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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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Is Big Oil Doomed To Repeat The Coal Industry's Mistakes?

Until this year, alarmists proclaiming the end of oil were often dismissed as crackpots or overly optimistic environmentalists. But the spread of the novel coronavirus and its unprecedented disruption of the global economy and many of the stalwart industries at its core has amplified the discussion about life after oil and brought it into the mainstream.  This year’s headlines have been full of oil obituaries, from shale companies falling into bankruptcy like dominoes to think piece after think piece saying goodbye to the oil sector as a whole, from Sierra’s “The End of Oil Is Near” to Vice’s “The End of the Oil Age Is Upon Us.” 

And it’s not all sensationalism or overreaction, either. Even Big Oil itself seems to see the writing on the wall, and has been moving swiftly away from oil exploration towards more lucrative ventures now that “Big Oil’s Most Profitable Business Is No Longer Oil.” In Europe especially, Big Oil seems to be accepting the inevitability of an impending global energy transition and is taking the first steps to transform itself into Big Energy

“Nine years ago, ExxonMobil was the most valuable corporation in the world,” The Houston Chronicle wrote on Friday. “Last week, Dow Jones removed the stock from its industrial index that is supposed to represent the U.S. economy. Exxon’s market capitalization has dropped from $400 billion in 2011 to just $175 billion today, and the oil business is no longer as important to the U.S. economy.”

Related: Putin Would Like To See Oil Prices Above $46 Per Barrel But Big Oil in the United States has responded very differently to its decline than its European counterpart. Instead of innovating and evolving, the United States’ response seems to be: deny...until you die. “Oil executives talk a lot about how their industry will bounce back after the coronavirus pandemic passes, but the truth is their business is in long-term, secular decline,” writes the Houston Chronicle. “No matter who wins November’s elections, we need to find new businesses to replace the oil and gas industry in Texas to avoid economic decay.”

Lucky(ish) for the oil industry, however, they are not the first energy sector to age out of the United States economy. For a little lesson from history, U.S. oil needs to look no further than the U.S. coal sector. “Old timers like to say the oil business has seen bad times before, and that every bust is followed by a boom. [...] Once the price of crude jumps, Texas will be rolling in money again,” continues the Chronicle report. 

“You know who used to talk that way? Coal company executives.” And we all know how that story ended.

Related: Oil Major Equinor Stops Drilling In U.S. Shale Patch

Also noting a contrast between the U.S. and Europe, the Houston Chronicle writes, “While European oil company CEOs have announced plans to transition from oil to natural gas and eventually to climate-friendlier forms of energy, the American oil industry continues to demand government bailouts and protections. Coal companies did the same, and look where they ended up.”

In this context, recent articles about the shale sector emerging from the pandemic stronger than ever before and $100 barrels of shale oil just on the horizon are disturbingly reminiscent of when chairman and CEO of Peabody Energy Gregory Boyce said in 2011 that coal was about to be bigger than ever and scoffed at the suggestion that natural gas would unseat coal in the U.S. energy mix. “We are at the early stages of a long-term supercycle for global coal demand with hypergrowth being driven by soaring energy needs,” he said in a now laughable quote. 

The message here for U.S. oil execs is loud and clear. Those who do not learn from history are doomed to repeat it. It’s time to evolve to meet a changing global energy industry, not dig their heels in--and get left behind. 

By Haley Zaremba for Oilprice.com

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  • Charles Dee on August 30 2020 said:
    Not for the first time this author seems unable to understand basic economics. Coal didn't decline because people decided to use something nicer. No it declined because people decided to use something CHEAPER - more efficient and cheaper forms of fuel were found. Gasoline replaced coal in transport about 100 years ago and gas is replacing it in power plants because it is cheaper to produce, transport and has little to no toxic effluent. Have we found something better than hydrocarbons yet as the most cost-effective fuels - I don't think so. Do we have something better than them to build the basic material building block of modern society (plastics) - I don't think so.

