‘Fundamental Culture Change’: Here’s Why Europe’s Energy Giants Are Pivoting Back to Oil

Two of Europe’s largest energy firms are pivoting from green energy back to their core oil and gas businesses, a move that industry experts tell the Daily Caller News Foundation signals a willingness to take political hits as oil and gas continue to be major sources of revenue.

Both Shell and fellow U.K. energy firm BP opted against further cuts to oil production recently, in a bid to restore investor confidence as their renewable ventures struggled, according to Bloomberg. While the moves were met with criticism from climate-focused investors — activist investors and protestors attempted to storm the stage at Shell’s annual shareholder meeting in late May — the companies are likely to stay the course despite criticism, thanks to the reliability of oil and gas to drive profits despite the emergence of green energy, Dan Kish, senior research fellow at the Institute for Energy Research, told the DCNF.

“Smart energy executives looking at the long term recognize that politics are fleeting,” Kish said. “Politicians may be flighty and distracted by today’s shiny objects, but real business sense combined with a knowledge of engineering and physics shows that real energy makes good business because it is what people need and want.”

Shell CEO Wael Sawan described his company’s shift as a “fundamental culture change” during a Wednesday presentation intended to draw investors, especially American ones, to support the company, The Wall Street Journal reported. Shell performed poorly in 2022 compared to U.S. titans Exxon Mobil and Chevron in 2022, and Sawan has made playing catch up a priority.

BP made a similar decision, opting to increase investments in oil and gas while slowing its advancement toward green alternatives.

“At the end of the day, we’re responding to what society wants,” BP Chief Executive Bernard Looney said.

Ryan Yonk, senior research faculty at the American Institute for Economic Research, described many green investments and climate commitments as a sort of “green-washing” that companies are more likely to view as a “cost of doing business” as opposed to a genuine driver of profits, in a statement to the DCNF. BP saw shares surge more than 15% in the days following its February announcement that it would cut just 25% of its hydrocarbon output by 2030, as opposed to its original target of 40%, according to Reuters.

“The profitability of these types of endeavors is generally much lower than market-driven innovation and growth because they are defensive in nature and driven not by consumer demand but by either actual regulatory action or the expectation that it will occur,” Yonk said. “Fossil fuels are currently, and the evidence suggests they will be for the foreseeable future a significant and important part of energy production in the US and across the world.”

While political pressure may have pushed companies towards green projects in the past, the current political landscape is much more amenable to oil and gas, Myron Ebell, director of the Center for Energy and Environment at the Competitive Enterprise Institute, told the DCNF. Russia’s invasion of Ukraine set off an energy crisis in both the U.S. and Europe, giving companies a “strong incentive” to pump more oil while providing them the political cover to be “more candid” about the necessity of such investments, Ebell said.

“The EU’s oil majors have an even harder time than America’s trying to remain politically correct while continuing to produce the energy the world needs and make sufficient profits to satisfy shareholders and invest in new production,” Ebell told the DCNF. “They are faced with the reality that renewables produce little energy at a high cost.”

While Shell re-committed to its target of net-zero emissions by 2050 in a Wednesday press release, it also said in a footnote that such a change was dependent on societal factors. There would be “significant risk that Shell may not meet this target” if society at large had not made a shift to net zero by then, the company said.

Shell and BP did not immediately respond to a DCNF request for comment.

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