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ExxonMobil’s chief executive predicted a resurgence of investment in fossil fuel production as he blamed soaring oil and gas prices on an “optimistic view” about how quickly the energy transition can happen.
Darren Woods, the head of the biggest western oil and gas supermajor, said pressure to reduce emissions by cutting production before addressing demand had left the world struggling to meet energy needs.
Governments had not only failed to deal “with the demand side of the equation” but also did not recognise “that you need a fairly robust set of alternative solutions if you’re going to reliably and affordably meet the needs of people”, Woods told the Financial Times.
Global crude prices have surged this year to well more than $100 a barrel as Russia’s invasion of Ukraine has tightened oil markets, fuelling decades-high inflation around the world. Brent crude was trading at about $116 a barrel on Monday.
Speaking to the FT on stage at a conference in Brussels organised by the German Marshall Fund, Woods said he expected the oil price to continue to climb until it spurs renewed investment in output.
“They always say that the cure to high prices is high prices. And that’s exactly what I think we’ll see. So it’s a question of how high prices eventually rise.”
Unlike its European rivals BP and Shell, which have committed to reduce oil and gas production over time to help lower emissions, Exxon has steadfastly resisted pressure to cut its production plans, and has large oil investments planned in the US, Brazil and Guyana.
Exxon came under pressure during the Covid-19 pandemic from activist investors who pushed the company to outline an energy transition strategy and successfully installed new directors to its board. The company has since announced a goal to reduce emissions from its own operations to net zero by 2050, but has resisted calls from to commit to reducing emissions created when its products are burnt.
Woods hit out at so-called “scope 3” targets for fuel consumption as “a crude approach” that would have unintended consequences.
“You’re going to drive the production and the growth in oil and gas out of the most visible . . . most responsible companies, into less visible, less transparent and potentially less responsible companies,” he said.
Still, even Exxon has pulled back its annual capital expenditure plans on oil and gas developments from before the pandemic. It now plans to spend $20bn to $25bn a year through 2027, compared to plans in 2019 to spend $30bn or more a year.
Woods said the world’s “pipeline” of new oil and gas projects was “thinner than it was in the past”, and that even with high prices, oil companies worried about the long-term demand for their product. Supply from US shale rock formations was also “not as productive as it was in the past”, exacerbating the supply shortfall, he said.
“These are multibillion-dollars investments with long time horizons,” he said. “How do you think about that with the uncertainty associated with the transition? That is a difficult balance to strike.”
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