    Remember we didn't leave the stone age because we ran out of stones.
  • STEPHEN GUILLOT on August 30 2020 said:
    Coal is used to generate electricity, and a small amount of it is used for steelmaking. Oil is refined into gasoline and distillates that create multiple types of fuel. It feeds the petrochemical business, making plastics for everything to iPhone cases to sanitary gloves to grocery bags to toys. Power generation can easily be switched from coal to gas, but finding a substitute for oil on such a massive scale will be a daunting task. Coal is much dirtier to produce than oil or gas (irrespective of GHG's) the latter of which SHOULD and could be much cleaner - with coal you have all kinds of environmental damage from mercury emissions, particulate emissions, SOx, ash disposal issues and the damage to water quality from strip and mountaintop mines. While oil may gradually be replaced, it cannot happen nearly as fast as is being done with coal. To lump oil in with coal in this respect is a mistake.
  • Mamdouh Salameh on August 31 2020 said:
    An emphatic NO. Oil is here to stay well into the future. While coal which has been overwhelmingly used to generate electricity can be replaced easily by natural gas, wind and solar energy, geothermal, hydro-power and nuclear energy, there is no alternative to oil in the global transport system and petrochemicals.

    It follows that alarmists proclaiming the end of oil could be dismissed as crackpots or militant environmental activists. When a prominent climate activist like Michael Shellenberger, who was nicknamed by Time magazine as “hero of the environment” apologizes on behalf of environmentalists for the climate alarmism they had propagated over the past three decades and also for misleading the public about the imminent existential threat of climate change, it speaks volumes about their dogmatism and militancy.

    There will neither be a post-oil era nor a peak oil demand throughout the 21st century and probably far beyond. Moreover, the notions of an imminent global energy transition from oil and gas to renewables and zero emissions by 2050 are illusions. Oil and gas will continue to be the fulcrum of the global economy and the core business of the global oil industry well into the future.

    And while renewables particularly wind and solar power have made impressive inroads into coal and even natural gas in electricity generation over the recent years, oil will remain the major driver for the global transport system well into the future while gas will continue to be the pivot for the global energy transition for years to come.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Arch Region on August 31 2020 said:
    There has to be a reason for this news item below:

    TESLA overtakes Toyota to become world's most valuable carmaker. Tesla has become the world's most valuable carmaker, overtaking Japan's Toyota, after its stock hit a record high. Jul 1, 2020

    This news item explains why the only Oil company to be worth more than it was on November 6 2016 is the one formerly known as DONG. Now called Ørsted is no longer a fossil fuel company. DONG (Danish Oil Natural Gas) became the first Oil company in human history to announce it was planning to divest 100% of its fossil fuels assets. Some people thought the big news of the day was the election of a degenerate (as many conservatives called Trump) in the US. On November 6 2016 missed the really consequential news. By the end of 2017 Orsted had shed 100% of the fossil fuel holdings raising capital to become the number one offshore wind power company in the world.

    Dong capitalization was 15B, in 2016 Ørsted capitalization is now 45B. During the same period ExxonMobil capitalization tumbled from 398B to 168B today. Hard numbers say that the clean fossil-fuel-free renewable energy future is roaring in faster than anyone anticipated.

    This is a cautionary tale that was heard loud and clear by the European Big Oil companies. The American Big Oil companies can continue ignoring it at their own peril.
    Trump did not do them any good.
  • Chris Tzvetcoff on September 25 2020 said:
    Big Oil in some capacity, shape or form will always be around. Coal never could generate the household things that Big Oil deliveries once the product is refined. You are comparing apples to oranges. I doubt people are going to paint their houses with dye squeezed from corn stock. I doubt people are going to start sitting on wooden toilet seats anytime soon. The trains, the ocean freighters and airplanes won't be switching over night to solar panels anytime soon. Last but not least, as long as NASCAR still drives around the track with gasoline fueled cars (and not electric cars) the oil industry will always have a presence in the US. Great article because it allowed us to have an honest debate. Thank you.

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