Guest essay by Eric Worrall
An activist shareholder push to force Exxon to include climate risks in their company reports has spectacularly backfired: Exxon has demonstrated that there is no threat to their business, for the foreseeable future.
Exxon Studies Climate Policies and Sees ‘Little Risk’ to Bottom Line
By BRAD PLUMER and HIROKO TABUCHIFEB. 2, 2018
WASHINGTON — In one sign of the pressures that companies face to understand the business risks of stricter climate-change policies, one of the world’s biggest energy companies on Friday offered its thoughts on how it would fare in a low-carbon world.
Exxon Mobil’s shareholders — concerned that the company’s main businesses, oil and natural gas, may be imperiled — had demanded last year that the company give a more detailed accounting of the consequences of global policies aimed at curbing emissions of earth-warming gases. Those policies include the goal of the Paris climate agreement to prevent global temperatures from rising more than 2 degrees Celsius above preindustrial levels.
Exxon’s conclusion: Even aggressive climate policies pose “little risk” to its investments. It stressed that it expected healthy demand for its products for decades to come, regardless of how strongly countries move to cut emissions.
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Exxon’s vast fossil fuel reserves “face little risk” of being left in the ground, the company said. Less than 5 percent of its reserves would be affected under a 2-degree scenario, the company estimated. Under that scenario, Exxon sees the world’s oil consumption dropping only slowly in the next two decades or so, and sees demand for natural gas rising slightly.
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Some climate campaigners were unimpressed with Exxon’s climate analysis. “The range of risks that Exxon faces if climate action is taken is far deeper than what’s being presented here,” said Adam Scott, a senior adviser at Oil Change International, an energy research and advocacy group.
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“ExxonMobil’s own analysis assumes the world will continue to burn through oil and gas to drive its profits, keeping us on a path toward global temperatures rising well above the 2 degree Celsius threshold,” said Kathy Mulvey, climate accountability manager at the Union of Concerned Scientists.
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Read more: https://www.nytimes.com/2018/02/02/climate/exxon-global-warming.html
Exxon’s climate report is available here.
Poor greens – they thought they had won a significant PR victory when they pushed Exxon to produce a report detailing the impact climate policies would have on Exxon’s business. Instead, they’re now grappling with an unexpected dose of public honesty, a clear headed assessment that all their efforts will be utterly inconsequential to the long term business prospects of a Big Oil company.
Doesn’t anyone else think this is BAD? Now the greenies can use this as evidence when they push regulations, “Look, Exxon themselves say these policies won’t hurt their business, so why not pass it.”
It won’t hurt Exxon, but it will still hurt the rest of us.
Americans need their cars and their cars need gasoline. The government can make gasoline more expensive (just look at California) which will discourage travel for pleasure, but for most people there is no alternative to using a privately owned gasoline powered vehicle for work, shopping, child care, and so on. When people are forced to pay more for a non-optional commodity, then they have to cut costs elsewhere. More money being spent at the gas pumps means less money for food, clothing, shelter. Money leaves the local economy in the form of increased fuel taxes, and nothing replaces it.
They’ll buy smaller vehicles. Some will car pool or use public transport. Some will move closer to work. It would be dumb to drive a gas hog SUV if gasoline costs $6 per gallon
All of which are options open to the wealthy, but often not available to the working class. Raising fuel cost has a disproportionate impact on the poor.
On the other hand, real people in other countries(you know, the ones that are not the USA), who are not “dumb”, pay way more than that already and they are happy to drive these hogs. Others buy smaller vehicles or even choose to use high pollution diesel engines to keep the cost down.
Ride bikes.
JMarkW, i live in europe, and i dont know anybody who is happy paying 80 euros to fill up. Europeans drive smaller vehicles than Americans for two reasons: 1. They are much more expensive. 2. Large vehicles are a bitch to park.
In addition to the extremely high tax on gasoline (>100% tax) (1) and very high tax on diesel fuel (2)(3), France also has:
– one time penalty when buying a big car (4), and a subsidy when buying a small car)
– a tax every year based on the “fiscal power” of the car which I believe is now its real power rating, but was not when it was created
(1) then there is VAT on the price including that tax, as if high taxation added “value”!
(2) but significantly lower than on gasoline, which makes that that high level of taxation a “subsidy” in cloud-cuckoo land of modern economics “science”!!
(3) the difference in taxation was a transparently protectionist measure to help French car makers sell small diesel cars
(4) a transparently protectionist measure to hurt German car makers – created by allegedly pro-European Union politicians!!!
Nobody is happy, yet they keep voting for the politicians who put those insane taxes on gas and diesel.
Cognitive dissonance at it’s finest.
