European energy companies are transitioning to renewables, while US firms focus on securing oil and gas supplies.
While European oil companies like BP and Shell have been promoting their shift from fossil fuels to wind and solar technology, major U.S. oil companies ExxonMobil and Chevron have been making significant acquisitions to ensure a steady supply of oil and gas in an uncertain world.
“Chevron and ExxonMobil and others are securing access to resources, especially in the United States,” said Ryan Yonk, energy analyst and senior faculty at the American Institute for Economic Research.
The purchase of Hess by Chevron provides access to Bakken sites in North Dakota and a field in Guyana.
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ExxonMobil also made a major acquisition, purchasing Pioneer Natural Resources for about $60 billion. This merger combines Pioneer’s assets in Texas’s Midland Basin with ExxonMobil’s holdings in the Delaware and Midland basins.
Gearing Up to ‘Meet Real-World Demands’ for Oil and Gas
“Anyone who believes that fossil fuels will be phased out of the market in the next few decades is deceiving themselves,” said Benjamin Zycher, energy economist and senior fellow at the American Enterprise Institute.
The Energy Information Administration (EIA) projects a modest but steady 0.7 percent growth in global demand for fossil fuels through 2050. However, energy executives believe that EIA projections underestimate the actual demand.
While reducing emissions is important, it should not come at the expense of affordable and reliable energy, according to Mr. Wirth.
Aside from resource access, other factors driving industry consolidation include higher interest rates and the need for larger companies to defend against regulatory actions and lawsuits.
As a result, the era of independent shale production may be coming to an end, with larger competitors acquiring ownership stakes from private equity companies. This consolidation aims to mitigate the boom-and-bust cycle that has characterized the industry.
The ‘Resource Curse’
However, the “resource curse” is a concern, as seen in Venezuela’s decline after transitioning to socialism. Stability is crucial for long-term investments in the capital-intensive oil and gas industry.
Despite the acquisitions, it is uncertain whether U.S. oil and gas production will significantly increase. Many companies are focused on maximizing production from existing wells rather than drilling new ones.
Instead of drilling more, Chevron and ExxonMobil have chosen to acquire companies already in production. This indicates a desire for stability rather than a significant boost in overall production.
Despite efforts to transition to renewable energy sources, why do U.S. oil companies like ExxonMobil and Chevron still believe in the future demand for fossil fuels?
Lenges. This has led to major U.S. oil companies like ExxonMobil and Chevron actively pursuing acquisitions to secure their position in the oil and gas industry.
Chevron recently announced its acquisition of Hess for $53 billion, adding to its operations in Colorado and Texas. This acquisition provides Chevron with access to Bakken shale assets in North Dakota and the Stabroek block in Guyana. Similarly, ExxonMobil made a significant acquisition by purchasing Pioneer Natural Resources for about $60 billion. This merger combines Pioneer’s assets in Texas’s Midland Basin with ExxonMobil’s holdings in the Delaware and Midland basins.
These acquisitions highlight the confidence of U.S. oil companies in the future of fossil fuels, despite efforts to transition to renewable energy sources. Benjamin Zycher, an energy economist and senior fellow at the American Enterprise Institute, dismisses the idea that fossil fuels will be phased out of the market in the next few decades. He believes that anyone who holds this belief is deceiving themselves.
According to the Energy Information Administration (EIA), global demand for fossil fuels is projected to experience modest but steady growth of 0.7 percent through 2050. However, energy executives argue that these projections underestimate the actual demand. Chevron CEO Mike Wirth emphasizes the necessity of oil and gas as a reliable and affordable source of energy. He states that while reducing emissions is important, it should not come at the expense of reliable energy supply.
In addition to securing resources, industry consolidation is driven by other factors. Higher interest rates and the need for larger companies to defend against regulatory actions and lawsuits play a role in the consolidation trend. Climate activists are increasingly using lawsuits to target oil and gas companies, alleging harm from global warming. Regulatory actions such as canceling pipelines and revoking drilling leases also contribute to the need for larger companies with more resources to withstand such challenges.
Overall, major U.S. oil companies like ExxonMobil and Chevron are actively acquiring assets to ensure a steady supply of oil and gas in an uncertain world. Their actions reflect their belief in the future demand for fossil fuels and the importance of affordable and reliable energy. While the shift to renewable energy sources is gaining traction globally, these companies remain confident in the continued relevance of fossil fuels in meeting real-world energy demands.
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