The ExxonMobil Papers

Nestled between a large and colorful picture of starchy endosperm and an article about signaling between parasite and host integrates, in the 13 January 2023 issue of Science, perhaps the world's most prestigious academic journal, is a one-page "review summary" with three unreadably small graphs, entitled "Assessing ExxonMobil's global warming projections." The article got press coverage in the usual places, ExxonMobil said it was wrong, and part of a campaign against the company, and we assume that people in the fossil fuel industry figure that the press will quickly tire of this story and find something else to write about. The review summary in Science boils down to the contents of a research paper not designed for easy reading, underwritten by the Rockefeller Family Fund and Harvard University Faculty Development Fund. The paper asserts that an analysis of available public and private research papers from Exxon and ExxonMobil demonstrates that the scientists at the oil company had a keen understanding of climate change, predicted it more accurately than most, presented this information to the company, and while this was going on the company publicly sowed doubts about climate change and the uncertainty of the science. The authors also assert that investigations by others uncovered similar attempts to downplay or hide the impact of fossil fuel combustion on climate by other oil and gas companies, the coal industry, the electricity industry, automobile manufacturers and trade groups. 

Related: Exxon Stops Flaring In The Permian, Urges Others To Follow Suit

You've heard this before, except for the discovery of how accurately the ExxonMobil scientists nailed down the trajectory of global warming. We'll leave the climate science to others. We think the story underlines the risk issues for both the fossil fuel companies and their investors. The oil companies and oil producing states now make this argument: "Okay, emissions from fossil fuels produce global warming, but the solution is to reduce the emissions not reduce fuel consumption." This public relations strategy suffers two weaknesses. First, it admits that fossil fuel usage contributes to global climate change - can't claim ignorance anymore. Second,  carbon capture and sequestration has to overcome numerous technical and economic obstacles before it is ready for widespread implementation. Would it be cheaper to reduce the use of carbon fuels instead?

As we see it, this report provides more ammunition for those who believe that the fossil fuel companies knew, didn't tell us, and even tried to hide the evidence. No doubt this article will be cited in court cases. (ExxonMobil won a case in New York four years ago, but this is four years later with new evidence.)  We don't know whether future juries will decide that fossil fuel companies caused damage. That certainly is a risk in these litigious times, with multibillion class action findings not uncommon. What we would worry about, sooner than the lawsuits, is whether the fossil fuel companies knew there was a risk to their business model due to global climate change and did not disclose this material information to investors. That possibility would prompt the financial markets regulators to act. Misleading the investors can cause big problems for directors and executives, not to mention the companies themselves. 

Now to the bottom line. These investigations add another risk to investment in the fossil fuel business: a greater risk of lawsuits and regulatory action. Increased risk requires a higher return. If you can't achieve a higher return on investment that takes into account the potential legal and regulatory issues, then don't invest. Maybe, get the money out before the lawyers get it?

By Leonard Hyman and William Tilles for Oilprice.com

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