For those of you who own shares, this is a very important reminder of why it’s EXTREMELY IMPORTANT to VOTE your proxies.
VOTE your shares !!!!
Since “Climate Change” isn’t working out so well as a boogieman, they have to create a new one based on the old one – “Climate Change Policies”. But those policies, even though some have gotten a toe-hold, are doomed to fail since they aren’t based on reality, but rather, Greenie Fantasies and bald-faced lies.
I do not find the estimate of Exxon about the exhaustion of oil and gas reserves. BP has estimated that the known oil reserves will be exhausted at the present consumption rate by 2066 and the gas reserves by 2068: https://knoema.com/smsfgud/bp-world-reserves-of-fossil-fuels
It looks like that Exxon relies on the new investments and therefore they are not worried about this issue. Maybe they are right. The famous Roman club (the club of the wisest men of the Earth) did a forecast in 1972 that the world will run out of oil in 1992 and gas by 1993.
Dr. Antero Ollila
“BP dutifully acknowledges the abundance of factors that could easily alter these projections” It would appear that methane clathrates aren’t even considered in the “natural gas” estimates.
Known reserves is an economic concept, not a geological concept. They are the amount that can be recovered economically with current technology if no new fields are opened up. A forty year margin as estimated by BP, is about all one would ever see as it would not be economic to explore beyond that horizon.
Walter, I think you are right.
Walter, we are lucky we are getting old and won’t have to shovel mud in Eastern Siberia to get the last drops.
“It looks like that Exxon relies on the new investments”
Or opening the Arctic to drilling?
Now, how about so-called green/renewable energies, especially wind and solar include the very real risks their shareholders face when those energy systems become recognized as the expensive boondoggles they are, and fail catastrophically. Because of our concern for the shareholders of course.
How can you be worried about demand for oil when those same Greens cited in the article get right into their SUV’s, go to the airport and fly to a climate conference. It’s retarded how much effort gets spent on this.
With respect to their oil business, except for the impact of electric cars, any attempts to reduce CO2 emissions will not affect that business. We don’t use any significant amount of oil to produce electricity. As for oil – there wil always be a need for lots of jet fuel, diesel fuel for trains and semi tractors, oil to produce lubricants and plastics, etc. Gas burning cars are not going to get dumped
into the junkyard just because electric cars have taken over all auto production, which they will.
EVs still have a long ways to go before they can even challenge ICEs, let alone “take over” production. Maybe in 50 years, and who knows what else might come along in the meantime.
Hard to imagine EVs taking over in the American South. How do you run air conditioning on a typical EV battery pack? How long would it last?
Maybe they will have an optional thermal refrigerator (such as Einstein’s) running on oil?
They aren’t so hot (see what I did there?) in cold weather either. -38C yesterday with the wind chill. Takes a lot of juice to keep up with that!
“s-t February 3, 2018 at 10:19 am”
Don’t know about an oil powered fridge but my family had natural gas powered fridge and it worked very well.
“electric cars have taken over all auto production, which they will.”
Bet they won’t. BEVs are the technology of the past. My great-grandmother owned an electric car at the time of WWI. So did Mrs. Henry Ford. At that time, BEVs were a third of the cars on the road.
BEVs are like vinyl sound recordings and mechanical watches, Nostalgia technology for a very limited coterie.
La Jamais contente was the first car to reach 100 km/h, and it was battery-electric.
And that was in 1899.
How much progress in energy storage since?
Electric cars won’t sell very well in Pakistan.
Natural gas is used in electricity production.
Solely for purposes of discussion, let’s assume the activists are on the level. If we grant them that much, we also see that their demands are unintentionally revealing; i.e., they aren’t asking for disclosure of harm to investors resulting from climate change, but rather disclosure of damage to investors resulting from climate change POLICIES voluntarily adopted by the activists’ political allies. In other words, if ExxonMobil shareholders are harmed, it will be done by deliberate policy choices and the activists are making it absolutely clear that they understand this.
I still don’t understand why any publicly traded corporation should be forced to evaluate the consequence of future hypothetical legislation.
You can’t understand why those who own it have a right to know the potential financial fallout of a threat?
“An activist shareholder push to force Exxon to include climate risks in their company reports has spectacularly backfired: Exxon has demonstrated that there is no threat to their business, for the foreseeable future.”
Kristi, did you even read the post?
It isn’t a probabilistic risk assessment.
It’s an empty discussion based on hypothetical.
What happens if the “Church of no round objects” takes over, makes it a state religion and declares that round objects are dirty?
I don’t understand why you say activists are making it clear they know this – isn’t that a given? Of course there would be costs, but the idea is that they are spread out over the populace and over time, and that the present costs far outweigh future costs.
