The Economist

FEW symbols of the oil industry are as familiar as the pumpjack, or “nodding donkey” (pictured). The technology is little changed since it was invented in 1925, and in some mature onshore fields it serves as a constant reminder of the world’s insatiable thirst for oil—until recently, about one-sixth of American crude came from the tiny “stripper” wells that it usually pumps. It is also a metaphor for how oil-company bosses have responded to the risks of climate change. Every so often they put their heads up and survey the future, only to bury them again. In the run-up to climate-change negotiations in Paris, starting at the end of this month, the industry’s willingness to stare the issue squarely in the eye is again under scrutiny.

In the 1990s oilmen responded to criticism from environmentalists by launching campaigns to encourage debate about climate change, and by increasing their investment in renewable energy. Under John (now Lord) Browne, BP of Britain declared itself to be moving “Beyond Petroleum”. However, steadily rising crude-oil prices after the global financial crisis led firms to scale back their loss-making green-energy businesses, while continuing to pour money into hydrocarbons (see chart).

More recently a dramatic fall in oil prices has forced them to start cutting some big exploration projects. And as the Paris summit has approached, ambitious pledges by more than 150 countries to cut greenhouse-gas emissions have taken oil bosses by surprise—even if the pledges are likely to fall short of the target of limiting global warming to two degrees Celsius above pre-industrial levels.

If these commitments were to translate into significant moves to limit global warming, this would challenge a view still held by oilmen on both sides of the Atlantic that demand for fossil fuels will keep growing strongly for the foreseeable future. Exxon Mobil, the world’s biggest publicly traded oil company, argues that fossil fuels will still account for three-quarters of primary energy demand even in 2040, only slightly below their current share. But the International Energy Agency (IEA), a body that represents oil-consuming countries, says that to keep global warming to two degrees, fossil fuels would need to fall to 60% of the energy mix by 2040. The IEA sees no mass abandonment of hydrocarbons, but nonetheless, its executive director, Fatih Birol, said on November 10th that, “There should be no energy company in the world [which] believes that climate policies will not affect their business.”

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