David Blackmon
British oil giant BP announced Monday that it is selling the business unit that manages its suite of U.S. onshore wind-power operations as part of its ongoing efforts to simplify its overall business and become more competitive with peer companies like ExxonMobil, TotalEnergies and Chevron.
In its release, the company said it will continue to invest in both solar and wind ventures through Lightsource BP, a joint venture in which it currently holds a 50% interest but plans to become 100% owner later this year.
When I published an analysis of this announcement by BP at the Substack I maintain, one reader asked: “Why in God’s name is an oil company spending billions of shareholder dollars on expensive, inefficient and intermittent energy sources? Who runs these companies?”
It is a good question, one that I and others who write about energy in the current rather bizarre societal atmosphere are asked quite often. It is also a question often asked of the executives themselves, in many instances by shareholders and investors who are disappointed at the poor returns such intermittent energy projects tend to generate in comparison to the companies’ core oil-and-gas business investments.
For the executives, it is a hard one to answer directly, mainly because somebody is going to be angry regardless of how they respond. So, they will typically rely on their investor relations, legal and communications teams to provide them with a non-answer answer that tries to please everyone without really saying anything of substance. This is what is known as “bridging” the question.
It is much easier for me, mainly because I don’t have shareholders or big investors to please, and the First Amendment still exists despite the best efforts of the Biden-Harris administration and the censors at LinkedIn, where I was suspended this week for reasons still unexplained to me. Clearly, the answer to my reader’s question about why major oil companies continue to spend billions of capital dollars on low-return investments in wind and solar is two-fold: Government policy and media pressure.
Government policy in the Biden-Harris regime consists of a central planning carrot-and-stick approach of providing big subsidies and tax breaks related to investments in the client industries of the Democratic party — wind, solar and electric vehicles — combined with mandates, penalties and fines for failing to do so. Those carrots are all the hundreds of billions of dollars in subsidies and tax breaks in the Inflation Reduction Act, for which Vice President Kamala Harris boasts about having provided the decisive vote.
The sticks include things like electrification goals, portfolio emissions restrictions, tailpipe emissions standards and pressure from a media establishment that largely functions as the Democratic Party’s propaganda arm, as former President Donald Trump discovered one more time in his recent 3-on-1 debate hosted by ABC.
Senior executives like BP CEO Murray Auchincloss, Chevron CEO Mike Wirth and ExxonMobil CEO Darren Woods must perform a delicate balancing act between pleasing shareholders and investors and not overly irritating regulators and politicians — who could do their companies great harm — while also striving to ensure their remarks and actions do not attract unfavorable media attention to their companies. Making matters even more delicate, unfavorable media attention can negatively impact either or both of the other legs of this three-legged stool in negative ways. This is no easy feat, and it is a constantly evolving equation they must keep top of mind seven days a week.
I don’t pretend to be a mind-reader, but it seems logical to believe that most of these oil company CEOs would prefer to be operating in a political, legal and investment environment in which they could simply focus 100% of their efforts on maximizing the profitability of their core oil-and-gas business ventures.
After all, they have a fiduciary duty to maximize returns to their investors, and focusing their capital budgets on core oil-and-gas operations is clearly the most effective way to carry out that duty.
But that is not the environment in which any of them operate today or are likely to operate at any time in the future. So, they do the best they can with the hand they’ve been dealt. Trust me, it is no easy task.
David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.
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