Feb 6, 2023 - Economy

Oil giants slow down their energy transition talk

Illustration of a road with a dollar sign hole in the middle

Illustration: Sarah Grillo/Axios

Oil giants for years have said that they'll pave the path toward energy transition, investing in everything from renewable projects to climate tech startups.

  • Now, some of them are sounding more like speed bumps.

Driving the news: BP plans to "dial back" some of the company's renewable energy initiatives, due to disappointment over return on investment, per the WSJ.

  • Dutch rival Shell said it will keep renewable energy investments at 2022 levels, despite blockbuster profits.
  • Exxon CEO Darren Woods argued that energy transition "is not a game for startups," despite the energy industry's significant participation in venture capital rounds for climate tech startups.

Zoom out: We're guilty of a little conflation here. European energy companies have focused most of their investment on utility-scale renewables, like solar and wind, whereas U.S. energy companies have gone more toward decarbonization technologies (capture, storage, etc.).

  • The commonality, however, is that both seem to be making a 2009-era sort of argument that the ROI is lacking.

The big picture: There's justifiable skepticism that oil majors have sincere interest in energy transition, given that they continue to earn billions of dollars by burning dinosaurs the old fashioned way.

  • For evidence, critics would point to the amount of capital invested in renewables and/or climate tech, compared to oil and gas spend.

Look ahead: There continues to be growing political and societal pressure toward decarbonization, no matter the short-term spending strategies of legacy industry.

  • These recent pronouncements may make upstarts less likely to partner with incumbants, or to accept their investment. They also could spark some brain drain.
  • Or perhaps the oil majors will again reverse course, as quickly as they're doing now, deciding that their own survival depends on it.
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