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LIKE ROME, OIL DEMAND WON’T BE DESTROYED IN A DAY

Signage for the CERAWeek energy conference is displayed at the entrance of the
Hilton Americas-Houston, in Houston, Texas, U.S. March 9, 2022.

Source: REUTERS/Sabrina Valle




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18 Mar 2024 | By   Robert Cyran Follow @rob_cyran

Sack of cash.

The question for the oil producers, investors and other energy participants
attending CeraWeek, the industry’s big conference in Houston starting Monday, is
when fossil fuel empires will be sacked, and how to cope.

The hope among most, and belief among firms like Exxon Mobil, is that the shift
away from oil won’t happen quickly. Past transitions occurred at a glacial pace.
Historian Vaclav Smil points out it took 40 years for oil to go from 5% to 25%
of the world’s primary energy supply, and 55 years for natural gas. Solar and
wind’s share of primary energy consumption only reached 5% in 2018.

Yet past transitions involved varying forms of combustion. Solar, wind and
batteries are diverse technology plays, with R&D and scale delivering regular
improvements and lower costs in multiple areas. Solar and wind’s share of
electricity production is growing more quickly than past transitions. The
adoption of electric cars is accelerating even faster, from about 2% of global
car sales in 2020 to over 20% this year, according to Canalys Research.

Participants deal with the prospect of oil’s death with a mix of denial,
avoidance, bargaining and acceptance. Executives in Exxon Mobil and Chevron can
seize the moment to talk about the massive deals they have in the works to buy
Pioneer Natural Resources and Hess, respectively. European firms may reaffirm
their plans for a post-oil future, which have so far been halfhearted. Saudi
Arabia, trying to reinvent itself, has guests presenting on carbon markets and
low-carbon fuels. Oil services company Baker Hughes is highlighting how to
maximize the value of mature assets.

So what to do? As in any dwindling land, oil emperors Exxon and Chevron are
characteristically being defensive by striking takeovers. Deals to cut costs are
helpful both now and when the retreat starts, ensuring a bigger piece of a
shrinking market. But that decline is coming. Purchases to increase overall
production, or investments in green power, carbon capture and other strategies,
as European giants like Shell and BP have done, look riskier. That leaves the
prospect of enriching the masses by paying back essentially all cash flow to
investors. It may not be exciting, but it’s rewarding and easier than guessing
whether building a bigger palace makes sense with barbarians on the horizon.


CONTEXT NEWS

CERAWeek, the annual energy conference sponsored by S&P Global, takes place in
Houston from March 18 to March 22.


SUBJECTS:

CommoditiesCompanies & FundsEnergyOil & GasRenewable Energy


REGIONS:

AmericasUnited States of America


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