Big Oil's Resistance: Defying the Transition From Fossil Fuels

Has the era of fossil fuels come to an end? The most recent global climate agreement may mark that turning point. However, recent developments indicate that the oil and gas industry holds a contrasting outlook on the future. After lengthy negotiations, the COP28 climate summit in Dubai reached an agreement on Wednesday, calling for an unprecedented shift "away from fossil fuels."

Several countries, such as the United States, embraced the strongest commitment yet to transitioning away from energy sources that produce the most planet-warming emissions. However, critics were swift to note that the agreement does not go far enough in mandating a "phase-out" of oil, coal, and gas, a stance that over 100 nations had backed.

"The resolution is flawed with loopholes that provide the fossil fuel industry with several ways to evade responsibility," stated Harjeet Singh, the leader of global political strategy at the non-profit organization Climate Action Network International.

Regardless of the vague or diluted language, the deal appears to be disconnected from reality. US oil production is currently at a record high, India has plans to double its coal output by 2030, the UK is granting new drilling licenses in the North Sea, and American oil giants are investing billions in deals that indicate a strong demand for decades to come.

Daniel Klier, CEO of ESG Book, a company that provides sustainability data on companies, stated that anything short of a systematic transformation of the fossil fuel industry would contradict the COP28 deal. He added that no single climate summit could independently lead the transition away from fossil fuels, especially not a phase out.

On Monday, Occidental Petroleum's announcement of its $12 billion acquisition of US shale oil producer CrownRock is the latest indication of the industry's reinforcement of fossil fuels.

ExxonMobil's (XOM) October announcement of a $60 billion purchase of shale driller Pioneer Natural Resources was followed by Chevrons (CVX) deal to buy shale producer Hess for a total of $53 billion. Chevron also cited Hess's large oil assets in Guyana as a factor to boost production over the next decade.

Another potential $50-billion oil and gas deal is on the horizon, this time in Australia. Woodside Energy and Santos are in discussions for a merger that would establish one of the world's largest exporters of liquefied natural gas (LNG), reflecting their confidence in continued strong demand from Asia for the fuel.

Steam and smoke billow from the Belchatow Power Station as it is fed by an open-pit coal mine below in Rogowiec, Poland. The station, with an output of 5,472 megawatts, is the largest lignite coal-fired power station globally, emitting around 30 million tonnes of CO2 per year. The United Nations COP 24 climate conference is set to commence on December 2 in nearby Katowice, just two hours south of Belchatow.

Climate talks' pledges are insufficient in constraining global warming to 1.5 degrees, according to the IEA. Meanwhile, oil giants with ample funds are capitalizing on recent profits to acquire more affordable assets and enhance shareholder returns, with a significantly reduced focus on investing in renewable energy.

According to the International Energy Agency (IEA), the industry only invested $20 billion in clean energy projects last year, which is about 2.5% of its total capital spending. The agency based in Paris suggests that this figure would need to increase to 50% by 2030 in order to help limit global warming to 1.5 degrees Celsius above preindustrial levels, a critical threshold to prevent significant worsening of the effects of climate change, such as extreme flooding, drought, wildfires, and food shortages.

Recent deals indicate that oil and gas firms are not likely to make significant changes in their spending habits, despite the urgent need for such changes. "With the world suffering from a worsening climate crisis, continuing with business as usual is neither socially nor environmentally responsible," stated IEA executive director Fatih Birol last month ahead of the climate summit. He added, "The oil and gas industry is facing a moment of truth at COP28 in Dubai."

Birol expressed a more optimistic view on Wednesday, congratulating the #COP28 Presidency and countries for the significant outcome that outlines a clear goal to move away from fossil fuels in accordance with the 1.5C target. The IEA did not respond to CNN's request for comment aside from Birol's statement, regarding how the agreement compares to the current situation on the ground, which contradicts its previous calls for a halt to new investments in oil and gas projects. Despite pledges to cut emissions made by numerous countries at COP28, the agency stated on Sunday that the world is still not on track to limit global warming to the critical 1.5-degree threshold. It predicts that global demand for oil, gas, and coal is expected to peak by 2030.

Even European oil giants, such as Shell (SHEL) and BP (BP), continue to allocate billions towards fossil fuels, despite having a more favorable history of investing in renewable energy compared to their US counterparts. Earlier this year, BP scaled back on climate targets it established three years ago, reducing ambitious reductions in carbon emissions and oil and gas production.

Coal pickers carry coal from near an open cast mining site on the outskirts of Dhanbad on July 6, 2023. India expects to double coal output by 2030.

Money Sharma/AFP/Getty Images

Oil and gas companies in Norway, the largest producer in Western Europe, are planning to invest 240 billion Norwegian crowns ($21.85 billion) in 2024. This represents a 9% increase from this year and almost a quarter more than their previous expectations, according to a survey from industry group Offshore Norway, as reported by Reuters.

Additionally, the United Kingdom has committed to granting "hundreds" of new licenses for companies to drill for oil and gas in the North Sea earlier this year.

Larger oil and gas producing nations appear to be moving in the wrong direction. In a joint statement on Wednesday, the Organization of the Petroleum Exporting Countries (OPEC) and the Gas Exporting Countries Forum (GEPC), which includes the United Arab Emirates, the host of COP28, welcomed the "consensual and positive" outcome reached in Dubai but emphasized that "continued investment in oil and natural gas is essential." According to a recent United Nations Environment Programme report, the world's fossil fuel production in 2030 is projected to be more than double the amount required to limit the global temperature increase to 1.5 degrees.

India, with its 1.4 billion people, is on track to significantly contribute to the disastrous overshoot due to its increasing use of coal and oil. Despite setting ambitious targets for renewable energy, the country plans to double domestic coal production by 2030. This indicates that the latest climate deal will have little impact on the future of fossil fuel producers. Even Saudi Arabia, the world's largest oil exporter and OPEC leader, has welcomed the deal, further demonstrating this lack of impact.

Energy Minister Prince Abdulaziz bin Salman stated to the state-owned news outlet Al Arabiya that the COP28 deal would have no impact on the Kingdom's hydrocarbon exports.