After BP CEO Bernard Looney announced record profits, the oil-industry executive defended the company’s decision to scale back plans to reduce oil production and carbon emission.
Key Details
- BP announced a $27.7 billion profit last year and, at the same time, announced changes to its plans to reduce emissions and scale back oil production.
- The oil giant’s previous goal had been to reduce emissions by 35% to 40% by 2030. Now the company plans to cut emissions by 20% to 30% in the same period.
- The gas producer’s plans had previously included intentions to scale back overall oil production, but BP now intends to ramp up production until at least 2025. Still, the company plans to achieve net-zero emissions by 2050.
- Looney defends his decision in a conversation with Fortune’s Alan Murray, saying that a transition away from oil is needed but “that transition needs to be orderly.”
- Looney explained that energy prices will spike if supply and demand are too off balance during the energy transition.
- “The energy transition needs to be orderly, because if it’s not, supply and demand get out of whack, you get what happened last year. Prices will skyrocket, and people around the world will be dealing with a cost-of-living crisis. We’re doing both—accelerating the energy transition, and ensuring the transition is an orderly one,” Looney says.
- In the last three years, BP’s investments outside of oil and gas have increased from 3% to 30%. BP plans to increase that investment to 40% in the next two years, Looney says.
Why it’s news
Oil and other fossil fuels are the lifeblood of the world economy. Where the trend is moving away from fossil fuels and toward cleaner-burning energy such as solar and wind, that transition will take years—and therefore a strong reliance on oil is necessary.
BP’s profits in 2022 were nearly double the previous year’s. The British oil producer isn’t the only oil company receiving criticism for high profit margins this year. Shell’s profit was $41.6 billion— more than $10 billion higher than its previous record. ExxonMobil posted a new high of $55.7 billion and Chevron $36.5 billion in profits, The Washington Post reports.
Many oil companies are under pressure from shareholder activists who propose resolutions to force companies to follow commitments from the Paris Accord on climate change. However, support among fellow shareholders for these resolutions is declining.
Dutch shareholder activist group Follow This proposed a resolution to Shell that would require the company to adhere to commitments made in Paris. Last year, a similar resolution garnered 30% of the vote, but it only received 20% this year.
BP’s decision to scale back has particularly shocked activists as the company has historically been aggressive on climate action. The company’s previous goals were set in 2020 and aligned with the Paris climate accord.
Notable quote
“People will not judge us on our words, they will judge us on our actions… People will believe us when they see us building out solar facilities, when they see us building out hydrogen, when they see us buying (biogas producer) Archea for $4 billion… While I understand that people are skeptical, I would encourage people to look at the facts,” Looney says.
