The Current Legal Onslaught Is Unlikely To Limit World Oil Production Significantly

From The MANHATTAN CONTRARIAN

Francis Menton

As you may be aware, a big part of the recent strategy of environmental activists supposedly to address “climate change” has been a multi-front legal onslaught against the major oil producing companies. The onslaught has included everything from hundreds of lawsuits in as many jurisdictions, restrictive new laws, regulatory initiatives, proxy contests, and much else.

The past few days have brought news of what may appear to be a couple of major victories by the activists. In the U.S., insurgent shareholders on May 26 scored a victory in a proxy contest involving ExxonMobil, successfully electing two directors (out of twelve) to the board of the company. Separately, on the same day, in a lawsuit brought in the Netherlands by Friends of the Earth, a court in The Hague ordered Royal Dutch Shell to cut its carbon emissions by some 45% by 2030.

Various media sources, including the Wall Street Journal at the two links above, are reporting these developments as significant defeats for the oil and gas industry, and even as harbingers of its impending rapid decline in the face of mounting legal obstacles. But is such a decline really likely? The recent developments are certainly significant for the shareholders of Exxon and Shell respectively, but I will confidently predict that the industry of large-scale production of oil and gas is not going anywhere any time soon. Indeed, that industry is highly likely to continue to grow for many decades as fracking unlocks more and lower-cost resources, and as developing countries get a taste for things like automobiles, air travel, home heating and electricity.

If you look into the various branches of the legal attacks on the oil and gas business, you quickly realize that almost all of this is focused on one relatively small corner of the industry, which is the major oil companies headquartered in Western developed countries. Exxon in particular makes a great bogeyman for anti-fossil-fuel activists, and finds itself on the defense in most every legal attack. Others regularly on the defensive include Chevron, BP, Shell, and ConocoPhillips — with headquarters in either the U.S., UK, or the Netherlands. Thus, for example, in the many cases brought by local governments around the U.S. seeking to hold oil companies responsible for damages from global warming, the defendants are generally the five named, or some subset of them.

But take a look at oil production statistics, and it becomes clear that the major Western developed-country oil companies are just not that big a part of world production. Here is a chart at Wikipedia, with data from the U.S. Energy Information Administration. In 2020, the world averaged production of about 76 million barrels per day of petroleum liquids. (That figure represented a substantial pandemic-induced decline from a 2019 figure of over 90 million bbl/day. A big rebound is already under way.). Then, here are 2018 figures for oil production by the largest companies. The largest of the Western-developed-country majors, Exxon, produced about 2.3 million bbl/day, for a sixth place ranking and a market share of well under 3%. Ahead of Exxon were the likes of Saudi Aramco (11.0 million bbl/day), Rosneft (4.2 million bbl/day), Kuwait Petroleum (3.4 million bbl/day), National Iranian Oil Company (3.3 million bbl/day), and China National (3.0 million bbl/day). The only other Western major in the top ten was Chevron, at 1.8 million bbl/day, in ninth place, with a market share well under 2%. The top ten was rounded out by the national oil companies of Brazil, Abu Dhabi and Mexico. The top ten companies in the aggregate had a market share of under 35%, with the remainder of the market made up of hundreds of entities, many of which are small U.S. “frackers.”

Of course the litigation plaintiffs aren’t interested in attacking the companies with 90+% of the production who are either small or are located in unfriendly jurisdictions like Russia, China, Iran and Saudi Arabia that have not drunk the climate Kool-aid. The plaintiffs are looking for money and/or publicity. But if your real goal is to save the world, driving producers with 10% or so of the production out of business is a completely futile strategy. The remaining players will just gobble up the market share and move on as if nothing ever happened.

So then what exactly were the activist investors trying to accomplish with the proxy contest at Exxon? Some of the proxy materials put out by the insurgents can be found here, here and here. Although some of the reporting has suggested that the insurgents want Exxon to commit to exit from the oil business, you won’t really find that. Rather, it’s vague generalities like “Gradually but purposefully positioning company to succeed in a decarbonizing world.”

Who knows what that even means? I’ve got news for them in case they don’t already know it. Exxon has no ability to shift from the oil and gas business to some other business with any real hope of success. In particular, the decarbonization business (wind, solar, carbon capture, etc) are fundamentally different from the oil business. The oil business is a profit-driven business where expertise in oil and gas extraction and marketing is everything. The decarbonization business is all about mining government subsidies and handouts, where expertise means nothing and political connections are the key.

After the oil shocks of the 1970s, Exxon went through a previous round of thinking that it needed to transition out of the oil business. It created an affiliate called Exxon Enterprises to direct investments into somewhat-related businesses where Exxon thought it could leverage its existing expertise. (I was involved in litigation against this entity in the early 1980s.). Two businesses I recall that Exxon sought to enter were the nuclear power business and the “word processing” business. No sooner had they created the nuclear subsidiary than the Three Mile Island accident happened in 1979, ending all nuclear power plant construction in the U.S. for decades. Exxon’s nuclear business struggled as a replacement fuel supplier for years before getting sold at a big loss to Siemens. The word processing business was also a total bust, getting beaten badly in the marketplace in the 80s by others like Wang and Digital Equipment, before those also lost out to new rivals. Meanwhile, Exxon went back to oil.

