The gusher of oil profits continued this week — publicly traded oil and gas companies are expected to shatter all records, booking over $400 billion in profits from last year.
“It’s outrageous,” declared U.S. President Joe Biden in his State of the Union address. And it certainly is — if you’d banked $20 million per year since Jesus was born, you still wouldn’t have the amount of pure profit just one oil major (Shell) made last year.
These monster profits truly are monstrous, a bonanza from the bloody fields and cities of Ukraine. Profits from products sowing climate chaos.
“Your core product is our core problem,” said António Guterres, the secretary-general of the UN. “I have a special message for fossil fuel producers and their enablers scrambling to expand production and raking in monster profits: If you cannot set a credible course for net zero, with 2025 and 2030 targets covering all your operations, you should not be in business.”
But President Biden’s outrage wasn’t leading to an announcement of windfall taxes on profiteering from the blood of Ukrainians, nor was he about to threaten fossil fuel companies with nationalization unless they aligned their businesses with climate sanity.
The president declared the profits “outrageous” … moments before calling on the industry to expand oil and gas production: “They invested too little of that profit to increase domestic production and keep gas prices down. Instead, they used those record profits to buy back their own stock, rewarding their CEOs and shareholders.”
Last week, we looked at BP’s downgrade on the outlook for oil. This week, the company announced its own record profits, the highest in its 115-year history. BP scaled back its climate pledges and announced it would pump more oil and gas.
BP had pledged to cut production 40 per cent this decade and boost investments in clean energy. Now, the company has scaled its ambitions back to perhaps 25 per cent — and even that reduction comes largely from abandoning its Russian operations.
The rewards were immediate. BP’s share price jumped eight per cent and kept rising into the double digits over the next few days. BP wasn’t alone — across the board, Big Oil is walking back its climate plans as profits surge.
I’m reminded of a conversation with a climate-minded financial whiz some years ago. “It’s like those monkey traps,” Mark Lewis told me. “Fossil fuel companies are hooked on double-digit returns — they grabbed on and now they can’t get their fists out of the trap.”
When oil and gas boom, they are just insanely profitable. Renewables and fossil fuel alternatives are much more stable but they might never be as lucrative as gushers of black gold.
As you probably know, renewables and batteries are plummeting in price. In most of the world, they already cost less than fossil fuels. But cheaper is a much different thing than more profitable.
Kate Aronoff unpacked this crucial distinction between price and profit in her article, Oil companies are finally being honest about their feelings on renewable energy. The walkback by BP and others “challenges one of the hallmark assumptions of the energy transition … that once solar and wind are cheaper than fossil fuels, they will outcompete them. What if, however, wind and solar aren’t as profitable as dirtier forms of energy?”
Put so starkly, the question answers itself: Many shareholders and other investors will demand the more profitable, dirtier investments. Executives will comply or be canned.
So long as governments avoid strong mandates, our future is hostage to stock markets and short-term profit maximization — even though we have economic, effective alternatives ready for deployment.
Shell’s CEO was questioned on this point by a Scotiabank analyst last week. Would the company accept lower profits on renewables?
“I think on low carbon, let me be, I think, categorical in this,” Wael Sawan said, fist firmly in monkey trap. “We will drive for strong returns in any business we go into. We cannot justify going for a low return. Our shareholders deserve to see us going after strong returns. If we cannot achieve the double-digit returns in a business, we need to question very hard whether we should continue in that business. Absolutely, we want to continue to go for lower and lower and lower carbon, but it has to be profitable.”
The dream of fossil fuel companies transforming into energy companies seems more of a fantasy than ever. And yet, they’re still running the show.
Tobacco companies are sensibly barred from global health talks but the president of this year’s climate summit is, quite literally, an oil CEO intent on doubling his company’s output. Sultan Al Jaber says he will wear multiple hats, staying on as head of the Abu Dhabi National Oil Company (Adnoc) and minister of industry for the United Arab Emirates, while heading COP28. He’s reportedly brought along at least a dozen Adnoc employees to run the summit.
Not to be outdone in the oily hats department, the new premier of Alberta is planning to introduce a version of the RStar scam she pushed as an industry lobbyist. Danielle Smith’s government is going to cut royalties to encourage companies to clean up old well sites, which they are already legally obligated to do.
