What Happens to Big Oil This Year Will Define the Next Decade


An aerial view shows an oil tanker on fire Lagos, Nigeria in November 2020.

An aerial view shows an oil tanker on fire Lagos, Nigeria in November 2020.
Photo: Benson Ibeauchi/AFP (Getty Images)

This is the decade oil and gas must begin their decline. To avoid warming above 1.5 degrees Celsius (2.7 degrees Fahrenheit) without overly relying on unproven technology, world oil and gas use must drop 37% and 25%, respectively, by 2030 before declining even further in the following decades. End of story.

The industry took a sharp jolt in 2020, both from the economic crash driven by the pandemic and the increasing pressure from climate activists. Donald Trump has left the White House, and the Biden administration is set to put more pressure on the industry. On day one, the president pulled the plug on Keystone XL pipeline permits and set the U.S. on track to rejoin the Paris Agreement. But other global forces are also conspiring that could constrict the flow of oil and gas in 2021. Their success and the fate of millions of lives are intimately tied together.

Even amidst the politics of what has been, oil and gas have had an increasingly rough go. After decades of sinking its tentacles ever-deeper into the world economy, Big Oil’s grip has loosened over the past decade. Stock prices for major oil companies have seen diminishing returns for investors.

That’s in part been driven by a mix of renewables prices plummeting, a bevy of revelations on the role oil companies played in lying about climate change, and increasingly out-front activists like Greta Thunberg calling out companies for being the bad actors they are. Then came 2020. Covid-19 hit, acting as what Jamie Henn, the director of Fossil Free Media, said was a “breath of virus-laden air that knocked over the house of cards faster than I thought it was going to crumble on its own.” Numerous oil majors posted losses throughout 2020 while many smaller companies went belly up. Production and demand both fell by record amounts, and they may not come back.

“Will we see permanent declines in oil demand resulting from (say) cheaper and more abundant renewables and electric car mandates across the globe?” Clark Williams-Derry, a financial analyst at the Institute for Energy Economics and Financial Analysis, said in an email. “My own hunch is that we won’t see demand recover the way it did after the 2007-2009 recession—but the world always has a way of surprising (and disappointing) me.”

Indeed, the risk of a return to business and politics as usual is a snapback in demand. To truly bring about the end of the fossil fuel era—let alone end it in a way that protects workers from the fallout—will require something totally new. Policies that passed for sufficient in recent years such as a carbon tax and dividend aren’t enough to draw down emissions at the scale needed. Gradual is simply not an option. These are the solutions we could see in the coming year that, at first blush, may seem radical but are actually in line with the urgency of the crisis.

A treaty to phase out fossil fuels

“We don’t have the luxury of that kind of time,” Tzeporah Berman, the international director at Canadian nonprofit Stand, said in a video call. “We need bold new ideas, and we need international cooperation to get there because no one is going to do it on their own.”

Berman is on the steering committee of the fossil fuel non-proliferation treaty, a nascent proposal that could gain more prominence as world leaders bolster their commitments to reduce emissions ahead of this year’s major international climate conference. The treaty is modeled after the 1970 nuclear non-proliferation treaty, but rather than stopping nuclear annihilation, it would stop planetary death by stopping oil and gas expansion, winding down production, and ensuring workers can transition to low- or no-carbon jobs.

Most world leaders have made pledges to reduce emissions by a certain percentage in a certain year, but it’s a game of hot potato as far as who will meet those reductions by actually stopping oil and gas production. Denmark became the first country in the world to announce it would do so, but others have yet to follow suit. A non-proliferation treaty could help stabilize the world order by winding down production in a fair manner.

The treaty has been signed by Vancouver, and a number of other cities are considering signing on as well, including New York and Los Angeles. The latter is littered with oil wells and signing on would be a powerful signal to other cities and states—to say nothing of countries—with an eye toward finding an equitable way out of oil and gas.

Governments turning against plastic

Oil companies have begun to pivot to plastic, but even that might not be enough to save the industry as stricter regulations on plastic pop up around the world. Kingsmill Bond, an energy strategist with Carbon Tracker, pointed to the EU’s legislation on plastic, whatever Biden comes up with, and China’s five-year plan as key touchpoints to see just how much of a dead-end plastic could be.

“But China above all,” he said in an email. “They are highly likely to implement aggressive strategies to reduce plastics demand because it is all based on imported oil.”

Money runs away from oil and gas

Governments taking action only offer one avenue to constrain the industry. Arguably the most effective climate campaign last year was the move to get banks to stop funding Arctic drilling. Every major U.S. bank agreed to not fund extraction in the rapidly thawing region, a key demand from Indigenous communities who would have to live with the impacts. There was also a strong economic incentive given the aforementioned declining returns on oil and gas companies, particularly those focused on fracking.

“If prices stay low, I expect to see investors very reluctant to jump back in to fund fracking companies,” Williams-Derry said. “That would force frackers to live within their cash flows, which means less oil and gas.”

He warned that less oil could mean higher prices, which could throw money back to frackers. All of which points to the need for strong regulations such as stricter methane emissions standards or an outright plan to phase out fossil fuel production to ensure that doesn’t happen. Protests that slow down drilling projects, fracking or otherwise, could also eventually sink them as the financial tide keeps turning. As Berman put it, “delays are our friend. Regulatory interventions, delays, blockades, it all increases controversy, increases cost. The case for not doing that new fossil fuel expansion grows dramatically, so delays are absolutely critical.”

A steady drumbeat of financial pressure on banks that loan money to businesses for other forms of extraction will be a central theme in 2021 as well as continuing to push for institutions to divest from fossil fuels. Last year saw one of the biggest-ever divestment announcements as the New York state pension fund laid out a plan to completely decarbonize.

Everybody hates Big Oil

Oil companies could also see their social license to operate constrained even further. That takes the form of individual actions like “greentrolling” oil companies on social media sparked by climate essayist Mary Heglar. But it will also mean calling out the industries that support them. Henn’s group helped launch Clean Creatives last year, a collective of PR professionals who are calling out the firms working with oil companies, thus constraining the very firms coming up with the deceptive greenwashing efforts.

“It was immensely frustrating to know that there are these multi-million dollar PR efforts that were designed to try and halt our progress,” Henn said of his time working at 350.org, which he co-founded. “One of the motivations [for Clean Creatives] is the sense that if we’re going to make progress at the speed we need to on climate, we can’t constantly be pushing against this barrage of misinformation from the other side. So undermining their ability to do that effectively will make life easier to get our message out there.”

With more people hearing that message and a reengaged U.S. working on climate, this year has the potential to be like no other.

“This is the last gasp of the fossil fuel industry,” Berman said. “They’re going to try and lock in as much expansion as they can at this moment, and so our job is to stop them in the markets, to stop them on the ground, and eventually to put in place the rules, the laws, and the international agreements to stop them everywhere.”



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