Big Oil's Inconvenient Truth

Oil companies are facing an inconvenient truth.  Their business model is predicated on extracting every last drop of oil from the planet despite the potential for that activity to destroy the planet.  It might be hard for the average person to understand how turning the Earth into a wasteland to insure corporate profits is the responsible thing to do, but that appears to be the strategy that ExxonMobile has adopted. 

Rex Tillerson, the boss of oil giant ExxonMobil, said cutting oil production was “not acceptable for humanity” as he fought off shareholders’ and activists’ attempts to force the company to fully acknowledge the impact of climate change on the environment and Exxon’s future profits.

Having worked for decades to fund and promote climate change denial, it is obviously difficult for ExxonMobil’s management to deal with shareholders who suggest that the company needs to have a plan to mitigate the impact of fossil fuels on climate change.  And, more critically to the companies investors, to recognize that ExxonMobil’s business strategy will lead to a corporate extinction event as surely as the one that made it possible for dinosaurs to ensure its current profits.

During a long and fractious annual meeting in Dallas on Wednesday, Tillerson, who serves as Exxon’s chairman and chief executive, beat back several proposals to force the company to take more action on climate change.

The one thing I know about technological change is that it takes longer to implement than expected but that once implementation begins, it can become an avalanche.  Renewable energy is moving from the slow initial penetration to the avalanche phase.  So will the energy world of 2040 conform to Tillerson’s vision.

Tillerson’s presentation at the meeting showed that Exxon believes oil and gas will still provide about 60% of the world’s energy demands by 2040, even if countries adopt climate change proposals agreed in Paris last year.

His comments came after investors urged Exxon, the world’s largest oil company, with a market value of $374bn (£254bn), to reduce carbon extraction or at least warn investors about how global governmental action against climate change could affect the viability of its fossil fuel assets.

After decades of denial and the obstruction of climate science, is ExxonMobil a victim of its own propaganda?  If the company is unwilling to change from an outmoded extraction model and embrace a new role as an energy business, shouldn’t shareholders be concerned that they are riding on an oil powered corporate Titanic?

More than 38% of Exxon’s investors rebelled against the company by voting for a proposal that would have required the company to publish an annual study of how its profits may be affected by public climate change policies, following the Paris climate agreement, to limit the global temperature rise to less than 2C (3.6F).

ExxonMobil and the oil extraction industry will struggle to salvage their companies if they are unwilling to accept their role in exacerbating climate change.  The backlash is coming and none is so blind as he who will not see.