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Is oil finally on its way out?

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Oil companies are under pressure from “governments looking to curb greenhouse gases, investors seeking better returns, and others simultaneously wanting both,” said Paul Takahashi at the Houston Chronicle. Last year was the worst on record for “the biggest six or seven companies collectively known as Big Oil.” Last week, Exxon Mobil, BP, and Shell “reported losses for the year of $22.4 billion, $20.3 billion, and $21.7 billion, respectively, as they grappled with a historic oil crash wrought by the global pandemic,” and the future looks far from certain. President Biden has made reversing climate change a tentpole issue, while General Motors announced recently it will phase out gas-powered cars by 2035. Even Exxon and Chevron, which have been “slower to acknowledge the energy transition” than rivals, are now facing “mounting pressure from investors to change course.” But some in the business are still resistant, insisting that 2020 was just a “reminder of how volatile the oil industry is.”

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Don’t write off the oil business yet, said Grant Smith at Bloomberg​, because “crude is staging a remarkable turnaround.” Last spring, the world was so glutted with oil that there was no place to store it and prices sank below zero. But futures are now back above $60 a barrel. One good sign for oil: China’s consumption is back up to pre-pandemic levels. While Western demand for “transport fuels — particularly in aviation — remains depressed,” oil producers say demand is “roaring” for petroleum products such as plastics “that cater to a society working at home.”

Still, Big Oil may have to consolidate to survive, said Derek Brower at the Financial Times. Exxon Mobil was formed in 1998 during “the brutal late-1990s crude price collapse.” Two decades later, reports of the industry further shrinking with a merger of Exxon and Chevron is “a measure of the panic” sweeping through the sector. Some investors welcome the prospect of a deal as a “reset” for two companies already “shedding value before the crash.” Others see it as more writing on the wall — a signal that oil giants are positioning themselves to remain “the last man standing” in a shrinking industry.

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Even GM realizes “the end of fossil fuels is inevitable,” said Paul Waldman at The Washington Post. The automaker isn’t shifting away from gasoline just because “it cares about the planet.” It’s making the move because the market is screaming too loudly to ignore. GM is worth just one-tenth as much as Tesla even though it sells five times as many cars. The question is no longer whether there will be a “transition away from fossil fuels,” but how it will happen. Right now, the oil business is split into two camps, said Julia Horowitz at CNN. There is the European side, with BP, Shell, and Total, which are “trying to pivot away from oil and gas production and transform their companies.” And there are the American giants, Exxon and Chevron, “which have resisted major changes to their business” in the belief that oil will boom again. Billions are being spent on each bet — and “both sides can’t be right.”

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This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.