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After a profitable year, some oil companies are slowing their pivot to renewables

AILSA CHANG, HOST:

Scientists say that the world urgently needs to cut its reliance on fossil fuels in order to reduce the catastrophic impacts of climate change. But the companies that pump those fossil fuels aren't exactly racing to get out of the business. In fact, they made huge profits last year by staying the course and sticking with oil. And some companies that had planned to make so-called green pivots are slowing down. NPR's Camila Domonoske joins us to talk about what this means for the world. Hey, Camila.

CAMILA DOMONOSKE, BYLINE: Hi, Ailsa.

CHANG: OK, so what is going on with oil companies and these so-called plans to invest in renewables?

DOMONOSKE: Yeah, let's talk about BP because this made some headlines. BP had a plan to shift from being an oil company to an energy company, and it did actually invest some money in renewable energy. But last week, they announced a shift in strategy, at least somewhat, slowing down the timeline for reducing oil production. I mean, they're putting more money into oil and natural gas this decade than they had been planning to do.

Now, to be sure, lots of oil companies never had any plan to pivot to renewables in the first place. And those that did, there were lots of concerns about greenwashing or very small investments relative to oil. But where there was appetite to do this in the oil industry, there are indications that it's dropping. The consulting firm Accenture did surveys several times with oil companies asking, hey, are you planning to radically reinvent your business model? And last year, the number of companies that said yes actually dropped by half.

CHANG: Wait, wait, why?

DOMONOSKE: Well, one obvious point - the demand for oil is there, right?

CHANG: Yeah.

DOMONOSKE: The world uses huge quantities of oil and natural gas today, every single day. And when oil prices are high, like they were last year, pumping oil is incredibly profitable. So to go back to BP, its big plan was to invest in renewable energy, but its renewable projects just haven't made as much money as oil and natural gas make. So the stock market punished BP for leaving money on the table. The stock really struggled. Dan Pickering is an energy investor and an analyst.

DAN PICKERING: The market is a moneymaking animal. And so when they said we're going to spend a little bit more in oil and gas, the market applauded that.

DOMONOSKE: That is to say BP's stock went up after this announcement that investors interpreted as being a recommitment to oil and gas.

CHANG: OK, I get it. In the short term, oil is profitable, but what does this mean for the future? Like, do oil companies think the world will just go on using oil and gas indefinitely?

DOMONOSKE: Yeah. What I think is really interesting, right now, even oil executives are talking a lot about an energy transition, the idea that the world will shift away from oil and gas. That's really different than just a few years ago, right? They talk about climate change a lot. But when it comes to the idea of shifting away from oil and gas, there is a major disagreement on the timing, with the oil industry arguing that this will take a very long time.

So on the one hand, you have an idea of a very rapid transition, reducing emissions as quickly as possible, which is still a couple of decades but just a couple of decades, right? That would be expensive and disruptive. It would mean higher energy bills for people today, but it would save money and save human lives in the future by reducing climate impacts more. On the other hand, you have a more gradual transition, a slower change that releases a lot more CO2. It would be cheaper and easier. Today, it would obviously be more profitable for oil companies, but it would mean a much bigger price paid in the future.

CHANG: Sure.

DOMONOSKE: So based on investments, right now, oil companies are betting on a slow change.

CHANG: Well, what does that mean for efforts to fight climate change then?

DOMONOSKE: This is a bet. It could be right or wrong. It depends on how fast demand actually goes down. On that point, you know, today, European lawmakers put the finishing touches on a law that would ban the sale of new gas-powered cars in 2035. There's the same in California.

CHANG: That's right.

DOMONOSKE: So things change fast sometimes, but it's not clear who's going to be right in this question about the future.

CHANG: That is NPR's Camila Domonoske. Thank you, Camila.

DOMONOSKE: Thank you. Transcript provided by NPR, Copyright NPR.

Camila Flamiano Domonoske covers cars, energy and the future of mobility for NPR's Business Desk.

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