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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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Europe’s Big Oil Companies Aim To Become Big Energy

Big Oil’s most profitable business is no longer oil. This attention-grabbing headline published by Oilprice.com earlier this month may be dramatic, but it’s not hyperbole - it’s the truth. “Even as oil demand and prices have recovered, the tried and true economic model is no longer a failsafe option for oil and gas companies,” reads the article. “Pumping crude just isn’t paying the bills.”  Instead, the sector is evolving from Big Oil to Big Energy. “Companies like Shell aren’t going to stop producing oil, but it will become less important as the world increasingly embraces less carbon-intensive forms of energy,” oil strategist Julian Lee recently wrote in a column for Bloomberg Opinion. “As they become more focused on natural gas, electricity and, very likely, hydrogen, their ability to offset any weaknesses in their core activities through trading profits are likely to be severely curtailed.”

Lee is not alone in this belief. “This may turn out to be the year that oil giants, especially in Europe, started looking more like electric companies,” The New York Times wrote this week. The article cites myriad clean energy projects that oil supermajors have either acquired or kickstarted in the past few months. Royal Dutch Shell is getting into wind power and green hydrogen production. Total is investing heavily in solar in Spain and wind in Scotland. Together, Shell, Total, and BP are going in on an electric vehicle charging business. While these are global companies, it bears noting that all of them are based in Europe - Shell is headquartered in the Netherlands, Total in France, and, lest we forget, that B in BP stands for British. 

Time and again, the United States is falling further and further behind on a global green energy transition. As fossil fuels have been battered beyond belief by the novel coronavirus pandemic and the ensuing OPEC+ oil price war and global oil glut, the move toward green energy has been catalyzed as many countries build clean energy into the core of their post-COVID economic stimulus packages. The Trump administration, however, has been slow to follow suit, even as blue chip companies like McDonald’s outright beg Congress to invest in renewable energy production. 

“American giants like Exxon Mobil and Chevron have been slower than their European counterparts to commit to climate-related goals that are as far reaching, analysts say, partly because they face less government and investor pressure,” reports the Times. But even the financial sector has been getting on board lately, leaving the government behind.

Related: Oil Piracy Has Spiked During COVID Pandemic

Europe, on the other hand, is racing toward a renewable future. In addition to buying into clean energy, European oil majors are actively moving away from fossil fuels. “The companies are ditching plans to drill more wells as they chop back capital budgets,” reports the New York Times. “Shell recently said it would delay new fields in the Gulf of Mexico and in the North Sea, while BP has promised not to hunt for oil in any new countries.” One hundred percent of Europe’s large oil companies have already set reduced emissions targets with the stated purpose of combating catastrophic climate change. “Most have set a ”net zero” ambition by 2050, a goal also embraced by governments like the European Union and Britain,” a sharp contrast from the U.S., where the Trump administration has publicly lampooned and loudly withdrawn from the Paris climate accord. 

For many of these companies, the collapse of the oil market brought on by the pandemic is less of an anomaly and more of an omen of things to come - “another warning that unless they change the composition of their businesses, they risk being dinosaurs headed for extinction.”

Moving away from fossil fuels is not based on environmentalism or altruism for these longtime veterans and leaders of the oil industry - it’s just smart business. “Companies like Shell and BP are trying to position themselves for an era when they will rely much less on extracting natural resources from the earth than on providing energy as a service tailored to the needs of customers - more akin to electric utilities than to oil drillers.” This bodes well for their employees as well. “They hope to take advantage of the thousands of engineers on their payrolls to manage the construction of new types of energy plants; their vast networks of retail stations to provide services like charging electric vehicles; and their trading desks, which typically buy and hedge a wide variety of energy futures, to arrange low-carbon energy supplies for cities or large companies.”

When what’s good for the Earth is also what’s good for business, embracing clean energy becomes a no brainer. While Europe is ahead of the curve, it’s all but certain that they are at the forefront of what will be a global trend.

By Haley Zaremba for Oilprice.com 

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