Oil companies are as reviled as banks and tobacco companies. Photo / AP
Oil companies are as reviled as banks and tobacco companies. Photo / AP
COMMENT:
Big companies are rarely popular but Bernard Looney has become BP's next chief executive at a particularly touchy moment. The Royal Shakespeare Company has withdrawn from a sponsorship deal with BP, citing the alienation of young theatregoers, and protesters have dubbed its head office in London a "crime scene".
As Extinction Rebellion activists mounted protests against climate change this week, oil companies are as reviled as banks and tobacco companies. "Your dirty oil will kill us all," an actress read during its event against oil majors including BP and Eni in July. Greta Thunberg, the 16-year-old environmental activist, is tipped to win the Nobel Peace Prize this week.
Given that the world will rely on fossil fuels for decades, even with the most stringent government policies to reduce energy use, oil companies face their own climate emergency. How can they retain social legitimacy when young Europeans protest against them?
They could just carry on, secure in the knowledge that even some activists will keep driving cars and travelling on aircraft, having condemned companies for making the oil that powers them. People still take out loans although banks are disliked, and smokers keep on puffing.
That would be a risky strategy. US pharmaceutical companies that produced opioid painkillers also had a receptive market and did not regard it as their role to limit how those drugs were used. The opioid epidemic has come back to haunt the members of the Sackler family who control Purdue Pharma and find their money turned away by art galleries and museums.
Bolder action is needed and Looney may be less resistant to it than his predecessor Bob Dudley, whose greatest environmental challenge at BP was the Deepwater Horizon disaster in 2010. I would bet that Looney follows the path taken by Shell and Total in taking account of greenhouse gases emitted by its customers, rather than merely its own operations.
Most oil majors still focus on their own operations in calculating their contributions to climate change, emphasising how they are cutting methane emissions from rigs or making drilling more efficient. Equinor is using onshore electricity to power its new Johan Sverdrup field off the coast of Norway, and estimates that it will save 25m tonnes of carbon dioxide emissions.
This is an inadequate measure. Shell estimates that 85 per cent of emissions are from customers using fossil fuels, rather than in production. You can be the most operationally responsible oil company in the world, and your products will still cause harm.
The next step is to evolve from being an oil company to an energy group. This often involves natural gas and — more pertinently for protesters and investors who worry about exposure to fossil fuels — alternative energy. Total is a proponent of biofuels and Shell is diversifying into electrical power.
Both companies have ambitions to reduce the overall carbon intensity of their output by changing their energy mix. Shell hopes to halve its measure of intensity, including its customers' emissions, by 2050 and thus to help progress towards the Paris climate accord targets for curbing global warming.
Environmental activist Greta Thunberg. Photo / AP
But this will not be enough to mollify the critics. Extinction Rebellion protesters broke windows at Shell's headquarters in April for "destroying the life support system for all of the natural world". Very few people distinguish between one energy major and another.
It is time to show them. This will require faster changes in energy mix than any major has yet envisaged: none is changing its portfolio enough to comply with the net zero emissions by the 2050 target, let alone Extinction Rebellion's 2025 demand, according to the Transition Pathway Initiative, backed by asset managers including Robeco.
Energy companies could also choose better customers. They have so far avoided it. "We can't refuse to fill up old cars or planes for holidaymakers," says one executive. But discriminating among clients and rejecting riskier ones is standard practice in banking and healthcare; why not adopt the same attitude to users of energy?
Rationing EasyJet might be a step too far, but how about not making fuel for private jets? Companies that sell petrol through their own or franchised stations could even charge more per litre for sports utility vehicles or older cars. They could instantly identify fuel efficiency levels by scanning licence plates.
This would be provocative, but it would have two advantages. One would be to help companies meet carbon intensity ambitions by ensuring that their products are used efficiently. Their customers would gain greater benefits from each barrel of oil they produced than would their rivals' customers.
It could also improve their image. Those who see no difference between Shell and BP would notice being charged more for SUVs by one of them. Such tough love on behalf of the environment might even resonate among Extinction Rebellion sympathisers.
It would probably frighten the directors of the oil majors to take such a public stand, rather than burnishing their images by sponsoring theatres. But they need their own rebellion.
