Extreme Temperature Diary- Thursday February 4th, 2020/ Main Topic: The Oil Industry Bleeds Money

The main purpose of this ongoing blog will be to track United States extreme or record temperatures related to climate change. Any reports I see of ETs will be listed below the main topic of the day. I’ll refer to extreme or record temperatures as ETs (not extraterrestrials).😉

Main Topic: The Oil Industry Bleeds Money

Dear Diary. I’m not a health care professional, yet I do know that if a patient looses too much blood, say from a trauma, and they can’t receive an infusion, they will die. That’s very unfortunate and heartbreaking for families contending with a loved ones auto accident, yet some entities in this world deserve to expire. The oil industry received a blunt trauma from COVID-19 like the rest of us in 2020. Now it appears that without a giant infusion of more cash, and if they don’t change their business models, many oil companies will expire.

For decades, like an old vampire, many oil companies have been biting into government subsidies to keep afloat, if not to also tremendously increasing their profitable bottom line. Starting in 2020 they are loosing because of the loss of A) demand. Now with GM’s announcement of stopping production of internal combustion engine cars by 2035 they will loose B) market share. At some point soon the Biden Administration could cut off C) government subsidies.

To make matters worse D) sunlight is starting to shine, uncovering corruption that has also gone on between governments and oil companies. Vampires can’t stand that light. Please read Rachael Maddow’s 2019 book Blowout to see how filthy petroleum and natural gas related corruption has gotten.

Well, the old oil vampire isn’t dead yet by a long shot, but is starting to get nervous that it can’t victimize us that much longer. For many more specifics on today’s main topic here is a New York Tines piece from this week:

After a Bruising Year, the Oil Industry Confronts a Diminished Future

Big oil companies lost billions in 2020 because of the pandemic and face broad questions about how they will adapt to climate change and regulations.

A Total refinery in Port Arthur, Texas. Even with a dim view of the future, there are signs of a recovery in the oil industry.Credit…Brandon Thibodeaux for The New York Times

Clifford Krauss

By Clifford Krauss

  • Feb. 2, 2021

HOUSTON — Big Oil isn’t so big anymore.

Exxon Mobil, BP and other large oil companies collectively lost tens of billions of dollars last year, posting their worst performance in years and, for some companies, in decades.

The pandemic was largely to blame. It sapped demand for gasoline, diesel and jet fuel as countries and states locked down and people stayed home. But such painful years could become more commonplace as growing concerns about climate change, tighter regulations, and the rise of electric cars and trucks force a reckoning for an industry that has dominated the global economy over much of the last century. General Motors further raised the stakes for the industry last week when it said it aimed to do away with internal combustion engines and sell only electric cars by 2035.

The oil industry is slowly transitioning to a future dominated by cleaner energy. BP, Royal Dutch Shell, Total and other European companies are investing considerable resources in offshore wind and solar energy while cutting back on oil. But those investments are unlikely to pay off for years, maybe even a decade or two.

The American oil majors have been far slower to pivot from fossil fuels, but they are feeling increasing pressure from investors to change their business models. Exxon said this week that it was investing $3 billion in a new business called Low Carbon Solutions, which will initially focus on carbon capture and sequestration projects.

On Tuesday, Exxon reported that it lost $22.4 billion in 2020, compared with a profit of $14.3 billion in 2019. Much of the loss came from a $19.3 billion write-down of assets, including natural gas operations that the company acquired when energy prices were much higher.

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And BP said on Tuesday that it lost $5.7 billion last year — its first loss in a decade. The company made a $10 billion profit in 2019. Now the company is cutting at least 10,000 jobs from a work force of about 70,000 people and selling some $25 billion in businesses it decided it didn’t need anymore.

Conoco Phillips, the largest American independent producer, lost $2.7 billion for the year. Chevron said last week that it had lost $5.5 billion, down from a profit of $2.9 billion in 2019.

