The Climate Chap: Money for nothing

24 Apr, 2023

OPINION

Yes, a great Dire Straits number, however, recent developments in the oil industry have added a whole new dimension. In the past year the major oil companies have achieved simply unbelievable profits. ‘How much’ I hear you ask? The leading five companies – Shell, BP, Chevron, Total and Equinox (Norway) – generated profits of over NZ$348,000,000,000. That’s NZ$348 billion!

It's hard to visualise that amount, so let’s make it easy. That’s approximately NZ$700,000 profit for every minute of every hour of every day in 2022. You could buy 10 lovely new Tesla’s, or treat yourself to almost 60,000 coffee and scone combos at Bennett’s every minute. And that’s not including Saudi Aramco, the world’s largest company, who reported profits of NZ$207 billion on their own, and that was just for the first nine months of 2022. Just think how many leading football clubs they can buy with that much dosh.

Most of the profits however have not gone to investing in renewable energy – the future for these wealthy companies – but over 50 percent into dividends and buying back their own stock. Of the remaining profits most have been spent investing in more fossil fuels and sadly only a minute investment in renewable energy.

The global oil industry has always been profitable, but never to this degree. ‘Windfall profits’ indeed. Money for nothing.

Over recent decades there has been a delicate balance firstly between global supply and demand, but also the exploration and drilling for oil and the refinery capacity. Added to this has been politics whereby many of the leading oil producers strive to protect their oil reserves, minimise exploration costs and keep prices high. The OPEC nations reduce supply when demand reduces, as happened with the Covid lockdowns, so prices remain stable. The refineries are frequently operating at over 95 percent capacity as are the oil tanker fleet, so even if producers wanted to urgently increase supply it would be near impossible to readily achieve.

So how has this all come about so suddenly? In a word: Russia. With Russia’s ‘military exercise' in the Ukraine underway, their ability to export oil came to a sudden halt… in the west. However, they continue to be the world’s second largest oil producer and have successfully redirected their oil exports to Asian nations, and especially China and India, two of the fastest growing economies and the two largest populations by miles. Russia is also the fifth largest oil consumer, so remains self-sufficient. It is hard to believe that Russia would have staged this horrendous war without the guarantee of ongoing oil sales, aided by offering these customers significant discounts of around $30 a barrel.

Amazingly profits would have been even greater but for many oil companies exiting Russia at huge losses.

What’s a barrel? Around 160 litres, enough to fill four cars with an average tankful of 40 litres.

Many of the leading oil companies are now predicting that their production will be the same or greater come 2050. This is simply remarkable when you consider that just about every nation on the planet has committed to vastly reducing their dependance on fossil fuels to reduce the negative impacts of climate change by then.

Please remember that whereas petrol is the major derivative of oil – followed by diesel and biofuels – oil forms the basis for literally thousands of industrial and consumer products so will be needed for decades to come. Aotearoa is striving to be ‘carbon neutral’ by 2050, and not ‘zero carbon emissions’.

So how are we going with reducing our dependance on petrol? Not too good. We have closed our only refinery, therefore now totally dependent on international supply and pricing. We have just abandoned our plans for biofuels. Chippy continues to subsidise the cost of petrol. Good for our pockets, but by making petrol less expensive decisions to invest in EV are delayed.

Sadly the installation of public EV charging stations is progressing at a snail’s pace. We still only have the one charging point outside The Hub, and seldom used. Z are planning to have no less than 40 charging stations nationally soonish. We now have a massive total of 340 nationally – one new installation a week over the past six years.

Petrol subsidies are causing consumers to delay investing in electric vehicles. PHOTO/STEVE GREEN