Day after day, we continue to be hit with surprises that shock global economies. But perhaps some people had insights about what was coming. In 2016, the heirs of the American businessman John D. Rockefeller, founder of Standard Oil, announced that they will leave the hydrocarbon business.
“As the global community works to eliminate fossil fuel use, it makes little financial or ethical sense to continue investing in these companies.”
Although only a small part of the $130 million is invested in fossil fuels, the family said they would also divest themselves of their oil investments in Canada, noting that Exxon’s conduct on climate issues appears to be “morally reprehensible.”
What is going on with Big Oil?
The Rockefellers are synonymous with the great companies of the 21st century, but this week Big Oil is experiencing an unprecedented historical moment. Oil futures contracts plummeted and set off alarms in an industry that was already experiencing very complex times. On April 20, WTI crude futures hit a record low of $1.02 a barrel, then traded at a loss of $ 16.47, or 80%, at $16.47 a barrel.
The fall in oil prices and the reduction in production has put in check entire countries that depended almost entirely on oil activity. Here are there major considerations for the future of Big Oil.
1. It is increasingly difficult to obtain oil.
Fossil fuel extraction rates tend to slow down over time. Countries such as Mexico, Algeria, Venezuela, Argentina, Guinea, Indonesia, Norway and the United Kingdom have been declining for years now.
2. Surprise, it is expensive to get oil.
Hydraulic fracturing requires very high investments and has disastrous environmental consequences. And as we mentioned in the previous point, the quality of crude oil is decreasing.
3. We are going to have to make the energy transition eventually.
Oil is a non-renewable energy resource. Eventually, it’s going to end. At the moment we are still developing clean energy alternatives that meet the needs of large populations (wind energy, solar energy), but we have not succeeded. But technology advances day by day and eventually, another way will be found to empower the world that is not dependent on fossil fuels.
It is a golden opportunity for entrepreneurs who are looking for alternative solutions such as biofuels or even to revitalize the industry that is stagnant because the only truth is that we are extracting coal, oil and gas at an immensely faster rate than it can regenerate.