Still, oil executives tried to strike an optimistic tone when speaking about the future, arguing that their business would bounce back in 2021 as vaccine distribution accelerated and economic activity recovered from the depths of the pandemic.

“We see more opportunity down the road,” Darren W. Woods, Exxon’s chief executive, who normally skips the company’s quarterly conference call with Wall Street analysts, said on the call Tuesday. “I feel good about where we are today. As I look at the first quarter we are already ahead of where we thought we would be.”

Through much of the last year, investors soured on Exxon, and Wall Street was rife with rumors that the company would slash its dividend to preserve cash. The share price had plummeted by roughly half from early last January — sinking as low as $31 in November, its lowest level in nearly 20 years.

But Exxon’s share price has climbed back to about $46, principally because energy prices have recovered strongly in recent weeks. Oil prices are up by nearly 10 percent this year, and the blizzard in the Northeast is driving up natural gas prices because the fuel is used to heat homes and businesses. Exxon’s dividend now appears safe. And aside from the write-downs, Exxon made a small profit in the last three months of the year.

“The industry has been to hell and back,” said Michael C. Lynch, president of Strategic Energy and Economy Research. “They’ve mostly survived the worst circumstances they have ever faced, and it’s all but certain things will look up from here in terms of price and demand.”

Goldman Sachs has predicted that oil prices could rise another $10 a barrel, to as high as $65 by July. That would be a remarkable recovery from prices that languished at less than half that for much of 2020, though it would remain far below prices of a decade or so ago, when a barrel of oil surpassed $140 and oil companies were making record profits.

The industry has suffered repeated shocks in recent years, with prices plummeting during the recession that started in December 2007, again in 2015 when OPEC flooded the market with crude to undercut American production, and last year, when the pandemic took hold.

The industry’s pain forced many companies to lay off employees and cut dividends. Dozens of once high-flying businesses, like Chesapeake Energy, declared bankruptcy in recent years.

Even now, when conditions seem to be improving, the industry’s prospects remain uncertain. Because of the emergence of new coronavirus variants, it is not clear how quickly the United States, Europe and other major economies will get virus spread under control. And then there are the larger questions about climate change.

BP’s chief executive, Bernard Looney, has pushed his company to invest heavily in areas like offshore wind farms and hydrogen production to prepare for a world that uses less oil and gas. But he acknowledged on Tuesday that the payoff from some of these investments might not come until the 2030s and that the company would remain reliant on oil and gas for its profits for some time.

Still, Mr. Looney said in an interview on Tuesday that he welcomed President Biden’s commitment to fighting climate change. The new president has signed executive orders directing the government to raise fuel economy standards and limit new oil and gas drilling on federal lands.

“That is one of the good things about being a company in transition,” Mr. Looney said.

Exxon has taken a different tack. But even its chief executive appeared to acknowledge that the industry was in for more turbulence.

“We don’t know where prices are going to go,” Mr. Woods told analysts. “Our plan is to rebuild the balance sheet so we can be in a position going forward to absorb any shocks that come in the future.”

Stanley Reed contributed reporting from London.The Energy Industry in Transition

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Clifford Krauss is a national energy business correspondent based in Houston. He joined The Times in 1990 and has been the bureau chief in Buenos Aires and Toronto. He is the author of “Inside Central America: Its People, Politics, and History.” @ckrausssA version of this article appears in print on Feb. 3, 2021, Section B, Page 1 of the New York edition with the headline: For Big Oil, Huge Losses And Pressure About Future.

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Here are more climatological notes:

Here is some more weather and climate news from Thursday:

(As usual, this will be a fluid post in which more information gets added during the day as it crosses my radar, crediting all who have  put it on-line. Items will be archived on this site for posterity.

Now here are some of today’s articles and notes on the horrid COVID-19 pandemic:

(If you like these posts and my work please contribute via the PayPal widget, which has recently been added to this site. Thanks in advance for any support.) 

Guy Walton…”The Climate Guy”

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