American Consequences - April 2021


A few months later, BP – which read the room as early as 2002, when it rebranded itself from British Petroleum, to Beyond Petroleum – said it would cut oil and gas production by 40% and aim to increase renewable-energy generation capacity 20-fold by 2030. Will it work? BP’s history – which includes one of the largest oil spills in Alaska’s history (2006) and the biggest marine oil spill ever (Deepwater Horizon in the Gulf of Mexico in 2010) – doesn’t inspire confidence. Its marketing propaganda – the company’s purpose is to “reimagin[e] energy for people and our planet” and to “help the world reach net zero and improve people’s lives” – has the feel of an all-night Greek diner that’s trying to reinvent itself as haute cuisine. And, of course, BP is just one of dozens of energy companies that are staring into the abyss. But since the FT ’s February 2020 forecast that oil companies would need to throw overboard $900 billion in assets,

investors haven’t blinked. The share price of the iShares Global Energy Fund (IXC), an ETF that holds a who’s-who of big energy companies, is roughly flat over the past year (though it’s been volatile, along with stock markets globally). There’s still plenty of room to fall. And any forecasts while the process is still ongoing aren’t worth much. A 2016 report by global investment bank UBS about energy companies’ stranded assets concluded that “many public oil and gas companies appear to be reasonably valued... even under a ‘strong form’ of the stranded assets hypothesis” – which is broker-speak for “it can’t get any worse than this.” (Since then, though, IXC is down around 20% – while the S&P 500 has roughly doubled.)

THE JOURNEY TO STRANDED No asset is “stranded” overnight (unless


April 2021

Made with FlippingBook - professional solution for displaying marketing and sales documents online