While those in vulnerable areas of Europe are preparing for sea level rise, our administration repeals the policy that our infrastructure be able to withstand flooding (where vulnerable). All preparation for the future is being sacrificed to maximize the illusion of present wealth, like a facade with no building behind it.
I meant our newly-built infrastructure.
Very few areas in Europe outside the Netherlands are exposed to SLR.
On French coasts, the WWII bunkers, all of these built on high ground, way above high tide and not on the shore, are getting wet, because sea is eating up land. A few small towns in France are literally slowly falling in the Atlantic, house after house.
It’s a cold winter in the north of the US thus far. This should be reflected in heating bills but there’s little mention in the MSM.
Put a TIGER in your tank!
“efforts will be utterly inconsequential to the long term business prospects of a Big Oil company.” The Paris Accord will also be inconsequential to the climate, even in the unlikely event it is fully implemented through the end of the century and results in fossil fuels being left in the ground. As WUWT readers know, the high end of the range of estimates of the climate impact would be under about 0.2 degrees C (equivalent to going about 10 miles further from the equator, according to Lomborg 2015 and others). A very strong case can be made a more realistic estimate would be a small fraction of that.
The Age of Symbolism continues. We need to hurry up with the AI and robot ages to let them conduct the useless debates for us and let humans move on to other exploration.
I know it’s capitalism, but should mutual funds influence policy using shares and force this kind of “reporting”?
This one looks a lot like tax payer funded speech (through owning shares).
Who will stand up against mandated reporting?
I was an oil and gas consultant until recently. I can whip up a report like exxon’s if I get company data and a $700,000 budget. Companies lacking the staff can hire an old hand like me, or a consulting outfit, and produce the report. And most of them will wipe their behinds with these type of green demands. This business has much tougher problems than California pansies demanding we do a bit of paperwork.
We assume oil companies are special. But they are analogous to Middle Ages woodchoppers. Tax them, criminalize them, whatever, but they know they aren’t the cause of demand for firewood, they only supply fuel to those demanding it, and bizarre political efforts to make their supply job more difficult only results in the price to their customers going higher and them making more money for the extra work. Happy woodcutters those oil companies be, no matter that some city dwellers aren’t happy with the smokey air, but are happy their hearths are warm.
“You wanted the truth!”
“WE CAN’T HANDLE THE TRUTH”
Link below is to the nationwide U.S. map of pipelines. I wish McKibben, Greenpeace, et al good luck trying to get rid of them all. ExxonMobil probably owns a fair percentage of them, but undoubtedly not all.
https://www.npms.phmsa.dot.gov/Documents/NPMS_Pipelines_Map.pdf
Exxon doesn’t have to worry about global warming policies. They have to compete against others in the same industries that are suppliers of similar products, or products that can be used as replacements for their product line.
The demand for such products is not in dispute, although the “shareholders” that demanded this study imply that it is. The fact that Exxon produces a report like this plays into the false narrative that “green energy” is inevitable and will replace oil, gas, and coal in the near future. There is just no scenario that is based in reality that justifies that narrative. The current “renewables” are not going to displace hydro-carbons. They are doomed to fail, and will remain a niche market for virtue signalling to those who “care but don’t think”. And Exxon has confirmed that common sense position through this study, instead of drafting a politically correct CYA report, that was so common over the past decade or so.
If taxation or regulations occur, they will be passed on to the consumers. It is unlikely that will make other energy sources more competitive, because of the proven superiority of oil and gas to provide low cost energy to the consumers of those products. Exxon knows this. The consumers of Exxon’s products know this.
The only thing in dispute is whether consumers will allow green politicians to take more of our income, through energy taxes, and if we will continue to support those green politicians at the ballot box. Blue States support more taxes on energy, and Red States don’t. Urban areas are more supportive of energy taxes, than suburban and rural areas. And I am not opposed to that. Freedom means putting up with the majority position. As long as you are free to vote, free to voice your opinion, and free to move to somewhere else that better reflects your values, then we still have “government of the people”. That is why global government should never have the capacity to tax and regulate. The ability to leave, moderates bureaucratic desire to take wealth earned by the public and use it to consolidate their power. When you can’t leave you are forced to comply or become an outlaw.
USA democrats can try their luck running on a platform with higher energy taxes, windmill subsidies, lower tariffs for Chinese solar panels, a wide open border to allow millions of Mexicans and Central Americans to enter freely and become dish washers and construction workers, campus censorship to silence anybody who isn’t a commie, and endless hostility with Russia while at the same reducing the defense budget and demand the USMC be 50% females.
‘The current “renewables” are not going to displace hydro-carbons. They are doomed to fail, and will remain a niche market for virtue signalling to those who “care but don’t think”.’
