The impossibility of throttling Big Oil through fossil fuel divestment campaigns was laid bare last week when ExxonMobil announced it was acquiring Pioneer Natural Resources, the #1 driller in the #1 producing U.S. oilfield, the Permian Basin.
In a transaction priced at $59.5 billion, Pioneer shareholders will receive slightly more than 2.3 shares of ExxonMobil stock for each Pioneer share. No banks are involved, no debt, no third parties; and, most noteworthy, no cash. Pioneer’s management evidently holds Exxon’s current and future financial strength in such high regard that it was willing to sign on to an all-stock deal.
Had it been necessary, though, Exxon could have bankrolled the entire acquisition using cash generated by its sales of petroleum products to U.S. and world motorists, truckers, air travelers and shippers. Last year alone, Exxon generated more than enough cash flow, $76.8 billion, to buy Pioneer outright. Its market capitalization stands at $450 billion, triple the lows during the 2020 pandemic year and higher than the $400 billion in 2012, when climate author-activist Bill McKibben kicked off the divestment movement with his Rolling Stone manifesto, Global Warming’s Terrifying New Math.
McKibben was admirably candid about wanting to “make clear who the real [climate] enemy is”: the fossil-fuel industry, led and epitomized by the oil-and-gas giant ExxonMobil. The eleven intervening years have cemented Exxon’s standing as Big Oil incarnate. Not only is Exxon the industry’s most technologically proficient and politically connected member, it’s the one that for decades sowed disinformation about climate change even as its own scientists advised management to fortify the company’s drilling platforms against rising seas.
Unsurprisingly, “Exxon Knew” ranks high among contemporary climate-protest slogans. And the company certainly merits every ounce of opprobrium directed at it. Divestment was a righteous idea, but it has proven futile.
The Pioneer acquisition should be a wake-up call. If the wave of divestments over the past decade by universities, philanthropies and pension funds had genuinely dented oil industry prospects, Exxon’s stock wouldn’t have had the cachet to lure Pioneer into an all-stock purchase. Nor would Exxon have been able to pull off a Plan B of forking over $60 billion in cash. The ease of the acquisition puts the lie to divestment’s starve-and-shame paradigm intended to dry up dollars and discredit industry brands.
Pressuring institutions to divest from fossil fuels never made much sense as a pro-climate strategy. Targeting any one oil company was never going to be able to restrain carbon emissions. No single company supplies more than a small slice of the world’s petroleum.
Indeed, as Bloomberg News reported last week, even with Pioneer, Exxon will account for only 15 percent of Permian Basin extraction and a far smaller share of world oil production — three or four percent, according to my calculations. At that modest scale, a hole in any one company’s finances would simply make room for others.
Divestment’s futility actually went deeper, though. In the oil business, access to capital markets matters hardly at all. Most of the time the industry is flush with cash. Just about everything it does — exploration, extraction, pipelining, refining, selling — is self-financing, paid for by the ceaseless ka-ching from sales of gasoline, diesel, jet fuel, bunker fuel and other petroleum products, not to mention natural (methane) gas, which in 2022 provided nearly three-fourths as much primary energy worldwide as petrol, according to BP’s 2023 Statistical Review of World Energy (covering 2022).
To be fair, divestment campaigning did appear to penetrate Exxon’s inner sanctum in 2021, when the activist hedge fund Engine No. 1 succeeded in electing three directors to ExxonMobil’s 13-person board. “Exxon’s Board Defeat Signals the Rise of Social-Good Activists,” trumpeted the New York Times headline reporting the surprise incursion. Yet the ideological impact, if there was one, was short-lived. All three insurgent members backed the Pioneer acquisition, the Wall Street Journal reported last week.
Indeed, in the Journal story, Charles Penner, architect of the Engine No. 1 campaign, says the Pioneer deal “shows Exxon had heard some of the campaign’s critiques and changed its approach to focus on returns instead of costly megaprojects more dependent on long-term demand.” Oof. The story has nothing from Engine No. 1 on Exxon’s present or future complicity in climate-damaging emissions generated from its products. And nothing in its detailed portrait of CEO Darren Woods suggests that worries about divestment ever cost him a moment’s sleep.
What To Do?
There are so many climate campaigns needing and deserving of the energies now squandered pursuing fossil-fuel divestment. I suggested a few of them in The Climate Movement In Its Own Way, my April 2022 article in The Nation (reposted here at CTC). Here’s a top-10 list (in no particular order):
- Policy campaigns to curb motor vehicle size and weight
- Organizing to expedite up-zoning in cities and suburbs and otherwise promote housing density
- Advancing walkable, bikeable and transit-oriented communities
- Restricting and overcoming NIMBY power to block wind farms and solar arrays
- Supporting the operability of existing, well-functioning nuclear power plants
- Advancing congestion pricing and other road-pricing / traffic-pricing proposals (valuable for themselves and as templates for broad carbon-emission pricing)
- Taxing extreme wealth, to both attack luxury emissions and promote social solidarity needed to tackle carbon consumption
- Shrinking the local, state and national reach of the world’s sole major climate-denying political party (whose dysfunction is currently in especially plain sight, as NY Times columnist Jamelle Bouie trenchantly documented this week)
- Reducing animal agriculture through both culture and policy change
- Advancing or at least keeping alive the idea of robust carbon pricing at the state and especially national level
Note that all of the above measures, except perhaps #8, attack carbon and other greenhouse gas emissions from the demand side, insulating them from the all-too-real whack-a-mole syndrome that undermines most supply-side climate campaigns due to global substitutability by which increased drilling “there” offsets halts to drilling “here.”
Missing from the list: abetting the electrification of cars, trucks, cooking, heating and industry. Why not? For one thing, “electrify everything” has no shortage of NGO advocates like Rewiring America, and, thanks to President Biden’s Inflation Reduction Act, it enjoys generous federal subsidies. For another, decarbonization of U.S. grids is far from complete and, in many states and regions, painfully slow.
Here in New York City, CTC’s home territory, fossil fuel burning today generates more than 90 percent of all electricity (see graphic from Nuclear NY), down from 70 percent since the 2020-2021 closure of the downstate grid’s only large-scale non-carbon generator, the Indian Point nuclear plant.
As a result, rarely if ever is the incremental electricity that my grid calls on to recharge EV’s or energize electric heat pumps generated from a non-carbon source. The same is true at present in much of the United States. Electrification, an essential long-term program, is not yet a carbon-eliminating panacea .
Want to hurt Exxon AND fight climate change? Work to bring robust carbon pricing back into the national policy conversation. A meaningful carbon price — one that quickly ramps up to triple digits per ton of CO2 — will crimp the oil business, the coal business and the fossil-gas business, harming the fossil fuel industry’s shareholder value and political power, while effectuating steady and significant reductions in combustion. And, when considering the to-do list above, keep in mind that robust carbon pricing (#10) enhances all of the others.
Addendum: Two days after posting, we learned that Chevron is acquiring oil giant Hess Corp. in another all-stock deal, this one valued at $53 billion.