“We are committed to playing a leading role in greenhouse gas reductions consistent with the goals of the Paris agreement…”
Thus spoke Exxon (XOM) CEO Darren Woods at Exxon’s investor day this week. For most chief executives, supporting the Paris climate agreement at this point is a no-brainer. For the CEO of Exxon—a company that has spent untold millions over decades lobbying against climate change—to make that statement is nothing less than shocking.
Woods’ capitulation is less surprising though if you think about where America’s largest oil and gas company finds itself, which is to say under siege. After a dismal 2020, the company is being called to account by analysts, activist hedge funds and even traditional investors.
“Exxon is in a tough spot,” says Randy Nelson, president of Sanguine Gas Exploration, a Tulsa-based, independent oil and gas company. “What [Exxon does] really well is managing complex projects at scale. But the market isn’t sure about that now because of disappointing results and you’re entering into a period of uncertainty about what demand is going to be after 2030.”
In other words concerns about climate change are causing industries and consumers to shift from hydrocarbons (oil, gas, gasoline etc.), into alternative fuels and products (solar and wind power on the wholesale side and Teslas and solar power on the consumer side.) This massive changeover, delicately referred to as “the energy transition,” poses nothing less than an extensional threat to Exxon.
And let’s not forget, it’s facing off against a new, less friendly administration in Washington. “All of a sudden you have political forces lined up towards what’s increasingly inevitable: Regulation of carbon emissions and regulated climate disclosure,” says Tim Mohin, who founded and led Apple’s Supplier Responsibility program and later served as chief executive of the Global Reporting Initiative.
It may surprise you that Exxon, until recently an impregnable, aircraft-carrier-of-a-company, had considered existential threats as far back as the 1960s. But back then the concerns were newly formed OPEC (founded in 1960), jacking up prices or the world running out of oil, (called peak oil theory).
That there would be an evaporation of demand for oil—the massive threat the company faces today—wasn’t even considered, but to be fair nor was it really on anyone’s radar.
Paradoxically though, those historical threats, (higher prices and no more oil to drill), would have had the same effect as today’s risk from a lack of demand, which was neatly articulated by a chemical engineer…
Go to the news source: What the future holds for Exxon