There actually is one way that Exxon could fully “decarbonize” its operations in very short order: Sell the oil business. Same for Shell. World carbon emission won’t go down by a single ton, but they could put the assets somewhere that is less of a target for the litigation industry.

While the legal onslaught has no prospect at all of making the oil business go away, or even really of diminishing it much, it could have major implication for Americans. The oil majors are a big part of what makes our energy cheap and widely available. Predatory government regulation to restrict drilling and transport of fuel could make our price of energy soar and significantly impoverish Americans.

Read the full article here…

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Joseph Zorzin
May 31, 2021 10:08 am

“Indeed, that industry is highly likely to continue to grow for many decades as fracking unlocks more and lower-cost resources…”

I don’t know but isn’t it the case that fracking has hardly started outside North America? Once it does won’t there be a huge production increase? I hope so- I like cheap fuel.

Scissor
Reply to  Joseph Zorzin
May 31, 2021 10:21 am

Seems like we’re past peak cheap fuel (at least for a while).

SMC
Reply to  Scissor
May 31, 2021 3:03 pm

The price of fuel is not being ruled by supply/demand fundamentals right now. The price of fuel is currently determined by domestic and geopolitical politics. The Biden Regime will raise the price of fuel further if they think they can get away with it, without major repercussions.

Earthling2
Reply to  SMC
May 31, 2021 7:48 pm

That’s even worse than a tax, since at least a tax (road or carbon) would be kept in the country. (well maybe not all of it with the Paris BS)

The illegitimate Biden Presidency is about destroying the country and especially the fossil fuel industry, so they can ‘build back better’ and reward and penalize various sectors as they choose, as they roll out more useless wind and solar to big donaters of the Democrats.

I didn’t think this would be possible, that American Marxism and this evil radical left would be allowed to take a sledge hammer to everything. And hardly anyone is saying anything. Russia, China and Iran must be splitting a gut laughing at us, just waiting to stick a knife into our backs whenever they can.

While Jimmy Carter ran an incompetent presidency, at least he was honestly incompetent. Biden sold his soul to the devil, and now his marching orders are to destroy the country which first and foremost is the fossil fuel industry in the USA and Canada/Mexico if he can.

Bob in Calgary
Reply to  Joseph Zorzin
May 31, 2021 3:59 pm

Any lower prices due to higher supply or reduced demand (unlikely IMHO) will be rapidly filled in by increased taxes in the name of saving the planet. For those in the surveys who say they will not spend more than $x/month on climate whatever, I have news for you, you already are, or at least on taxes claiming to save the planet.

Coeur de Lion
May 31, 2021 10:47 am

If you believe many of the commentators ‘the West’ is losing against China in several dimensions. A pity to add energy prices wilfully.

pigs_in_space
May 31, 2021 10:59 am

Exporting jobs, pure and simple, no matter if it’s in NL or USA.

Hope the greenies know what that means,- less cake to share for everyone.

Carlo, Monte
May 31, 2021 11:43 am

In the 70s and early 80s, nearly all of the major PV module manufacturers were subsidiaries of oil companies: Solarex (Exxon), Arco Solar, Mobil Solar. They all sold out after being unable to make any profit.

Warren
Reply to  Carlo, Monte
June 1, 2021 4:27 am

BP Solar

Earthling2
May 31, 2021 12:17 pm

At the end of the day, this is really a hate crime against humanity, in that fossil fuels are what powers the vast majority of civilization. It would be one thing if they were suing for actual pollution, which we have mostly cleaned up in the West. But suing for ‘carbon’ pollution’ is really just a hate crime and an assault on the citizens of the free West. Sometimes freedom and democracy isn’t all it’s cracked up to be, although it is certainly better than the alternative as we see around the rest of the ‘imprisoned’ world.

markl
May 31, 2021 12:35 pm

We are adding more need for fossil fuel than renewables are replacing. That’s all you need to know for now.

czechlist
Reply to  markl
May 31, 2021 3:07 pm

IMO because we insist upon supporting those who refuse to or cannot support themselves. All my life I have witnessed the UN campaigns to send food and aid to third world nations which produce nothing but more needy generations while we create wealthy dictators. There are at least a billion on the planet who would not have been born save for 1st world
Heartless perhaps but true.

May 31, 2021 2:32 pm

The truly stupid thing is that the alarmist think skepticism only exists because Big Oil is supposedly funding us, which is wildly false, so these lawsuits have great weight to them. In reality they are weightless.

