Big Oil Staggers Toward Paris Climate Talks, Potential Clinton White House

The industry is grappling with low prices and a Democratic front-runner moving left.

Hillary Clinton speaks at a town hall meeting in New Hampshire on Thursday.
AP Photo/Robert F. Bukaty
Ben Geman
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Ben Geman
Oct. 30, 2015, 3:38 p.m.

Big Oil has hit rough wa­ters at a crit­ic­al time.

Polit­ic­ally, the Demo­crat­ic White House front-run­ner is get­ting more bel­li­ger­ent to­ward the oil in­dustry.

On Thursday Hil­lary Clin­ton joined calls for a Justice De­part­ment probe in­to wheth­er Ex­xon has pulled the wool over the pub­lic’s eyes on glob­al warm­ing (something the com­pany vig­or­ously denies). She said in New Hamp­shire that there’s “a lot of evid­ence that they misled.” 

It’s part of her broad­er move to the left on the en­vir­on­ment. A few weeks ago, Clin­ton came out against the Key­stone pipeline and drilling in Arc­tic wa­ters.

But Clin­ton’s bolder stances are just one prob­lem fa­cing Big Oil. The col­lapse in crude prices, which have fallen by 50 per­cent over the last year, is tak­ing a heavy toll as com­pan­ies slash spend­ing.

That was brought in­to stark re­lief this week when Shell an­nounced a huge quarterly loss of $7.4 bil­lion, thanks in part to bil­lions of dol­lars in write-offs for scuttled pro­jects in the Arc­tic and Canada’s oil sands. But oth­er com­pan­ies are also feel­ing the crunch, in­clud­ing Chev­ron, which an­nounced Fri­day that it’s cut­ting 6,000-7,000 jobs amid lower profits and spend­ing cut­backs.

All this comes at a sens­it­ive time for an in­dustry that’s hugely power­ful but holds as­sets—like car­bon-heavy oil sands and deep­wa­ter pro­spects that are ex­pens­ive to de­vel­op—that could be vul­ner­able if na­tions get tough­er on cli­mate change.

Which they just might. In one month, world lead­ers will gath­er in Par­is to fi­nal­ize a far-reach­ing in­ter­na­tion­al cli­mate-change ac­cord that car­ries high stakes for the fossil-fuel in­dustry, which could see more pro­jects jeop­ard­ized if na­tions get more ag­gress­ive on glob­al warm­ing.

“It is a tough time for all of them … to think about modi­fic­a­tions to their busi­ness plan giv­en the lower oil prices,” said Eliza­beth Rosen­berg, who heads the En­ergy, Eco­nom­ics, and Se­cur­ity Pro­gram at the Cen­ter for a New Amer­ic­an Se­cur­ity.

Coun­tries have been of­fer­ing the United Na­tions their do­mest­ic emis­sions-cut­ting pledges ahead of the talks that ad­dress ac­tions through 2025 or 2030 (the U.S. has vowed to slash heat-trap­ping pol­lu­tion by 26-28 per­cent be­low 2005 levels by 2025).

But a pri­or­ity for the White House in the talks is craft­ing a deal that prods na­tions to even­tu­ally get more ag­gress­ive than these tar­gets, es­pe­cially be­cause na­tions’ com­bined pledges to date are too weak to hold the glob­al tem­per­at­ure rise to 2 de­grees Celsi­us above pre-in­dus­tri­al levels, the long-term goal of U.N. cli­mate ne­go­ti­ations.

“We are work­ing hard to se­cure an agree­ment in Par­is that will en­cour­age all na­tions to ratchet up their am­bi­tion and ratchet down their emis­sions over the course of the com­ing dec­ades, set­ting tar­gets in reg­u­lar five-year in­cre­ments with the help of strong trans­par­ency and ac­count­ab­il­ity mech­an­isms,” said Paul Bod­nar, a top en­ergy and cli­mate of­fi­cial at the White House Na­tion­al Se­cur­ity Coun­cil, in a blog post Fri­day.

As the United Na­tions cli­mate talks loom, not every com­pany is on the same page.

Shell, BP, Nor­we­gi­an oil gi­ant Statoil, and oth­er oil-and-gas com­pan­ies headquartered in Europe (but op­er­at­ing world­wide) have jointly thrown their weight be­hind policies that put a price on car­bon emis­sions—something ac­com­plished through taxes or cap-and-trade sys­tems.

In a joint let­ter to the U.N. sev­er­al months ago, they en­cour­aged gov­ern­ments to ad­opt car­bon pri­cing of some sort, and offered to hold a “dir­ect dia­logue” with the U.N. and na­tion­al gov­ern­ments.

As Na­tion­al Journ­al wrote about here, the move re­flects the rising im­port­ance of the “gas” side of the oil-and-gas in­dustry. Com­pan­ies see car­bon prices, as long as they’re not too strict, as a way to help gas beat out more car­bon-heavy coal in elec­tri­city gen­er­a­tion.

But big U.S.-based oil-and-gas com­pan­ies like Ex­xon were not­ably ab­sent from the list of com­pan­ies sign­ing the let­ter. Ex­xon has said for years that if there is a price im­posed on car­bon, a tax is the way to go.

In an in­ter­view with the trade pub­lic­a­tion Pet­ro­leum In­tel­li­gence Weekly last month, Ex­xon CEO Rex Tiller­son ex­plained why the com­pany steered clear of the re­cent let­ter.

“We didn’t join the European let­ter be­cause, first, we didn’t see any­thing new in there. We’ve ar­tic­u­lated our po­s­i­tion pretty clearly now,” he said. “When I looked at the European let­ter, it lacked a lot of spe­cificity; it’s kind of as­pir­a­tion­al. We’ve been very spe­cif­ic ourselves.”

One ex­pert, however, sees U.S. do­mest­ic polit­ics be­hind the lack of sig­na­tures of U.S. com­pan­ies on the car­bon-pri­cing let­ter, not­ing the close­ness of the U.S. in­dustry—rep­res­en­ted by the power­ful Amer­ic­an Pet­ro­leum In­sti­tute—to Re­pub­lic­ans who op­pose pri­cing car­bon emis­sions and man­dat­ory reg­u­la­tions.

“The dif­fer­ence is that API is ca­ter­ing to Re­pub­lic­an Party polit­ics, where­as European oil ma­jors are less con­cerned about GOP mach­in­a­tions,” said Paul Bled­soe, a former Clin­ton ad­min­is­tra­tion aide who now heads Bled­soe and As­so­ci­ates, a con­sult­ing com­pany on cli­mate and en­ergy.

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