Large Western oil companies are strengthening themselves with billion-dollar takeovers and purchases of fossil fuel competitors. Does this fit the times? The author and financial market expert Heike Buchter stood at the first fracking towers in the USA in 2011. Five years ago she predicted an “oil earthquake” in her book of the same name. ntv.de talks to her about “a remarkable resurrection” and a “new self-confidence” of an industry that was already on the decline.
ntv.de: Big Oil is on a massive shopping spree, one billion-dollar takeover chasing another. We are in the middle of the transformation away from fossil raw materials. What’s happening here right now?
Heike Buchter: We see indeed a remarkable resurgence of the oil industry. During the pandemic, when demand for oil collapsed completely, the industry temporarily had to pay for someone to buy oil from it. Including storage costs, oil prices were negative. At that time it was believed that oil production would only go downhill…
This was the peak oil moment that had been long awaited. The oil run-out seemed closer than ever.
Yes. And suddenly they are all back. Business is booming. Exxon presented the most spectacular result in its history with $56 billion in 2022. Big Oil is brimming with confidence. The buyouts, the mergers and acquisitions are nothing different.
Where are we now?
The fact is: The USA is the largest oil producer in the world. No country in the world has ever pumped as much oil as the Americans did in December. That was 13.3 million barrels per day. Nobody could have imagined that this would ever happen again. The USA pumps more than the Saudis and more than the Russians, and is also the largest gas producer. America is back again.
It was clear that oil would not disappear overnight. But How can this 180 degree turn be explained?
Unique things have happened in the past few years. When demand collapsed during the pandemic, it simply fit into the green narrative of the energy transition to act as if we no longer needed oil. Then the industry recovered, production started up again – and it was thirsty for oil. Oil is still essential in many areas. Especially for emerging countries like China and India. Then came the Ukraine war and the Russia sanctions. We suddenly needed oil from other sources. Prices went through the roof and gave oil companies huge profits. By then it was clear: Big Oil was never really gone. They can now use the money they earned to finance their acquisitions.
European competition seems more reserved. Is the impression deceptive?
The oil companies never really left the window. The British oil company Shell is also investing heavily in fossil fuel projects again. There is still a difference: European companies such as BP and Shell have made more efforts in alternative energies in recent decades than their competitors in the USA and have invested a lot. This was also due to pressure from governments in Europe. The US giants Exxon and Chevron, on the other hand, have consistently said that we will stick with what we can do: oil and gas. We are not solar or wind. That was against the trend on Wall Street too. Investors and investors turned away because it wasn’t the futuristic thing people wanted to hear at the time. Exxon also made its own mistakes, such as a spectacular bad investment in fracking gas, and was heavily in debt. Over! Today Exxon is suing its shareholders who are climate defenders. The bosses say that more climate, transparency and savings in emissions are damaging to the company. Not so long ago this would have been considered a bad image! This is how times have changed.
Does that mean we’re heading back to the fossil age at full speed?
Financial market expert Heike Buchter has been reporting from Wall Street since 2001. Her book “Oil Quake” was published in 2019, in which she discussed the US energy dominance.
(Photo: Heike Buchter, photographer Stefan Falke)
No. The oil companies are not that blind. Nobody says it will last forever. Climate change has not been forgotten. Everyone in the oil industry is aware of this, the Saudis as well as the Americans. Demand will shrink, perhaps at some point it will no longer be there at all. The only question is when? And what happens until then? Every oil company wants to squeeze every last drop of profit until the end. You want to be the “last man standing.” The boss until the end.
Given the climate goals we have, this doesn’t seem to be a very effective strategy. Is this slowing down the energy transition?
No not really. Because the USA is also adding huge amounts of renewables. Ultimately – and we should be honest about this – the future of how much oil will be produced does not depend on the oil companies, but largely on us, the consumers. As long as we demand oil, the oil companies can’t be blamed for much. We decide. If Chevron or Exxon aren’t pumping the oil, someone else is pumping it. Is it better if the Saudis do this?
There is unexpectedly a gigantic oil deposit off the coast of little Guyana in South America that Exxon is currently exploiting. How important is this oil in a time of multiple crises?
The find in Guyana is extremely important. Also for us in Europe! Previously, when there was a crisis in the Middle East, oil prices rose enormously. We now have war in Israel. The Houthis, who sympathize with the Palestinians, are shelling oil tankers in the Red Sea. Oil prices should actually go through the roof. But they don’t. Before the start of the war in Israel, North Sea oil Brent cost $85 a barrel. In mid-December the price was $73. Oil prices have fallen amid one of the biggest crises in the Middle East. Why? Because thanks to fracking in Texas and mining in Guyana, everyone is relaxed. Thanks to the Americans and their oil and gas giants, we are no longer so dependent on the markets in crisis areas.
What role does fracking play in this final spurt until the last drop of oil has dried up?
Fracking is extremely important for the last man standing strategy. Drilling in the Arctic requires incredible effort. It can take up to a decade until the system is set up and the first drop of oil flows. Fracking can be implemented more quickly; it’s a matter of months, not years. The oil also dries up more quickly, but it is cheaper and can be better tailored to demand. If we both pool our savings and borrow from friends, we could rent a rig, a drilling rig, and set it up somewhere in Texas on land we lease and drill for oil there. This is of course an exaggeration (laughs) But fracking operations are comparatively manageable. Oil giants like Exxon were therefore not interested in the topic for a long time. Today, fracking is much more sophisticated, much more efficient. And unlike the fracking pioneers, often so-called wildcatters, who are not least driven by the enthusiasm for the search, the large corporations have access to the capital market, they don’t have to beg for money, they can make money.
In your book “Oil Quake,” which came out in 2019, you discussed the renaissance of the oil age. The reason was the fracking boom and Donald Trump, who wanted to promote everything that had to do with oil and gas in order to make America great again. It looks like not only is Big Oil coming back, but possibly Trump too. The dream of the one bursts green transition?
Trump is not ideological and he is not an idiot, he will definitely not take money from his fans and friends for any projects, no matter how useful or not they may be. You don’t have to worry about that. Trump isn’t going to go and say the battery plant in Michigan, which is being built with subsidies from Washington, won’t be built. Because that would affect his voters. From Obama to Trump, Biden and now possibly Trump again – all US governments have encouraged everything. No matter whether oil, gas, solar or geothermal energy. That’s how America is. No US president has ever stopped something that advances the economy. George W. Bush, for example, ensured that Texas is now the largest provider of wind energy. Oklahoma, where oil is almost more powerful than in Texas, is investing in wind energy. Solar energy is also being expanded. America not only has the energy, but above all also the generous capital to produce it. And the corporations use that. Whatever suits them.
Diana Dittmer spoke to Heike Buchter