Nobody should care what the boss of an oil company wants to do and hope he wants to do the right thing and hope he will not change his mind in the future. Just force them to do the right thing, make oil less profitable if that is what you think needs to be done.
Pass laws to force the CEOs into compliance and throw them in jail along with seizing their precious money and assets when they don’t comply. We’ve been too lenient on corporations and the rich and all it’s gotten in the US is corporations buying the government.
The companies and even more so their management are just intermediaries. Oil companies are not producing oil for the sake of it or to raise carbon dioxide levels, they are doing it because people buy the stuff made from oil and they can make a profit from it. So the laws you want are laws that discourage people and companies consuming oil and gas. With regard to lobbying and corruption, there many of the laws are probably already in place, I would guess, they just have to be properly enforced.
Taxes are hands down the best way to handle this “as long as there’s demand someone will produce supply” tragedy of the commons. Taxes can be progressively introduced and are completely compatible with our existing legislative, legal, accounting frameworks. They also scale naturally with usage, impacting large users disproportionately with smaller users. It will also disproportionately increase prices for carbon-intensive products and services. Proceeds can be applied towards climate mitigation solutions and climate tech research.
This will not solve all problems. But it would be unreasonable to suggest that some incremental tax would not have beneficial effects. Tax oil at the source. Right now oil is one of the most profitable industries in the world. That is not a tenable or stable position.
Don't be so cynical... apparently it was liked by 'hundreds'...
sigh...
written by two employees working in the 'low-carbon division'. Maybe they're about to quit to create a ton of Social Media accounts and produce Youtube videos and to deride themselves as heroes...
To anyone bothered by my demeanor: excuse the cynicism, I have little respect for "open letters", it's childish and narcissistic. I'm sorry the evil hierarchical structure doesn't give your opinion enough credit, you, who should obviously be running this place. So yeah, better cause a media stir like a little child in a supermarket wanting chocolate... also little respect for the blown up media coverage around such minor events.
Thank you for posting this. The koolaid-drinkers are vocal, but rest assured your perspective is generally shared by those who do things and have responsibility.
You'll be attacked by the sullen crowd who believe wearing pink ribbons fight cancer, but please don't waver in saying what you think is right.
I have no idea what your point is. Is your point that those “do things” and have responsibilities support destroying our planet through climate change?
People who care about the environment are naive hippies, but the business people are the serious ones who “take responsibility” and know how the world works
I think the point is that “signing” an open letter is mere slacktivism, barely one step above clicking “like” on a social media post. Very little effort required, or results obtained.
Expecting these companies to 'do the right thing' is very confusing to me. They've know about this for decades and not chosen to do the right thing.
Dealing with fossil fuels isnt actually that hard, if our society was able to muster any political will. Since we still need fossil fuels in the short term, ideally very short, these companies should be immediately and thoroughly nationalized, then the government can manage their decline. Companies arent going to intentionally manage their own decline, and there isnt really reason to believe theyre in the best position to pivot, which is clearly the Shell CEOs sentiment as well
That's assuming an equal amount of carbon is produced by a given amount of extracted material, regardless of how it is used or processed. That seems an incorrect assumption completely disregards potential processing improvements that would reduce it.
This is why you need a true carbon tax if you want to go down this road, as it would make you pay for the actual carbon you produce.
Applying this uniformly to all manufacturers around the world, along with users of final products (like gasoline) would be very difficult though.
Taxing imports causes mass famine? That sounds bad! I wonder if there is a level of tariffs and such where the post you replied to could be effective without accidentally making everyone starve and overthrow their government. Do you have any info about the tipping point there?
Their fossil fuel business is likely much more profitable than their renewable business. It makes sense for the CEO to be clear about the direction the company will take in the future as well as to focus on their core competencies.
The closing off and lack of a diversified approach to solving energy problems also reveals the incapability or unwillingness of the CEO to think of the long term success of a corporation now singularly focused on the exploitation of a non-renewable, finite resource. They are now more focused and perhaps more profitable these quarters, but next FYs they will be more vulnerable to other competitors in the energy sector.
Short-termism seems to be an unavoidable condition when markets demand higher efficiencies.
As an investor, I would very much prefer them to focus on what's profitable. I can invest my dividends/buyback cash into long-term successful renewable energy businesses, if that's what I want to be in. There's no need to have Shell make those decisions for me.
Now, if there's a synergy in there — somewhere where an oil company is uniquely positioned to implement renewables — that would be nice. I'm not sure if any such thing exists.
Also, oil/energy companies provide the foundation of modern technological civilization. We now see some downsides to that particular method, but “murder” is a jump of Olympic proportions.
As a fellow investor, I started investing in RDS a couple years ago because I liked the opportunity for them using their oil war chest to springboard into renewables. Being an "energy company" rather than an "oil company". It's been doing pretty good, up 20%, but if they're just going to be another oil company, I'll probably put my money elsewhere.
Why not ask them for the war chest money, and decide on your renewables allocation yourself? This whole “we're green now” approach is a very transparent plan of the management to remain in control of the “war chest”.
