~Dear Chevron

 

Secure Retirement Financial encourages constructive debate. Comments are welcomed.
The personal opinions expressed here may not represent company viewpoints.

 

September 2021
By Peter Eriksson
IT and Trading Specialist (not an Investment Advisor)

Dear Chevron,

Since your world-headquarters building is almost adjacent to our office, this letter is meant as a warm hello from a friendly neighbor. If you ever run out of coffee, paper clips, scotch tape, whatever, just let us know because we have plenty.

First of all, Chevron, congratulations are due on behalf of you recently-announced “New Energies” division. This is a gratifying development, especially given the latest horrific climate reports. From your media release: 

“Chevron's New Energies’ initial focus will include commercialization opportunities in hydrogen, carbon capture, and offsets and support of ongoing growth in biofuels."

If you don’t mind a friendly inquiry, Chevron, many of us are curious about your inner workings, your culture and identity, what makes you tick? Which master-strategies drive your tactical eco-decisions, each with its own pivotal, far-reaching effect?

I can appreciate the mind-boggling complexities and pressures you must be dealing with in the context of our global energy transition. As a corporation, everything you undertake must have economic viability. This is a basic concept so often ignored by those social and political groups who push for rapid change. 

In a previous, simpler era, viability planning meant meant estimating profits/costs for oil and gas exploration, production, and decommissioning infrastructure. Now you are expected to fund massively expensive environmental projects with uncertain returns on investment. And the revenue must come from existing oil and gas projects. 

I began my online quest looking for historical insights. And through this lens, it struck me that the 1970’s may have been an especially formative decade for domestic oil companies. Why? Because this tumultuous era had challenges with interesting parallels to our own— for example its painful oil embargo. Though proving premature, apocalyptic projections of Peak Oil and Silent Spring were also in vogue at the time. 

And, because of the sudden fuel shortage, petrochemical companies were blamed for many things– including weather patterns. (Doesn’t that sound familiar?) As millions of Ford Pintos,  AMC Hornets and Datsuns waited in gas lines that stretched ever longer, there were increasingly strident, angry demands for alternate energy sources. 

I’m sure you recall, Chevron, how oil supermajors saw the writing on the wall, diversified their holdings and made huge bets on solar and wind-turbine technologies. The problem was, those nascent renewable industries, still in their infancy, proved unprofitable at the time, and were eventually sold at heavy losses. BP alone declared a hit of $10 billion ($70 billion in today’s inflation-adjusted dollars). It seems you were more private about your own write-downs, because I couldn’t find any numbers.

All this makes me wonder if, as the saying goes, “once burned, twice shy”? Meaning, could this backdrop give us insight into your historically reticent boardroom psychology? In other words, has this history contributed to what some might term an overly cautious approach to renewables? Because it must be said– solar and wind are noticeably absent from your New Energies’ stated focus. 

At any rate, this brings us to our present Déjà vu. History is repeating itself—and the public is again clamoring for alternative sources of energy. In response to intense pressure to “keep it in the ground”, oil company exploration projects are downgraded or walked away from. There is a common theme of downsizing, consolidation, lower risk. 

Yet I came across another, quite troubling fact. This trend may actually have unintended consequences for the environment. The reason is because unregulated and secretive National Oil Companies are filling the void, and gleefully exploiting those abandoned reserves.

As described in this recent Bloomberg article:

[“…It’s an unmistakable trend that’s drawing heightened attention to some of the largest and most secretive entities in the world. Many government leaders are seeking to lower planet-warming emissions, with nine of the10 biggest economies staked to net-zero goals. At the same time, these opaque government-sponsored oil producers — insulated in most cases from both investors and environmentalists, and under little obligation to disclose climate data — are taking over the job of filling the millions of barrels consumed each day.”]

It appears that, in a twist of bitter irony, the accelerating trend toward fossil fuel divestment may actually contribute to global warming, pollution and geopolitical risks. Why? Because it increases the market share of secretive, unregulated, ecologically destructive state-owned oil companies. This world is indeed a complicated place.

Yet on the subject of divestment, is there any alternative to a sustainable energy transition? To most people, the answer is simple. Climate change is already here, in the form of enormous wildfires and catastrophic weather. Chevron, I know you agree. We cannot let our children inherit a dystopian future simply because of profit motives and half-hearted rationalizations.

That’s why I’m sure you realize that eliminating fossil fuel subsidies and carbon pricing are urgent. At present, renewable energy is cheaper than fossil fuels. However, fossil fuel is still several times more profitable. This is likely why expenditures on renewable energy projects average only a miniscule two or three percent, if you examine global oil companies’ total budgets. It’s equivalent to dipping one single toe into the water, though Europe appears to be far ahead of the US in renewable investment.

Intriguingly, Chevron, my research seems to show that, out of the global Big Seven (BP, Chevon, Eni, ExxonMobil, Royal Dutch Shell, and Total), your own budgeting for sustainability has hitherto been the laggard, only averaging one percent. Is this true? If so, I’m glad you’re leaving that dubious distinction behind you– and am confident you’ll fund your new progressive division generously. 

However, according to the International Energy Agency, those renewable expenditures of even two or three percent need to be at least double that amount to avoid climate disaster. I’d advise your shareholders to shout even louder that they value climate action over slightly higher returns, don’t you agree? Wouldn’t economy of scale lead to higher dividends from those investments anyway?

