The Historic Week

Photo: Stock.adobe.com

Oil risesafter the defeats on climate policies that major oil firms suffered at the hands of shareholders and judges. Last week’s climate-related actions in boardrooms and courtrooms involving some of the largest international oil companies signal a rising threat to the sector, Moody’s Investor Service said in a comment on the industry. “A new court ruling against Royal Dutch Shell and shareholder votes at ExxonMobil and Chevron highlights the increasing credit risk for major oil producers over concerns about climate change,” Moody’said.

Royal Dutch Shelllost a landmark legal case in a Dutch court, which, if it stands, will require 45% cuts in GHG emissions by 2030. The case is seen as a warning sign for the rest of the oil industry, signaling legal exposure to Scope 3 emissions (those burned by end-users). The court ruling ordering Shell to speed up its plans to cut greenhouse gas emissions could lead to a 12% decline in the company’s energy output, including a sharp drop in oil and gas sales.

Engine No. 1 won votes for two if its candidates in a stunning blow to ExxonMobil. The win is being viewed as a shocking and powerful statement by shareholders as to their displeasure with the oil giant for not doing enough to mitigate the effects of its business on the climate. And For Exxon, it could mean big changes are coming. Engine No. 1 said that ExxonMobil must cut oil production. “They need to position themselves for success,” Charlie Penner, of Engine No. 1, told the FT. “You would certainly believe that would mean less oil and gas production going forward.” The hedge fund’s founder, Chris James, added: “Watching that meeting yesterday was such a perfect example of how they don’t realize the world has changed. It was all on display.” 

Chevronalso lost a notable shareholder vote, with a measure requiring a target to reduce Scope 3 emissions passed by more than 60% of shareholders, another major rebuke to the oil industry. On the heels of the string of losses suffered by Exxon, Chevron, and Shell, France’s Total is facing growing scrutiny from investors over its corporate strategy. Total remains committed to new projects and plans to increase gas production in the coming years, and is also involved in building new projects in the Arctic and East Africa.

“It was a historic week for the oil industry, potentially marking a turning point, at least for the corporate strategies of the oil majors. More curbs on the supply side do add some bullish sentiment to the market, although the impacts on the fundamentals are not necessarily going to unfold in the near term. But in the wake of the huge blows to the oil majors last week, more than a few analysts spoke about growing odds of a supply crunch in the years ahead,” OilPrice said.

Maria Kutuzova