ResourceGuy
May 31, 2021 2:43 pm
Sara
May 31, 2021 3:25 pm

Are these control freaks even remotely aware of the byproducts of petroleum (never mind the rare earth stuff) that they carry around in their pockets or purses or fake briefcases, wear on their persons, walk around in (because those shoes are SO WAY cool@) and what the cost is to produce all that junk they like?
And have any of them ventured out into the real wilderness for a couple of years at a time, as Henry Beston did, which inspired him to write “The Outermost House”?

Nah, didn’t think so. It’s all show and no real go for them, isn’t it? They’ll be sorry.

Rusty
May 31, 2021 4:31 pm

What alternative is there? 6,000 by-products are manufactured from petroleum.

Earthling2
Reply to  Rusty
May 31, 2021 9:08 pm

As they say, if fossil fuels didn’t exist, we would have to invent them.

Christopher Allport
Reply to  Earthling2
June 1, 2021 5:45 am

Its unlikely that you would be around to invent them? The growth and affuence of the current population globally over the past 150 years has only taken place due to the benefits of hydrocarbons.

Robert of Texas
May 31, 2021 5:09 pm

“a court in The Hague ordered Royal Dutch Shell to cut its carbon emissions by some 45% by 2030.”

Relocate the headquarters and then shutdown all parts of the business in the EU – problem solved.

Doug Proctor
Reply to  Robert of Texas
May 31, 2021 10:14 pm

Yes. But first reduce production until supply crunches have prices soaring and the governments come back with grants to “modernize ” the equipment and get production levels back up.

John Robertson
May 31, 2021 5:30 pm

Apparently when Lawyers and Politicians engage in extortion,then it is “legal”.This trend has been growing for decades,because it works.
Identify a pool of wealth,then extort them.
When can we bring back duelling?
The age old technique of leaving bandits hang,as a warning to their kind,sadly,has gone out of fashion.

John
May 31, 2021 5:43 pm

Big Tabaco had multiple lawsuits against it
Smoking is still here

pre fossil fuel oil we used whale oil – thank god we don’t now

Oil (whale, fossil fuel, manmade) is the elixir of human life
Without oil there is no energy (renewable etc) of any sought available to support 7Billion humans

I expect oil will still be used in 100 years

Edward Katz
May 31, 2021 6:04 pm

One of the key lines above is the observation that if the big Western producers leave the business they would simply sell their assets to companies located in jurisdictions that wouldn’t tolerate any legal action trying to interfere with their output. Not only would the same amount of oil be pumped but also with less attention being paid to environmental matters.

Felix
May 31, 2021 6:44 pm

I doubt even 1% of the developed world population is willing to pay the price of cutting back oil production: cold winter houses and hot summer houses, slow and expensive transportation, lack of fresh fruit and veggies in the off season, and so on. Talk is cheap. Marching is cheap. When push comes to shove, and people find out life sucks entirely because politicians got woke, the payback will be tremendous.

Politicians know this too. Their talk is meaningless.

Gerard
May 31, 2021 9:45 pm

It’s never been about oil or the climate. It’s just about damaging Western economies.

michel
June 1, 2021 12:37 am

Yes, this is quite correct. And it raises the usual question, which I have referred to many times.

Why does the global warming activist movement continually keep proposing actions which their own theory says will be totally ineffective?

Why do they never propose the actions which, according to their theory, are both effective and necessary.

Some examples:

— We never hear of attempts to reduce China’s coal use. If they are right, this will all by itself produce a catastrophe for civilization on earth.

— They never propose the abolition of the personal car in the West. This, far more than the substitution of wind and solar for conventional generation, would actually reduce Western CO2 emissions. And without doing that, and making the concomittant changes it would require to living, shopping, and working, there is no way the West is going to get to zero carbon. The concomittant changes would be wholesale movement of population into high density urban housing, and moving workplaces and shopping of leisure into location where people can walk bike or take public transport to work.

Shorthand: abolish the suburbs and the car. Its never even talked about.

— We never hear demands that China, India etc shall reduce their total CO2 emissions. The stance is that if the West gets to zero carbon, everything will be fine, when according to the theory it will on the contrary still be headed for the cliff, because the West is only doing around 20-25% of global emissions.

— Why do they keep talking about per capita and historical emissions? Historical emissions are unchangeable. Per capita emissions are immaterial, what counts, according to the theory, is the total tonnage being emitted now and in the future. Yet another example of focusing on the immaterial while refusing to address the issues which the theory says are the driving forces to imminent catastrophe.

It is impossible to make sense of the social phenomenon of the modern Green movement without giving an explanation of why its followers continually advocate doing things which, according to their theory, will have no effect in saving human civilization from collapse, while refusing to advocate or even mention the things which their theory requires and which would, in its own terms, be effective.

You also have to ask why pointing this out is so politically toxic that doing so will get the poster immediately banned from almost any mainstream forums or discussion groups.

Warren
June 1, 2021 4:43 am

BP is the worst. It’s run by an extreme looney. Sell your BP shares ASAP.

2hotel9
June 1, 2021 6:15 am

It is long past time we went after these lawfare scumbags, teach them what war really is so their children’s children will tremble in terror at its mention.

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