I'm starting to realize that wind farms are not profitable at all. GE has a good bit of that industry buttoned up but they are not pursuing it. There are other examples of companies walking away from it or avoiding it. It's not out of ideology, corporations scramble for profit.
"Short-termism seems to be an unavoidable condition when markets demand higher efficiencies."
That's not a market failure, but poorly chosen bonus / reward structure (from society's point of view).
What if the bulk of CEO / board members' salaries & bonusses where structured as company share value, cashable no earlier than say, 20y from now? 'Pocket money' now for living expenses, a rich pension later if company does well long term.
That would surely change the incentives. As opposed to "add short-term share value, cash cheque, jump ship" as seems usual for CEOs these days.
Also it depends on whether Shell defines itself as oil company, or energy company. "Oil company"? Ok. No need to expect much from them concerning the energy transition. 1.5% of overall expenditure didn't match with "Shell continues its path as a leader in the energy transition" anyway.
Personally I think oil companies have a shrinking time window in which they'll continue to be profitable. After which market conditions & politics have changed, assets will be restructured, and (mostly small) shareholders + society at large will be left holding the bag. If you happen to be one of them: get out before the big boys do! Your funds are better used elsewhere.
> What if the bulk of CEO / board members' salaries & bonusses where structured as company share value, cashable no earlier than say, 20y from now? 'Pocket money' now for living expenses, a rich pension later if company does well long term.
Pretty interesting concept actually! Much like stock as a golden cage retainer for tech workers. Who would have to be lobbied for that to go ahead?
One day soon, when we can no longer grow enough food due to soil erosion, and mass migration to northern Europe & the US will make today's migration problems look like nothing. I'm sure that shells investors will be happy that shell decided to focus on their core competencies.
The tech industry is littered with once-giant megacorps that had an opportunity to pivot as technology progressed, failed to do so for this exact reason, and were usurped by startups with a better vision. In Shell’s case, the writing is already on the wall. With the emergence of EVs and renewable energy, what is the fossil fuel industry going to look like in 20-25 years? How will this decision seem justifiable retrospectively?
Fossil fuels are likely to play an enormous role in energy for at least the next 50 years. We'll almost certainly still be burning coal at that point, let alone getting rid of natural gas and liquid fuels. EVs need power and without massive transmission and distribution system upgrades if EVs achieve even 25% market saturation the physics don't work as-is. Generation is the easy part but the deeply unsexy real problem is moving that power around. Which is ironic because that problem has nearly exactly zero presence in the minds of politicians and the public. It's yet another example of what happens when complex engineering is turned into sound bites.
This is likely very short-sighted as a pure business decision, you’re ignoring the trends and growth, and CEOs that ignore trends tend to drive companies down, regardless of how much clarity they provide. While oil might be profitable today because it’s an older, entrenched business, the trends for renewables are going up much, much faster than fossil fuels. Global sentiment is shifting, electric vehicle production growth looks to be on the order of 10x yoy what fossil fueled vehicles are doing and accelerating, not even counting the hybrid market. This is to say nothing about the looming environmental crisis that has already begun, the negative PR Shell gets from being callous, and the possibility that regulations could swing hard against fossil fuels very swiftly. Even if money and nothing else is the bottom line, being clearly focused on fossil fuels and staying out of the future markets while other companies race to win them seems like a bad long term strategy.
It’s probably better for shell investors if shell focuses on what they are good at and returns the profits to shareholders who can then invest in whatever they want. The goal of a corporation from a shareholder pov is not to maximise total enterprise value but rather to maximise the time value of money that shareholders receive.
Shell should only be investing in renewables if they have a durable competitive advantage in doing so over the other investment options of their shareholders.
Renewables have generally been horrible investments for these energy companies btw which is one reason they have been reversing course.
1. > the trends for renewables are going up much, much faster than fossil fuels
What are these trends?
2. Electric Vehicles should never be considered an energy transition effort. You’re just shifting commodities. Instead of burning pentane in your car you’re burning coal and natural gas in a plant.
If you want to invest in energy transition, invest in an energy transition company. If you want to work for a company that prioritizes energy transition, work at a company that prioritizes energy transition. Shell is not an energy transition company.
Where do you live that you don't have access to nuclear, solar, and wind? It's been a couple years since solar started being cheaper to produce than coal.
Then the CEO should also be clear when their motivations are directly influenced by actions (like removing their predecessor) due to PE firms that are acting as political proxies. Because most HN readers agree that R&D is important and that no single business unit will last forever.
Also, fossil fuel industry will last more a few decades. It is a low risk decision if he is thinking about a short time horizon. Looks he is just trying to save his own ass showing big profits.
Do you really think the proportion of people who care about those issues is greater inside these companies, compared with the general population? Or is the proportion of people roughly the same, but they only speak up about it because those are the issues the company is involved with?
According to Tim Harford's book "Adapt" it's wrong to expect a company like shell to be good at renewables. Shell are good at handling liquid fuels and negotiating with governments. These are not useful skills for photovoltaics.
Pivoting away from fossil fuels would be a terrible idea. They would be losing out on the entire class of educated consumer who wants to increase their own carbon emissions. Ignoring the environmentally conscious consumer would be a very bad play in today’s day and age.