How easy it is to make assumptions about the future and judgments about people. Many on the left do it too, but they think the right neither thinks nor cares. I think you’re both wrong.
First Kristi YOU have to show that they are wrong otherwise you have nothing to show to them or anyone else.
Try producing windmills and solar cells out of the energy they produce. Try mining the raw materials that are required to produce, transport components, connect, and maintain those products by using only the energy they produce. They are available only because we have access to “low-cost” energy to make them in the first place, and because we subsidize the production, and operation of them. If we stopped doing that, they could not compete. They exist because some people are afraid of rising CO2 levels, and have forced the bill for their irrational fear, on the public at large.
Our emissions of CO2 have an insignificant impact on global temperatures. Water vapor is the primary greenhouse gas, and has a much greater impact on temperatures. Our contributions are not driving the small variations we see in the climate. We know those variations have occurred in the past, and there is nothing unusual about the present climate.
That is what the comparison of temperature records and CO2 levels show. That is why the AGW scientists will not debate that fact publicly. They will lose and they know it. They prefer the politics of ad hominem, and appeal to authority, over the Scientific Method.
There is only so long you can get away with that, before the public catches on.
The left cares so much for poor people, that they do everything in their power to create as many as possible.
The right on the other hand doesn’t care about people, they just go on promoting policies that make everyone better off.
“Urban areas are more supportive of energy taxes, than suburban and rural areas”
Not really. Not so much.
This is funny. Donald Trump doesn’t write the scripts, but he pushes other to be themselves, when they are, it ain’t pretty.
When the federal taxes are lowered, the “left” is angry; the allegedly leftists living in high taxes states say it’s bad. Why? Simply because they wouldn’t be able to deduce from their taxable income the (quite high) local taxes.
High local taxes and a high level of “free” local services are not a necessity: other states have much lower taxes (and still have roads, etc.). So at the end of the day:
– either they claim high taxes are a burden that are imposed on them, not a democratic choice (and the party that raises their local taxes is tyrannical)
– or they claim it’s their choice, and they cannot claim a deduction on their income, just like there is no iPhone X income deduction (“hey, the new iPhone I am practically forced to buy really reduced the money I can freely spent!”)
The left seems happy with high taxes as long as they can deduct them from the income and then get lower fed taxes! This doesn’t go well with the mantra of “solidarity” and “generosity” of the left…
This is a stunning revelation and one of the things I can now rub in their face if they claim again the right is selfish.
“Poor greens – they thought they had won a significant PR victory when they pushed Exxon to produce a report detailing the impact climate policies would have on Exxon’s business. Instead, they’re now grappling with an unexpected dose of public honesty, a clear headed assessment that all their efforts will be utterly inconsequential to the long term business prospects of a Big Oil company.”
Does he not read the articles he quotes? It was shareholders, not greens who demanded the report.
If anything, this is a huge win for those pushing for energy policy reform since the message is that it will not have a negative economic impact, at least on Exxon. No one is out to destroy FF companies, people just want them to be responsible, past present and future.. What a bizarre idea that greens would be disappointed by this. I don’t understand.
Who are these shareholders? Are they normal persons with a personal economic interest?
Or do they represent “unions” and towns?
For some reason, poor Kristi thinks that shareholders who voted for this nonsense, and greens are two entirely different groups.
Kristi complains,
“Does he not read the articles he quotes? It was shareholders, not greens who demanded the report.”
He he, you didn’t read the secondary link, here is a hint:
“An activist shareholder push to force Exxon to include climate risks in their company reports has spectacularly backfired: Exxon has demonstrated that there is no threat to their business, for the foreseeable future.”
It was Envirnomentalists who pushed it last year.
I’m doing all I can do to help raise that temp to 2C above some arbitrary mean but it ain’t easy!
Fernandoleanme, there is no need promoting your Malthusian views of the world running out of petroleum. The EIA says we have enough to last to 2050, history says we will keep finding more, and even if you are right no one will remember your forecast. The important thing is that, we will run out sloooowly, and prices will indeed rise, as you say. The continuous demand for energy will ensure that replacements are found…even if that means people have to accept nuclear to keep the lights on. People debating this stuff today only impacts near-term political pressures to provide subsidies to industries that can’t survive on their own, which is an inefficient use of or wealth.
You just wonder how much money was utterly wasted in this effort.
And Pelosi calls the Trump tax-cut chicken-feed.
I’m sure she blows my entire annual gross income every day before breakfast.
If you really believe that Exxon’s analysis was wrong, then put your money where your mouth is and short their stock.
Odd that Adam Scott of Oil Change International doesn’t actually do that.