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May 26, 2021: A Day That May Live In Infamy For Big Oil

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May 26, 2021: A Day That May Live In Infamy For Big Oil

David Blackmon: Senior Contributor: Energy:

Wednesday was a quite an epic day for a trio of the world’s largest oil and gas corporations, and not in a positive way for their management teams. The C-suites at both ExxonMobil XOM -0.6% and Chevron CVX -1% suffered defeats at the hands of activist shareholders, while Netherlands-based Royal Dutch Shell was handed a major adverse decision from the Dutch courts. It’s hard to know which event will have the biggest impact on the respective companies – and potentially the industry as a whole – in the long-term, but in the short-term each presented a shock to the oil and gas system.

The adverse event of the day with the most obvious potential bite may well be the Dutch court’s decision ordering Shell to dramatically expand its plan to cut greenhouse gas emissions. Already one of the more aggressive major oil companies in this arena, Shell had earlier this year adopted targeted cuts of at least 6% by 2023, 20% by 2030, 45% by 2035 and by 100% by 2050 from its 2016 levels. But, as reported by Reuters, the court found that Shell’s plan was “not concrete and is full of conditions…that’s not enough.”

The decision orders Shell to cut its absolute levels of emissions, rather than its planned focus on reducing its carbon intensity. At the company’s recent annual general meeting, Shell CEO Ben van Beurden had firmly rejected an effort to cut absolute emissions, saying that the only practical means of achieving such a goal would be to actually shrink the company’s business.

Shell promised to appeal the decision to a higher court, but if it is upheld, it’s most obvious ramification would be to inevitably render the company less competitive with its group of peers who are not subject to similar mandates. More broadly, an ultimate upholding of this unprecedented decision could theoretically influence jurisprudence in similar lawsuits in other western democracies.

All in all, Wednesday was quite the day for Big Oil, one that may end up living in infamy not just for those three companies, but for the industry as a whole.

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