Summary
- Exxon Mobil spells out underpinning assumptions for dramatic expansion of oil and gas production.
- World energy needs are increasing; XOM claims fossil fuels needed to do the heavy lifting.
- Renewable energy largely irrelevant (XOM says 4% contribution by 2040); intermittent, storage inadequate, too slow.
- Society wants less carbon emissions but they must be reliable and affordable; XOM hopes carbon capture will solve the problem.
- Assumptions about renewable energy and emissions mean Exxon Mobil’s business model is fatally flawed, with serious consequences.
Once upon a time, only a select few had access to pearls of wisdom from the CEO of major corporations. Today, thanks to pioneering groups like Seeking Alpha and ease of data access, someone like myself in the Aussie bush can be figuratively “at the back of the room” when the CEO of Exxon Mobil presents at a banking conference in New York.
Here I reflect on a 4 September presentation Exxon Mobil (NYSE:XOM) Chairman and CEO Darren Woods. In this presentation Woods outlines the key underpinning assumptions on which XOM is basing its aggressive expansion of oil and gas exploration, which will mean dramatic expansion of greenhouse gas emissions as the products are consumed.
I reviewed the presentation and comments shortly after submitting a recent article in which I suggested that Exxon Mobil’s problems of its underperforming share price were structural rather than cyclic. The presentation by Woods was so at odds with my experience of the current status of new energy developments and climate issues, that I dug into key assumptions made.
Exxon’s 8 year plan is focused on oil prices and earnings on the basis of various scenarios involving just different oil pricing, nothing else. While one can argue that demand will affect price and indeed how much oil gets consumed, the plan shows no serious consideration that oil & gas might be under threat from competitors or by the need to reduce emissions.
The rationale for ignoring demand is that energy need is increasing and Woods goes into some detail in explaining why renewable energy isn’t a solution. Readers will appreciate that Seeking Alpha is an investment site and not a place for detailed comparisons of technologies. However, since a core plank of XOM’s business strategy, and the basis for dramatically expanding production of oil and gas, involves technology, it is important to examine whether assumptions made about renewable energy can withstand scrutiny. Here I briefly show that key assumptions made by XOM regarding renewable energy not being a competitor for its products, do not have a sound basis.
