UN and US Officials Ramp Up Attacks on Oil Industry

• The UN chief's impassioned speech condemning the oil industry was not the only one this week.
• A group of Democratic Representatives wrote a letter to the Department of Justice urging the institution to open an investigation into Big Oil.
• Calls for the ban of advertising for the oil and gas industry don't seem to be getting a lot of traction.

"The Godfathers of climate chaos -- the fossil fuel industry -- rake in record profits and feast off trillions in taxpayer-funded subsidies," the secretary-general of the United Nations said this week in a speech on the occasion of World Environment Day.

Antonio Guterres then went on to paint an apocalyptic picture of our immediate future, which features a mass extinction—all because of the oil and gas industry—and suggested advertisers stop working with the industry and governments ban oil and gas advertising altogether. Yet advertising bans are unlikely to stop people from using oil products, including Guterres himself.

The UN chief's impassioned speech condemning the oil industry, however, was not the only one this week. His bold demand for a ban on oil and gas advertising was also not unprecedented. Attacks on the oil and gas industry from various national and international officials have been on the rise recently amid a faltering transition—even as reports come in that the buildout of low-carbon electricity generation capacity is breaking records.

Earlier this week, before Guterres' speech and his suggestion that oil companies should be hit with a windfall profit tax, a group of Democratic Representatives wrote a letter to the Department of Justice urging the institution to open an investigation into Big Oil. The motive for the investigation was the claim that US oil companies had colluded with OPEC to keep fuel prices high and, more interestingly, had failed to share their profits with end consumers by using them to keep prices at the pump low. Related: Oil Exploration Firm: South Korea’s Offshore Prospects Hold Great Potential

The idea that would sound eccentric and not really embody the spirit of a free market in any other context apparently sounded logical enough to its authors, who then went on to urge the DoJ to "investigate rigorously to uncover and punish wrongdoing."

"If U.S. oil companies are colluding with each other and foreign cartels to manipulate global oil markets and harm American consumers who then pay more at the pump, Congress and the American people deserve to know," the legislators said.

What the US oil companies were, in fact, doing during the pandemic lockdown year of 2020 was curbing production in response to a massive slump in international prices that pushed many a smaller producer to the brink and some over it. Reducing production is what any company would do when faced with a market awash with it due to a sudden drop in demand. Yet for the Jerrold Nadler-led group of Representatives, the oil and gas is as special a case as it is for Antonio Guterres and the other attendants at the World Environment Day celebration.

No other industry has been subjected to such pressure from legislative and international circles with the singular aim of squeezing it as much as possible to force it to essentially stop doing what it does. It is ironic in a sense because the authors of that letter to the DoJ, if they get what they want—punishment for the industry—might inadvertently cause even higher prices at the pump as producers curb output to capture higher prices and make up for the hypothetical penalties. It seems to be a problem for some legislators in the US that there is still a free market in the country.

The United Nations' Guterres and some Canadian legislators also seem to have a problem with the free market, hence the suggestion that governments ban oil and gas advertising—oblivious to the fact that people don't put gasoline in their cars because of advertising but because of basic needs to get from one place to another in the fastest and most comfortable way.

Besides, if the idea is to ban any oil product advertising, almost any advertising would need to be banned because of the versatility of oil derivatives and their ubiquitous use—including in transition industries such as wind and solar power and electric vehicles.

In fairness, calls for the ban of advertising for the oil and gas industry don't seem to be getting a lot of traction. In Canada, after an MP tabled a bill for such a ban, other legislators from the same party, the NDP, criticized the proposal, saying, "We already have legislation around false advertising, and we are more interested in advancing ideas that can actually help people," and that "It is not helpful to pick fights that just polarize people and get in the way of the real solutions we need."

The idea of a windfall profit tax specially leveled on the oil and gas industry to pay for alleged climate damages is another one that seems to have the favor of many in top political circles who are no doubt wondering how governments would foot the bill for the transition. Yet, the effect of actual windfall profit taxes, such as the one in the UK, seems to be discouraging wider adoption. Because this effect has been counterproductive, leading to lower investments and consequently lower local oil and gas production.

In theory, this is exactly what windfall tax and ad ban proponents want: lower oil and gas production. What they don't want are the consequences of that lowered production such as a cost of living crisis compared to which the current one would look like a picnic and, as a result, riots. It seems those anti-oil activists need to reconcile their attitude to the energy industry with their future career plans.

By Irina Slav for Oilprice.com

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