It shouldn't need to be said, but it's absolutely crazy that Albertans are going to "give oil and gas companies a tax break for meeting their legal obligations to clean up old well sites". Especially in an era of ballooning profits. #ableg https://t.co/XbH3KVAZii— Blake Shaffer 📊🇺🇦 (@bcshaffer) February 8, 2023
At the federal level, Big Oil lobbyists “far outgun their environmental counterparts in the battle for influence over climate legislation.” That’s the headline, if unsurprising, finding from a joint investigation by Canada’s National Observer and the Investigative Journalism Foundation, released this week.
Climate advocates get a pretty fair hearing from Environment and Climate Change Canada, but we all know Finance Canada holds the purse strings. Chrystia Freeland’s department took 104 meetings with oil and gas lobbyists last year — only 22 with environmental groups.
There were some big announcements coming out of a global summit on oceans this week in Vancouver.
- Canada announced “effectively a moratorium” on deep-sea mining.
“Making the declaration, Canada has joined close to a dozen nations calling for a moratorium or pause on mining the deep sea that includes Germany, Spain, Chile, New Zealand and a number of small island nations, such as Fiji and Palau, expected to suffer most from any environmental harms if proposed mining in the Pacific gets underway.”
- And Rochelle Baker also reports that 15 First Nations are assuming stewardship of the Great Bear Sea Marine Protected Areas Network — a vast network of marine protected areas in their traditional territories that span two-thirds of the West Coast.
“Ancient wisdom tells us that the right to use and benefit from our lands and waters will never be separated from our responsibility to care for them,” said Christine Smith-Martin, executive director for Coastal First Nations.
- Far from the marine conservation conference on the West Coast, Norwegian company Equinor is one step closer to developing Canada’s first deepwater oil project off the East Coast.
In late January, Equinor was granted a “significant discovery licence” for additional oilfields near Bay du Nord. Equinor originally proposed to extract 300 million barrels of oil. Adding on the new fields, it now estimates more than 500 million barrels, which “includes the 2013 Bay du Nord discovery, as well as the 2020 Cappahayden and Cambriol discoveries,” Equinor spokesperson Ola Morten Aanestad told Canada’s National Observer. Equinor has not yet made a final investment decision to proceed.
The federal budget is coming soon. And while “federal investments in climate action have increased in recent years, at only 0.5 per cent of annual GDP, they are far from the scale needed to transform Canada’s economy at a speed that reflects the changing global landscape,” said Caroline Brouillette, acting executive director of the Climate Action Network (CAN-Rac).
Canada should commit two per cent of GDP annually, amounting to new public investments of $287 billion over the next five years, according to a new analysis by CAN-Rac and the Canadian Centre for Policy Alternatives.
Blockbuster report today from @MarcLeeCCPA and friends at @ccpa and @CANRacCanada on the investments needed to meet climate targets--and the massive labour, economic & environmental gains they'd deliver: https://t.co/mjfulXgp3Z. Hard numbers proving why this must happen. #cdnecon pic.twitter.com/DY27gjt0oI— Jim Stanford (@JimboStanford) February 9, 2023
In a separate missive, 110 academics and 55 civil society groups urged the feds not to add new fossil fuel subsidies under the guise of hydrogen production. The budget is expected to include a hydrogen tax credit and the signatories want the finance minister to exclude any hydrogen made using fossil fuels.
On Thursday, the International Institute for Sustainable Development issued a report warning that carbon capture and storage (CCS) is too pricey and takes too long to build. The think tank urged the federal government not to allocate any more subsidies to the oil and gas industry for CCS projects that risk becoming stranded assets.
No skating on the Skateway
Things are not looking good for the world’s largest skating rink — Ottawa’s Rideau Canal Skateway. For the first time, the UNESCO World Heritage Site might not be able to open at all this year. Even if it manages to open one section, it would already be a record for its latest opening day.
EVs keep you out of the ER
It doesn’t take many EVs to make a noticeable health benefit. In California, there are already fewer people in emergency rooms because of asthma.
