Economy

A new path for Old Oil; plus Biden's Plan B on infrastructure

By David Callaway, Callaway Climate Insights

Oil prices rose Thursday.

With environmental activists still celebrating the historic hat trick of legal and shareholder victories Wednesday against ExxonMobil (XOM), Chevron (CVX) and Shell (RDS.B), and their stocks down accordingly, commodity investors at least moved back to the reality that oil will be with us for a while.

That’s not to say environmental, social and governance (ESG) investors shouldn’t continue relishing the landmark results. As we report in our EU notebook and Insights columns below, the gauntlet is already being thrown down for more lawsuits and resolutions in Europe — but particularly in the U.S. where they are more common.

But even as we look toward more investment in renewable energy and reductions of fossil fuel use, the climate clock ticks on. The World Meteorological Organization reported this morning there is a 40% chance the world will experience a rise in temperature above the Paris Agreement’s 1.5°C. goal in the next five years. Last year, that estimate was 20%.

Some countries, such as Mexico, China and parts of the Middle East, are increasing oil production as we speak. The United Arab Emirates, which expects to boost production to more than five million barrels by 2030, even wants to host the COP28 global climate summit two years from now.

What this means for global warming is that the big oil companies such as Exxon, Shell and Chevron will not only have to comply with new rulings and shareholder resolutions to cut fossil fuel production and invest in renewables, they are going to need to lead. A tall order indeed.

More insights below. . . .

ZEUS: Biden’s Plan B on infrastructure bill

. . . . Now that the Republicans have played their card on the infrastructure bill, it’s time for President Joe Biden and the Democrats to decide whether compromise is possible, or whether to try to ram it through using the controversial reconciliation strategy, writes David Callaway. Despite the traditional animosity over the plan’s call for higher taxes on the wealthy, a deal could be reached on key components of the strategy that would push the U.S. into the a new renewable era. But a lot of stuff is going to have to go. . . .

Read the full ZEUS column

Rethinking the potential for the emerging green bond market

. . . . The surge in green bond financing to date has been more an exercise in greenwashing than a revolutionary new way to finance the fight against global warming, but that could soon change, writes Mark Hulbert. A new study out of Harvard Business School has found the elusive green bond premium in many of the $1.2 trillion in green financings, leading Hulbert to, grudgingly, admit that there is scope for real impact in Wall Street’s latest trend. The question now — with $90 trillion in climate financing needed by the end of the decade to mitigate the worst of global warming — is whether it will be enough to make a difference. . . .

Read the full story

Thursday’s insights: Drilling in Alaska or saving the prairie chicken?

. . . . With a decision not to undo a Trump-era decision to allow oil and gas drilling in Alaska’s Arctic Wildlife Refuge, Biden has proved susceptible to political pressure — this time from moderate Republican Lisa Murkowski, whose support he desperately needs in the 50-50 U.S. Senate. (But the White House stood firm in its mission to get the lesser prairie chicken, above, put on the endangered species list.) Read more here. . . .

. . . . In another legal victory for environmentalists, the Australian government has been told it has a duty to protect children’s health from the proposed expansion of a giant coal mine. That, and a landmark loss by Shell in a Dutch court, give considerable momentum to about 1,800 similar lawsuits around the world, the vast majority of them in the U.S. Read more here. . . .