By Paul Homewood
Did Ben Marlow never study economics?
First BP, now Shell. One by one, the oil giants are returning to what they know best – doubling down on fossil fuels and prioritising shareholder returns – in u-turns that inevitably have to come at the expense of climate pledges.
Worse, it comes at a time of record profits – a double snub to government and eco-campaigners, who want to see green investment ramped up, and at the same time a capitulation to investors frustrated at seeing the big US energy producers generating far higher returns than their European counterparts.
Total shareholder returns for Exxon and Chevron over the last five years far exceed those of BP and Shell, a phenomenon that some fund managers have put down at least partly to them having embraced the renewables charge even more reluctantly.
The latest setback is a wake-up call to the political classes. If the Government thinks it is driving the green agenda it is very much mistaken.
On the contrary, if this is a return to the old set-up then it has as good as lost control of the energy transition completely, something that it must accept a sizeable share of the blame for.
No 10 may have established a new department for Energy Security and Net Zero in a bid to bring greater clarity to energy policy but its messaging remains more confused than ever.
The “highlights”, if indeed they can be called that, of Shell’s capital markets day are a harsh reminder that when it comes to the future of the energy system, the oil industry is firmly calling the shots.
The argument from environmentalists is a fairly simplistic, yet not unfair one.
Their central case is that with the sector essentially feasting on the spoils of the Kremlin’s indiscriminate war in Ukraine – while many families struggle to pay rocketing energy bills – Shell and others have an even greater duty to seriously step up their commitment to big green energy projects.
Shell, it is probably fair to say, doesn’t see it like that.
It is more concerned with appeasing shareholders than it is with bending to critics who accuse the Anglo-Dutch company of abdicating its responsibilities on leading the climate change fight, never mind simply being a willing part of it.
Armed with annual profits of $40bn (£31.5bn) for 2022 – double the previous year’s – Shell has served up a plan that is unashamedly pro-Wall Street.
There’s a planned 15pc dividend increase in the second half of the year; a promise to return another $5bn to investors through share buybacks, having lavished $12bn on shareholders in the same way during the first half; and a clear pledge to focus on the most profitable areas of the business, which unsurprisingly does not include clean energy.
With commitments to “grow” its sprawling gas operations, “maintain leadership” in the liquefied natural gas (LNG) market and “extend its advantaged position” in both oil and gas exploration, it is patently obvious where Shell’s priorities lie.
But combined with a fairly unambitious and somewhat fuzzy promise to spend between $10bn and $15bn by 2025 on “low carbon energy solutions” there can be no doubts.
Even Shell privately concedes that biofuels, hydrogen, electric vehicle charging and carbon capture storage – the four areas it has earmarked for investment – are at the more speculative and unproven end of the renewables spectrum.
The absence of any plans to invest in other, far more established clean energy sources such as wind and solar – which are attracting record investment around the world – is glaring.
He complains that BP and Shell are doubling down on fossil fuels! Well yes, that’s what companies do – invest in products that make a profit, not carry out the government’s agenda. Indeed they have a duty to look after shareholders’ interests first and foremost.
And quite why this is the government’s fault is a mystery to me. The government has been doing its best to destroy the UK’s fossil fuel industry.
He accuses Shell and BP of feasting on the spoils of the Kremlin’s indiscriminate war in Ukraine, but even a 6th Form student would tell him that the only way to bring prices back down is to increase the world’s supply of oil and gas. It’s called Supply & Demand, Mr Marlow!
In fact, while the Ukraine war did cause gas prices to spike, the biggest factor has been the pressure put on fossil fuel companies across western nations in recent years to divest from oil and gas. This has cut the development of new fields, thus reducing supply while demand has continued to increase.
He finishes by saying the absence of any plans to invest in other, far more established clean energy sources such as wind and solar – which are attracting record investment around the world – is glaring.
If wind and solar really were so attractive, companies like BP and Shell would need no urging to invest. The reality is that they are only viable because of the obscene subsidies thrown at them.
I would suggest to Ben Marlow that he goes back to school to study A-Level Economics!