Researchers used real-world data and took socio-economic factors into account: In a given zip code, every 20 zero-emissions vehicles per 1,000 people results in a 3.2 per cent drop in the rate of emergency room visits due to asthma.
Heat pumps over gas
Americans bought more heat pumps than gas furnaces last year — and that’s before incentives kick in under the Inflation Reduction Act.
In 2022, heat pump sales exceeded gas furnace sales in the U.S. The era of the heat pump has arrived (🧵): pic.twitter.com/fqKdV9YlOr— Rewiring America (@rewiringamerica) February 6, 2023
It’s an inflection point worth celebrating, but you can see the problem — it’s not just the heat pump line going up.
Bloomberg reports: “Between last August, when President Joe Biden’s landmark climate bill became law, and the end of January, companies have announced more than 100,000 clean energy jobs in the U.S., according to an analysis released Monday by the non-profit advocacy group Climate Power.”
Ninety new projects have been announced in 31 states, most in traditionally “red states” like Arizona, Georgia and Texas.
Gasoline v lithium
There’s a strange dynamic afoot — online accounts that had never displayed the slightest concern about digging up nature are now suddenly gripped with anxiety about the impact of digging up minerals for batteries. There are solid reasons to push for battery recycling and standards, but it’s worth keeping things in context:
“The average new fossil-burning passenger vehicle bought in Canada and the United States needs 20 tonnes of gasoline to move around,” writes Barry Saxifrage. “This gasoline weighs 10 times more than the car itself. And it's 2,500 times more massive than the lithium needed for each BEV.”
Translated into climate impact, the contrast looks like this:
If you’re interested in digging beyond lithium, the International Energy Agency has crunched those numbers as well. “Today’s energy system uses over 25 million tonnes of resources per year… The path to net-zero uses half as much resources.”
In the first case to sue directors personally over their company’s climate strategy — ClientEarth filed a lawsuit against Shell’s 11 directors in England’s high court.
“Shell may be making record profits now, but the writing is on the wall for fossil fuels long term,” ClientEarth lawyer Paul Benson told The Guardian. The lawsuit has the backing of Nest, the U.K.’s largest workplace pension fund, as well as the Swedish national pension fund, French asset manager Sanso IS and Danske Bank.
Shell was also sued in London by 14,000 Nigerians suffering from oil pollution. The company denies responsibility and says it’s not liable for its Nigerian subsidiary.
The company had to go to court itself this week — trying to end Greenpeace’s occupation of its oil and gas platform heading for the North Sea, now festooned with banners reading, “Stop Drilling, Start Paying.”
🚨 BREAKING:— Greenpeace International (@Greenpeace) February 8, 2023
After Shell reported £32.2 BILLION in profits, people from Africa, the Middle East and Europe joined the protest in the English Channel. ✊
It’s time for Shell to Stop Drilling and Start Paying for the climate damage they’ve caused.#MakeShellPay pic.twitter.com/aAwZpvARUl
Deep under Saskatchewan
Canada is set to get its first commercial-scale geothermal operation. Saskatchewan’s Deep Earth Energy will begin construction this year to produce electricity from heat in the deep. The first phase will be 25 megawatts, located in southeast Saskatchewan, near the U.S. border. The project is financed by private investment and government support, including $25.5 million from the federal government.
“We’re using a highly skilled team and workforce from the oil and gas sector and redeploying those skills and that know-how for the first time ever on a renewable energy project,” said Deep Earth Energy’s chief executive Kirsten Marcia.
Climate change’s evil twin
We don’t pay nearly enough attention to impacts on the ocean. So, I’ll leave you with a recommendation for a superb short film about ocean acidification just released by The Economist.
“By the end of this century, the ocean is expected to be 150 per cent more acidic than it is now. Acidification is threatening marine life. It’s killing baby oysters, deep-sea coral reefs and pteropods, tiny creatures known as the potato chips of the sea.”
The film also does an admirable job outlining how we could address the problem. (Full points if you’re guessing, “Check the monkey traps.”)
That’s all for this week. Thanks for reading Zero Carbon. Please forward it along and always feel free to write to me with feedback or suggestions for future newsletters at [email protected]
Support for this issue of Zero Carbon came from The McConnell and Trottier foundations and I-SEA.