Just a few short years ago BP proudly told us they were embarking on a journey – and I quote – “in support of our purpose to reimagine energy for people and our planet, and our ambition to become a Net Zero company by 2050 or sooner and help the world get to Net Zero.”
This week, the oil giant revealed a sizeable slump in profits and its new chief executive had vowed to deliver “a fundamental reset”.
So what’s going on? Is Net Zero falling out of fashion?
As recently as 2020 BP’s annual report was dripping with feel-good sentiment about a clean energy future – in tone and design it looked more like an advert for Innocent smoothies.
The firm was unambiguous; their future wasn’t in being an International Oil Company but an Integrated Energy Company. With massively ambitious plans to ramp up and up their investment in renewable energy they said that this journey will, and I quote, “require patience but will, over time, create a more valuable company for its shareholders…”
But it hasn’t worked out like that. Bernard Looney, the CEO who wanted to lead this journey has gone and his successor has been left to survey the wind turbine dotted landscape and it’s not that pretty.
The company just reported a significant profit slump and a decline in revenues and the boss has now promised to deliver “A new direction for BP” – so which direction will it go in?
Well, if investor Elliot Management has anything to do with it, it probably won’t be towards a clean, green future.
The activist hedge fund has taken a near 5 per cent stake in the oil giant worth almost £4bn and is understood to be pushing BP to massively row back on its green investment strategy, focusing more on, well, oil and gas.
Analysts cite rival Shell as an example of the wisdom of this approach, with its current CEO having reversed many of the Net Zero pledges made by his predecessor. Shell’s shares have risen sharply since the new broom came in and the business is now worth north of £160bn in contrast to BP’s £75bn valuation.
This all comes at a time when the mantra in America is “Drill baby drill” – with Donald Trump promising a new golden age for American energy.
Meanwhile in the UK, the government continues to insist that Net Zero is both vitally important and eminently achievable – but its biggest cheerleader, Ed Miliband, is being forced to swallow policies that rub up against this commitment – not least the expansion of Heathrow which has climate activists up in arms or up trees or doubtless, before too long, sitting in the middle of motorways again.
Politically, Nigel Farage and Reform UK sense a major opportunity to make the pursuit of Net Zero a huge wedge issue and at a speech in the City earlier this week the insurgent party – which now tops the polls – said they would scrap Net Zero, calling the objective “stupid” and pledging to tax wind and solar farms out of existence. They said they were “serving notice” on the renewables industry.
Now, make of this what you will, but here at City AM we’ve been inundated with pitches for comment pieces seeking to remake the case for Net Zero. A lot of people are trying to get on the front foot in this debate, making the argument that Net Zero and economic growth go hand in hand – and we’ve given space to that argument – but we’ve also given space to voices warning that while the policy itself isn’t necessarily daft, the binding targets and ‘reach it at all costs’ approach to achieving the holy grail of Net Zero is hard to justify and will come at a high cost.
It’s good that we’re having the debate; policies of this magnitude and impact need to be probed, adjusted, debated. It’s clear where energy policy is moving, it’s clear where technology is going to be transformative…and of course environmental concerns aren’t dead – they’re not even dead at the major oil companies, they’re just coming up against reality.
Now, speaking of reality – time to consider Rachel Reeves.
You know it’s been a tough week for the Chancellor when the best thing that happened to her was the UK marginally, technically avoiding a recession. The latest GDP figures pointed to economic growth of 0.4 per cent in December meaning Q4 2024 was… basically flat.
Stagnant is another word for it. December’s growth figure does, however, bring some modest relief to the government though it should be noted that the growth in question was pretty much driven by strong trading in pubs, bars and restaurants – Christmas, in other words, and it masks a grim reality that GDP per head fell in the final three months of the year.
Economists are clear that the outlook is still deeply concerning – and as if we needed any more evidence of this the latest figures released today show that hiring continues to slump, vacancies are down, employers are braced for higher costs and regulations coming online in April – all of which will make the debate about the accuracy of Rachel Reeves’ CV feel like a comedy interlude.
The paper will be back on Tuesday of course and in the meantime the City AM App and this website will keep you up to date and in the know.
Have a great weekend.