Global Oil Companies' Opposite Choices... US "All-in on Oil" vs Europe "Renewable Energy"

US-based ExxonMobil and Chevron Expand Oil Production to Grow Larger
Europe-based BP and Royal Dutch Shell Outline Plan to Increase Low-Carbon Sales Tenfold
Climate Change, Policies, and Oil Price Outlook Drive Different Choices

[Asia Economy Reporter Naju-seok] As the unprecedented crises of the COVID-19 pandemic and global climate anomalies unfold, major oil companies in the United States and Europe are presenting contrasting survival strategies, plunging the crude oil market into confusion. While European companies are turning their attention to renewable energy, American companies are increasing crude oil production, thereby strengthening economies of scale. Recently, Russia, a leading member of the Organization of the Petroleum Exporting Countries Plus (OPEC+), has sided with the U.S. stance, adding another variable to the situation.

The companies undergoing the most significant transformation are large European energy firms such as British Petroleum (BP) and Royal Dutch Shell. According to the Wall Street Journal (WSJ) and others on the 5th (local time), these companies are reducing their investments related to oil by halting or scaling back new well explorations. Some interpret this as a reduction in dividends due to declining profitability caused by a decrease in global energy demand, but the analysis that they are swiftly restructuring their business models by turning this crisis into an opportunity is gaining credibility.

BP has cut investments in oil and natural gas by 40%. Instead, it has unveiled a blueprint to expand its low-carbon emission-related business tenfold to an annual scale of $5 billion. Other European oil companies such as Royal Dutch Shell, Eni, Total, Repsol, and Equinor have set similar goals. In this regard, BP and Equinor recently signed a partnership to build wind power plants in New York and Massachusetts in the United States.

On the other hand, American companies ExxonMobil and Chevron are expanding their crude oil production scale. Chevron recently invested $13 billion (15.11 trillion won) to acquire its competitor Noble Energy.

The difference in business orientation is analyzed to stem from the realities faced by Europe and the United States. Europe prioritizes climate change policies as its top agenda. European countries have emphasized investment in renewable energy while rolling out COVID-19 economic stimulus packages. Last month, France announced a 100 billion euro (136.42 trillion won) stimulus package, of which 30 billion euros will be invested in the green economic transition.

The atmosphere in the United States is markedly different. Former U.S. President Donald Trump has shown a stance of rejecting climate change, calling it a "hoax." Although Chevron invested $1.1 billion in developing systems to capture carbon and prevent its release into the atmosphere, international organizations and environmental groups have not given high marks to the efforts of U.S. majors. According to global information firm Morning Consult, as of August this year, the U.S. government has provided $71.6 billion in support to the fossil fuel industry through COVID-19 aid and other measures. In contrast, the amount supported for renewable energy was only $349 million.

Because of this, oil price forecasts also show significant differences. European companies like BP believe the oil market has already peaked or is passing its peak. American companies expect oil demand to revive once the COVID-19 crisis ends. They argue that the rise in oil prices and the revival of related industries is now only a matter of time.

Russia is shaking up the situation amid the contrasting views of the U.S. and Europe. Supporting the U.S. position, Russia stated that if new investments do not continue, the current oversupply situation could suddenly turn into a supply shortage.

Oil well in Texas, USA

Didier Casimiro, Vice Chairman of Russian state-owned oil company Rosneft, recently told the media, "They (European energy companies) are trying to withdraw from their core businesses," adding, "Someone has to step up and take responsibility." He argued, "This is an existential crisis on the supply side," and "an existential threat that could cause price volatility."

The International Energy Agency (IEA) expressed concerns about the positions of U.S. and Russian companies. In a recent report titled "The Oil and Gas Industry in Transition," it pointed out that "there is no sign of large-scale capital allocation movements by energy companies toward a more sustainable world." The nonprofit environmental organization Oil Change International (OCI) also evaluated that most oil-related companies' efforts fall short of achieving climate change mitigation goals. If all proven reserves and already producing reserves held by oil companies are developed, the goal of limiting temperature change to within 1.5 degrees Celsius cannot be achieved. The 2018 Intergovernmental Panel on Climate Change (IPCC) plenary session released the "Special Report on Global Warming of 1.5°C," analyzing that if the global average temperature exceeds 1.5 degrees Celsius compared to pre-industrial levels, climate change will become uncontrollable.

This content was produced with the assistance of AI translation services.