Chevron made known Monday that it is purchasing Hess, an oil and gas business, for a stock exchange value of $53 billion. Subsequently, Exxon Mobil revealed it was taking oil business Pioneer Natural Resources under its wing for a stock exchange price of $59.5 billion. In a phone dialogue with CNBC on Monday, Larry J. Goldstein, the ex-President of the Petroleum Industry Research Foundation, asserted that "the large non-government companies do not anticipate that oil demand will be at an end in the near future."
On Monday, Chevron declared its intention of acquiring oil and gas corporation Hess for $53 billion in stock. This preceded Exxon Mobil's announcement just under two weeks ago that it would be purchasing oil company Pioneer Natural Resources for $59.5 billion in stock. On Tuesday, the International Energy Agency (IEA) published its annual world energy outlook report forecasting that demand for coal, oil and natural gas would reach an all-time peak by 2030–a prognosis Fatih Birol, the IEA's executive director, had already presented in September. In an accompanying written statement, Birol stated, "The transformation to clean energy is taking place across the globe and is unavoidable. It's not a matter of 'if' but a query of 'when'—and the sooner the better for all of us." Nevertheless, Chevron and Exxon are apparently planning for a different outcome than that predicted by the IEA. Larry J. Goldstein, former president of the Petroleum Industry Research Foundation and a trustee with the Energy Policy Research Foundation, commented to CNBC in a telephone interview on Monday, "The large companies — non-governmental companies — don't anticipate oil demand making a decline in the near future…They are devoted to the industry, to producing, to reserves, and to investing. They are in this for the long haul. They do not think that oil demand will be diminishing in the near term, and they anticipate oil demand being fairly large for the next two-five decades." This was corroborated by Ben Cahill, a senior fellow in the energy security and climate change program at the nonpartisan policy research organization, Center for Strategic and International Studies, who said to CNBC, "The debate over when 'peak demand' will happen is ongoing, however right now, global oil consumption is close to its peak. The major oil and gas producers in the United States are expecting oil demand to carry on for a considerable length of time."
Investment in clean energy is gaining traction around the world. According to a prediction from the International Energy Agency (IEA) in May, total investment in the global energy markets in 2023 is estimated to be $2.8 trillion, with clean technologies accounting for approximately $1.7 trillion of that sum. This leaves about $1 trillion for fossil fuels such as coal, gas and oil. Shon Hiatt, director of the Business of Energy Transition Initiative at the USC Marshall School of Business, explains that the continued demand for oil and gas is due to population growth, particularly in Africa, Asia and Latin America, and is a result of people ascending the socioeconomic ladder. Oil and gas are less expensive than installing clean energy infrastructure and are more easily transported.
According to Marianne Kah, senior research scholar and board member at Columbia University's Center on Global Energy Policy, electric vehicles may be popular, but they only make up one sector of transportation. Much of the transportation industry will still rely on fossil fuels. Speaking of this transition, Hiatt says that the big oil firms are assuming European oil majors will divest their global oil reserves due to policy changes, and that U.S. climate policies will not seriously limit oil and gas production domestically. Energy and Sustainability Lab director Amy Myers Jaffe adds that sanctions on state-controlled oil and gas companies, such as those in Russia, Venezuela and Iran, are providing companies such as Exxon and Chevron with a geopolitical opening. Lastly, Edward A. Goldstein, professor at the University of Massachusetts Lowell, argues that with the ever-expanding U.S. national debt, all kinds of subsidies will be under pressure, which will ultimately benefit the large financial oil companies.
As European and American governments limit the exploration for new oil and gas reserves, Hiatt noted that Pioneer and Hess possess desirable, existing reserves with potential for expansion and diversification for Exxon and Chevron. While deep water oil exploration can take five to seven years to exploit, Kah explained that 'tight oil' in shale rock, such as found in the Permian basin, can typically be brought to market in a timeframe of 6 months to a year, making it the ideal candidate in times of energy transition uncertainty. Both Exxon and Chevron are striving to cut costs and minimize risks by boosting the percentage of short cycle U.S. shale reserves contained within their portfolios, which gives them greater ability to respond to changes in fossil fuel pricing volatility, Jaffe indicated. Furthermore, Chevron's acquisition of Hess gave it access to Guyana, a low cost, near-to-home production region with high productivity.
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