Oil prices are back at their peak, giving oil giants reason to "turn a blind eye" to climate commitments

The energy crisis and the aftermath of the Russia-Ukraine conflict have caused oil and gas prices to explode. In 2022 alone, the world's five largest private oil companies made $153 billion in profits. This figure shows that the direction of oil producers' development is still entirely dependent on what the price of a barrel of oil will be.

Châu Âu: Giá dầu phất lên, lời hứa bay mất, những 'đại gia' dầu mỏ đồng loạt làm ngơ với cam kết khí hậu? (Nguồn: InfluenceMap)

Europe: Oil prices soar, promises vanish, oil giants turn a blind eye to climate commitments? (Source: InfluenceMap)

As the world plunged into a severe crisis due to the Covid-19 pandemic, crude oil prices plummeted. Very quickly, major European oil corporations made commitments to shift to carbon neutrality. But 3 years on, what have they left of their commitments?

Oil prices could spike to $100 a barrel?

Global oil prices hit a new three-month high on July 31, posting their strongest monthly gain since January 2022 on signs of tightening supplies and rising demand in the second half of the year.

In the final session of July, both Brent and WTI crude oil hit their highest levels since late April for the third consecutive session, after extending their winning streak to a fifth consecutive week.

Edward Moya, an analyst at financial brokerage OANDA, said the crude oil market ended July in a relatively solid position, with the outlook for demand remaining strong and confidence that the Organization of the Petroleum Exporting Countries (OPEC) and major non-OPEC producers (OPEC+) would ensure tight supply in the market.

In this session, the price of Brent crude oil for October 2023 delivery increased by 1.02 USD (equivalent to 1.2%) to 85.43 USD/barrel. The price of Brent crude oil for September 2023 delivery also increased by 0.7% to 85.56 USD/barrel. The price of US light sweet crude oil (WTI) also increased by 1.22 USD (1.5%) to 81.80 USD/barrel.

While energy demand has quickly recovered to pre-pandemic levels, supply is struggling to catch up, causing global oil prices to rise in the second half of the year.

According to the International Energy Forum (IEF) Secretary General Joseph McMonigle, world oil prices will increase in the second half of the year as supply is unlikely to meet demand. He also noted that the only factor that can adjust prices now is the fear of an impending economic recession.

Asked whether oil prices could once again surge to $100 a barrel, the IEF Secretary General noted that prices were already at $80 a barrel and could potentially rise further from there. He did not forget to point out that global oil inventories had fallen more than expected, a signal to the market that demand was definitely on the rise.

When the tycoons "turn a blind eye"

Le Monde newspaper commented that after making commitments to support the ecological transition, European oil and gas corporations such as BP, Shell and TotalEnergies are abandoning their promises to rush into seeking short-term profits in this field.

In 2020, when the Covid-19 pandemic plunged the world into an extremely serious crisis, crude oil prices plummeted. Very quickly, major European oil corporations made commitments to shift to carbon neutrality.

“The world’s carbon budget is running out fast, so we need a rapid transition to carbon neutrality,” warned Bernard Looney, then newly appointed BP chairman, who set out a “rare” plan that was warmly welcomed by parts of the UK climate movement.

Patrick Pouyanné, CEO of Total, now renamed TotalEnergies, also told the media at the time that the sustainability of oil companies was an issue.

Shell, a joint venture between the UK and the Netherlands, and Italy's ENI have both pledged to be carbon neutral by 2050 and will invest heavily in renewable energy projects.

Meanwhile, American rivals Exxon and Chevron have taken the opposite approach, devoting most of their investments to oil and gas.

But three years on, what do European corporations hold back on their commitments?

In mid-June, Shell's new boss Wael Sawan announced that the company had no intention of focusing on climate goals.

Shell has made a 180-degree turn with plans to compete with US giant Exxon. Shell's decision actually follows BP's lead, which in February 2023 revealed it was abandoning its goal of reducing carbon emissions on a large scale by 2050.

For his part, the boss of TotalEnergies also said that the group, like the two competitors mentioned above, will continue to invest in new oil fields until at least 2030. As for ENI, the group has just acquired producer Neptune Energy for 4.5 billion euros ($4.94 billion) to increase its oil and gas production capacity, and this is one of the largest acquisitions in this sector in Europe.

The reversal has disappointed European public opinion, which had hoped for serious efforts by industry to combat climate change.

However, the scientific consensus is clear. Reports from the Intergovernmental Panel on Climate Change (IPCC/GIEC) have consistently stated that any new fossil fuel projects will hamper the planet’s ability to sustain life.

In 2021, the International Energy Agency (IEA), an organization with a history close to the oil industry, also affirmed that to stay on track with the Paris Agreement, the world “should have no new oil and gas projects.”

Despite acknowledging the authenticity of these scientific warnings, the oil "giants" have so far turned a blind eye.

Even TotalEnergies CEO Patrick Pouyanné told the French press on June 18 that instead of making recommendations to the energy industry, the IEA should do better to convince its members (oil consuming countries) to reduce demand.

The argument of oil industry producers is always the same: "we are responding to the growing demand of the market".

Indeed, the world is on track to reach record oil consumption by 2023, averaging more than 102 million barrels per day. After years of funding publications that deny climate science, the oil giants are now adopting the same refrain as the multinational tobacco companies. They have no accountability, and the story is in the hands of national governments.

The energy crisis and the aftermath of the Russia-Ukraine conflict have caused oil and gas prices to explode. In 2022 alone, the world’s five largest private oil companies made $153 billion in profits, a figure that shows how completely dependent the producers’ model is on the price of a barrel of oil.

So the recurring question in the oil industry is why change the model when it brings high profits in a short period of time?

At TotalEnergies, more than 70% of investments are dedicated to oil and gas, and a large part of them are earmarked for new projects.

In the May 2023 issue of the forum, nearly 200 French scientists asked shareholders to speak out against the group’s strategy. But to no avail, as TotalEnergies’ management and shareholders still want to implement a “radical strategy” to take advantage of high oil and gas prices rather than try to follow the path of transformation.

In 2012, the New Yorker published a cartoon depicting a man in a devastated world explaining to skeptical children: “Sure, the planet is doomed. But in one glorious moment in history, we created a lot of value for our shareholders.”

This again reflects the current state of the energy industry. There is no doubt that in the short term, the strategy of concentrating investment in oil will bring extraordinary profits. And there is no doubt that its consequences will be catastrophic for the global climate trajectory.

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