The oil industry is changing. as it is dragged -- kicking and screaming -- into the future. Tom Friedman writes:
Since the 1990s, the wisest oil-producing countries and companies have regularly reminded themselves of the oil patch adage that the Stone Age did not end because we ran out of stones; it ended because we invented bronze tools. When we did, stone tools became worthless — even though there were still plenty on the ground.
And so it will be with oil: The petroleum age will end because we invent superior technology that coexists harmoniously with nature. When we do, there will be plenty of oil left in the ground.
So be careful, wise producers tell themselves, don’t bet the vitality of your company, community or country on the assumption that oil will be like Maxwell House Coffee — “Good to the last drop” — and pumped from every last well. Remember Kodak? It underestimated the speed at which digital photography would make film obsolete. It didn’t go well for Kodak or Kodachrome.
The world's largest oil company -- Exxon-Mobil -- didn't get that memo:
Today, it is no longer the biggest. As a result of its head-in-the-oil-sands-drill-baby-drill-we-are-still-not-at-peak-oil business model, Exxon lost over $20 billion last year, suffered a credit rating downgrade, might have to borrow billions just to pay its dividend, has seen its share price over the last decade produce a minus-30 percent return and was booted from the Dow Jones industrial average.
Last week, green activists finally got through to the corporate board room:
A little hedge fund called Engine No. 1 delivered an unprecedented master class in mean green using the tools of democratic capitalism. A plucky, purpose-driven investment fund, Engine No. 1 set out to force Exxon to improve its financial returns by getting much more serious about gradually transitioning — through innovation and acquisitions — into being an energy company, not just an oil and gas company.
At Exxon’s annual meeting, Engine No. 1 offered up a slate for four new members of Exxon’s 12-member board. The four represent deep energy expertise and climate solutions. The slate committed to push the oil giant to a net-zero emissions strategy by 2050, more investments in clean energy systems and more transparency about Exxon’s energy transition, with metrics and milestones, as well as disclosure of its lobbying payments and partners, suspected of undermining the science around climate change.
And darn if half the slate — Gregory Goff and Kaisa Hietala — wasn’t immediately elected by wide margins, and at least one other member might be as well when ExxonMobil finishes counting the votes from its very, very bad day.
Engine No. 1 was successful because it got three of the four biggest pension funds in America — fed up with Exxon’s relentless value destruction — to vote for its nominees. We’re talking about the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the New York State Common Retirement Fund. Also, three of the world’s biggest fund managers, Vanguard, State Street and Black Rock, which together own more than one-fifth of all Exxon stock, each voted for part of the dissident slate.
Oil hasn't left the building yet. But it's on the way out. Have Justin Trudeau and Jason Kenney got the memo?