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
Add to Briefcase
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.

What We're Following See More »
North Korea Threatens H-Bomb Test Over Pacific
2 days ago

"North Korea said on Friday it might test a hydrogen bomb over the Pacific Ocean after President Donald Trump vowed to destroy the reclusive country, with leader Kim Jong Un promising to make Trump pay dearly for his threats. Kim did not specify what action he would take against the United States or Trump, whom he called a 'mentally deranged U.S. dotard' in the latest bout of insults the two leaders have traded in recent weeks."

Trump Makes Good on Promise of New North Korea Sanctions
3 days ago

President Trump this afternoon announced another round of sanctions on North Korea, calling the regime "a continuing threat." The executive order, which Trump relayed to Congress, bans any ship or plane that has visited North Korea from visiting the United States within 180 days. The order also authorizes sanctions on any financial institution doing business with North Korea, and permits the secretaries of State and the Treasury to sanction any person involved in trading with North Korea, operating a port there, or involved in a variety of industries there.

Trump Promises More Sanctions on North Korea
3 days ago

In response to a reporter's question, President Trump said "he’ll be looking to impose further financial penalties on North Korea over its nuclear and ballistic tests. ... The U.N. has passed two resolutions recently aimed at squeezing the North Korean economy by cutting off oil, labor and exports to the nation." Meanwhile, the Guardian reports that South Korea's unification ministry is sending an $8m aid package aimed at infants and pregnant women in North Korea. The "humanitarian gesture [is] at odds with calls by Japan and the US for unwavering economic and diplomatic pressure on Pyongyang."

FLOTUS to Speak at UN Luncheon
4 days ago
Trump Meets with UN Leaders
4 days ago

President Trump on Tuesday night met with UN Secretary Guterres and President of the General Assembly Miroslav Lajcak. In both cases, as per releases from the White House, Trump pressed them on the need to reform the UN bureaucracy.


Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.