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One day in May and Big Oil’s future

One day in May and Big Oil’s future thumbnail

May 26, 2021 is not “a date that will live in infamy,” unless you work in the oil and gas industry. That day saw three events across the world being cited as the “end to Big Oil.” In The Netherlands, a Dutch court ruled Shell Oil must accelerate its carbon emissions reduction efforts to comply with the climate change goals of the Paris Agreement. In the U.S., activist shareholders voted three of their candidates onto the ExxonMobil board of directors with a mandate to accelerate the company’s transition to renewables. Further west, Chevron shareholders directed management to implement more stringent emission targets for their products. Environmentalists cheered these victories. Is this really the beginning of the end for Big Oil?

The importance of oil and gas in the modern world is well established. It is what has delivered a century of global economic growth, raising living standards worldwide.

Burning fossil fuels is cited as a cause of global warming and unsettled climate conditions, although no scientific determination can tell us how much is due to humans versus the natural cycle. The debate over fossil fuels’ role in our climate has been underway for over 50 years.

As the debate grew more mainstream, questions were raised about the long-term outlook for fossil fuels and the companies that find, produce, and refine them.

The oil crisis of the 1970s ushered in a new era for oil and gas companies. An industry dominated by the United States and its corporations was overwhelmed by the power of OPEC, who had become the supplier or denier of the marginal barrel of oil, thereby dictating global oil prices. Oil prices soared from $3 to $37 in seven years. In 2021 dollars, the 1980s oil price peak was nearly $130 per barrel!

That price peak also marked the highpoint weighting for oil and gas stocks in financial markets. From that peak, the energy stock weighting in the Standard and Poor’s 500 Stock Index fell, as did oil prices.

Economics worked! High oil prices drove drillers to seek and develop huge new resources in places such as the North Sea, West Africa, Latin America, and Southeast Asia. This new supply overwhelmed OPEC’s power to dictate oil prices, leading to a price war among its members that cut oil prices by three-quarters to $10.

The oil and gas industry, devastated by the oil price collapse, needed years to recover, culminating in a wave of industry mergers at the end of the 1990s. That wave produced today’s leading oil giants. It also witnessed a decline in investor interest in energy stocks, but which stabilized in 2000. By 2003, the oil market was on the move.

A decade of underinvestment restrained oil supply growth, just as China embarked on a major industrialization phase that exploded global demand growth, surprising the industry and the market. Energy stocks were hot! Their weighting in the overall stock market climbed to a modern high, which was supported by years of $100-plus oil prices. But the handwriting was on the wall. Technology, which had crashed around 2000 with the collapse of the dotcom stocks and the Y2K fiasco began to rebound, just as investor interest in oil peaked and oil prices fell sharply during the 2008 Financial Crisis.


8 Comments on "One day in May and Big Oil’s future"

  1. FamousDrScanlon on Wed, 16th Jun 2021 9:52 pm 

    “Burning fossil fuels is cited as a cause of global warming and unsettled climate conditions, although no scientific determination can tell us how much is due to humans versus the natural cycle. The debate over fossil fuels’ role in our climate has been underway for over 50 years.”

    Analysis: Why scientists think 100% of global warming is due to humans

    “However, the science on the human contribution to modern warming is quite clear. Humans emissions and activities have caused around 100% of the warming observed since 1950, according to the Intergovernmental Panel on Climate Change’s (IPCC) fifth assessment report.”

    I wonder what it’s like going through life making shit up & 100% believing it.

    I’m guessing it feels like it felt watching Disney movies when I was 5 years old.

    Using the stock market to gauge what’s going on in the real world/economy is a Disney movie all it’s own.

    It makes me sad to think all the entertaining ‘news’ media of late has so little time left.

  2. FamousDrScanlon on Wed, 16th Jun 2021 11:29 pm 

    Tim Watkins. One of a handful of realists left.

    The everything death spiral

    Another key difference which needs to be factored in is the difference between what we might call “real GDP” as opposed to the debt-fuelled GDP measure used by economists and central bankers. As Tim Morgan explains:

    “In the twenty years before the pandemic – from 1999 to 2019 – reported ‘growth’ of $71 trillion (110%) in world economic output was accompanied by an increase of $206tn (198%) in aggregate debt. Annual average growth of 3.5% in global GDP was made possible by annual borrowing which averaged 10.0% of GDP. Each dollar of ‘growth’ was bought with close to $3 of net new debt.”

    “Each dollar of ‘growth’ was bought with close to $3 of net new debt.”

    No great reset. The pandemic just exposed that y’all was running on fumes for a decade or two.

    Y’all should be grateful you got to coast on that debt well after you hit the limits to growth.

    It’s really quite hilarious to hear the white-boys bitch & moan about an imaginary ‘great reset’ stopping your imaginary economic growth.

    No more debt. Party’s over.

    I knew it in 2008 & planned & lived accordingly. That’s why it’s no big whoop to me.

    There was only a thousand warnings. If you’re angry & fucked now it’s your own fault for not takings ‘personal responsibility’.

    Too late for bootstrap pulling now. It’s belt tightening for the rest of your lives.
    Growth is long gone & it renders capitalist dogma hollow.

    What good is an ideology based on economic growth when the growth you once knew is now a physical impossibility?

    Limits to Growth was right. New research shows we’re nearing collapse

    Four decades after the book was published, Limit to Growth’s forecasts have been vindicated by new Australian research. Expect the early stages of global collapse to start appearing soon – Tue 2 Sep 2014

    2014. That’s 15 years into $3 of net new debt for $1 growth.

    Warned a thousand times, ignored it & clung to the debt bubble fantasy like most….then POP! goes the bubble & now they’re clinging to imaginary scapegoats & twisting a dumb ancient academic boomer’s fantasy idea that the world SHOULD reset, into yet another grand conspiracy that was in the works since….Jesus was 12 or some shit.
    Anything but admitting you ignored the writing on the wall in 2008, thought you were smart, and are completely unprepared.

    Don’t take it too hard if you’ve been working 20+ years & are broke or close to it. We live in a system that’s essentially designed to make that happen. They started changing the rules to funnel the consumer-worker that way back in the 1980’s. The anger is righteous, but it’s misdirected & decades late. It’s a class war & always was. All else is a feint to divide.

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  5. ThisGameSucksIAmNotPLayingIt on Thu, 17th Jun 2021 4:18 am 

    There is no reason to play a game that it only made of lies. Better not to play. My legs hurt too much. I would not take a bike today or Friday. LOOOOOOOOOOOOL

  6. Cloggie on Thu, 17th Jun 2021 6:04 am 

    Big Oil’s future is Big Renewable and Big Hydrogen.

    “Shell-led group angles at Norwegian offshore wind build with eye on hydropower link”

  7. Duncan Idaho on Thu, 17th Jun 2021 8:15 pm 

    “Ted Cruz Calls Obamacare a Democratic Plot to Keep People Alive So They Can Vote”

  8. Biden's hairplug on Fri, 18th Jun 2021 3:04 am 

    US court rules: if a BLM mob invades your territory, you no longer can defend it. If you do, YOU will be blamed and fined, not the mob; they can do what they want anyway:

    “St. Louis couple charged over confronting Black Lives Matter protesters plead guilty, forfeit guns”

    It’s now open season on white people in America, all in the name of “fighting racism”, that goes without saying.

    Now, how do you think this is going to be played out?

    The EU, China and Russia don’t need military parity with the US. We have troops doing the dirty work for us in the streets of America!

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