financial liability having a direct and linear impact on the success of a company.

Another group that has felt a duty to counter the complacency of Big Oil are shareholders themselves. As seen in the instance of Exxonmobil, its shareholder defied the company in electing at least two new board members and backing activists which defined, rightly so, fossil fuels as an ‘existential risk’. Much a similar case can be observed with Chevron’s shareholders in calling for the company to ‘substantially reduce’ its scope 3 emissions.

However, to say that Big Oil is now on a moral retreat towards a greener future would be a fanciful assessment. Thus, despite BP’s August 2020 announcement that the company would cut oil production by 40% and increase low-carbon investment by tenfold both by 2030, BP’s chief executive was kind enough to offer an assessment of the company’s guiding principles: ‘this is not about altruism or charity’, but rather ‘value creation’. And so it should be. It is difficult to get companies to engage risky morally-centred economic considerations of their corporate procedures, but easily much more effective would be to indicate the personal and immediate repercussions of climate change on their companies in the absence of some rapid effort.

And so it is fair to perhaps conclude that whilst Big Oil is not quite ‘scared’ yet, it certainly is finding itself in a precarious state as it wonders how to appease shareholders, whilst simultaneous balancing its engagement in a lucrative hydrocarbon market with diversifying towards renewable energy.