Are markets shifting against oil companies?

Mike Fourcher

Mar 22, 2024 — 3 min read

Amin Nasser, president and CEO of Saudi Aramco and Simon Stiell, UN Climate Change Executive Secretary.

Within days of each other, we were offered two different views of the energy world. In Houston, fossil fuel company leaders gathered earlier this week at the energy conference CERAWorld. There, Amin Nasser, president and CEO of Saudi Aramco, declared, “We should abandon the fantasy of phasing out oil and gas.”

Setting an opposing view, government leaders gathered yesterday for the annual Copenhagen climate ministerial, where UN Climate Change Executive Secretary Simon Stiell told ministers, “If we halve greenhouse gas pollution by 2030, while tripling renewable energy and doubling energy efficiency, we will also help free countries from the vagaries [of] volatile fossil fuels prices.”

By all accounts, oil companies are doing gangbusters business. In the last year they have experienced record profits, are producing more energy than ever before and have been paying supersized dividends to shareholders.

And yet, oil company share prices have been largely flat over the last two years. Exactly why, is a mystery, although some analysts believe the market is pricing in a future shift away from oil prices. In other words, investors seem to believe Mr. Stiell’s view more than Mr. Nasser’s.

Knowing that oil executive compensation is linked to share price, calls for increased oil sales in an era of flat share prices begin to take on a different hue. Adding fuel to the fire: The Economist last week produced a lengthy analysis of what could happen as oil phases out. In short: It won’t happen quick, the richest oil countries are already shifting their investments, but the smaller, less stable petrostates could become even less stable.

Oil companies will be paying out hefty dividends for some time. But their share prices could be stuck in neutral for good – which could become one of the most powerful forces for greening the economy.

A note: I will be vacationing with my family next week, so Heat Rising will be on hiatus until April 2. See you then!

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