Perhaps I’m oversimplifying what must be an incredibly complex situation for you, Chevron, given your corporate profit mandate and a thousand other pressures. I can sympathize (and I mean this in a genuine, non-snarky way). You don’t tend to get much love from your customers. So let me take this opportunity to express some appreciation for a change– to acknowledge your hardworking people, to recognize the extreme lengths they must sometimes go to in pursuit of the energy we all must have.

A good friend of mine worked in oil fields– so I’m aware how incredibly grueling that kind of job can be. I’d guess top management might be even more stressful, having to make huge judgement calls on where to roll the dice next. As a rule, your customers tend to ignore what’s behind the fuel they use. And yet, integral to our very lives, the energy you’ve long supplied is often the difference between life and death itself.

I think it’s time for a group hug.

In all seriousness though, when regarding you from this wider perspective, an eye-opening fact strikes me– one that seems to contradict the many accusing fingers pointed at hydrocarbon producers these days.

The truth is, those secretive government-owned oil companies mentioned above could be sanctioned if they flout regulations. Yet the resultant loss of energy and raw materials might force oil consumers, including environmentalists like myself, to take a hard look in the mirror. Meaning, there seems to be an intensely personal aspect to our global crisis.

And it comes down to this. Maybe we as individuals need to own up and take personal responsibility for our “more, bigger, faster, more convenient” lifestyles. Pointing this out won’t make me popular at parties. It’s also why this blog-letter is doomed to obscurity– nobody likes being preached at and it’s understandable. But think about it. If we didn’t require next-day delivery for an ever-increasing amount of frivolous stuff, oil companies could no longer be scapegoated for simply being agents of supply and demand.

Maybe I’m digressing here, Chevron, but I need to let off a little steam. It’s not directed at you, so please just bear with me for a minute. Time to get Dead Eco-Serious on the public at large (even though what might sound like condemnation is really meant to be a wake-up call to myself). Ready? OK, deep breath.

Look, everyone. It’s time to own what we condone. It’s more than just retail. Our society admires, adores, worships people who self-indulge in flagrant, supremely wasteful excess. That’s nothing new– we’ve always enjoyed watching “over the top” extravagance. But given how much is at stake, maybe it’s time to stop giving disgustingly conspicuous consumption a free pass, let alone its typical sugar-coated sheen of glamour.

You can afford it. That doesn’t always mean you should buy it. A movie star piloting his empty 707 everywhere for fun should not be gushed over like a heroI’m all for freedom to choose your lifestyle, but not at the expense of our children. The abovementioned example might be only a drop in the bucket when compared with commercial aviation, yet a tidal wave is made up of drops.

If we stop idolizing such behavior in our cultural and corporate icons, it could help lead to the tipping point in mass-awareness so desperately needed. Striving and talent should indeed have their reward, but not to such an obscene and harmful degree. The world has gotten smaller and our actions make much more of a difference now. In order to reduce mass extinctions, moderation and conservation must become more fashionable. Maybe if we withdraw our stamp of approval, egregious environmental offenders will get the message. 

It’s not just the super rich. We each vote for our planet’s future every day, with what and where we purchase. Obviously big-ticket items require vastly more resources to ship, let alone manufacture and use. Yet lots of smaller consumables add up to the same thing, because widespread, truly green trucking, railways, cargo planes and container ships are decades away at best. So let’s try to buy closer to home more, supporting local farms, manufacturing, artisans and merchants. If we each switched to even one local purchase a week, like from a farmer’s market, it’d make a huge difference. Small, reasonable but sustained actions, that’s all. 

Let’s strive for nice things, live the good life, treat ourselves to luxuries… but also try and remember the polar bears once in a while. Yes, this is a real, three month old cub in a zoo. As we all know, they will soon be gone unless we drastically curb greenhouse emissions. 

To save them we might not need to slow our economy– just refocus it to some appropriate degree, devoting only a fraction of that destructive consumption toward hundreds of regenerative projects such as reforestation. At the very least, this could take the form of everyone simply tithing five or ten percent of their disposable income to their children– in the form of donations to effective climate causes

There are cynical arguments, for example that emerging countries are creating a vast demand for cars, washing machines etc– which negates what we could hope to accomplish by reducing our own consumption. Yet new technologies may prove such attitudes to be based on false assumptions. Even more importantly, I have a hunch most of us suspect, deep in our hearts, that every such defeatist, indifferent, self-serving rationale adds to the ugly, molten core of our global crisis.  

So how about it, Chevon? I’m game if you are..? Less share buybacks, more trees? 

Sorry for the lecturing.  On the other hand, maybe more of us quiet, deferential, mild-mannered environmentalists need to start talking a little louder these days, on behalf of that little bear who can’t speak at all.  

At any rate, I hope you feel this letter has at least attempted to present a balanced viewpoint. And good luck with New Energies. Some may still feel you’re not quite off the hook for climate disinformationpollution and complacency, but hey, that’s all in the past, right? And what’s a few shortcomings between friends?

That’s why I’d like to invite you over for tea and cookies. Maybe we can all talk about the weather, and even discuss investments in renewable energy? After all, that may be the single most effective thing anyone can do for our lonely planet, right?

Peter Eriksson
peter@secureretire.com

Again, the views expressed here do not represent Secure Retirement Financial Services in any way.

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