ExxonMobil (XOM) Seeks Subsidies for Gas-Derived Hydrogen
ExxonMobil Corporation XOM, the largest U.S. oil company, lobbied the Biden administration to consider natural gas-derived hydrogen for valuable subsidies offered under the Inflation Reduction Act, per a Bloomberg report.
The Inflation Reduction Act offers substantial tax incentives for hydrogen production, with rewards escalating based on emission levels. The highest incentive, a notable $3 per kilogram, is reserved for fuel that approaches near 100% emission-free status.
The company is seeking billions of dollars in tax credits designed to phase out fossil fuels, arguing that hydrogen produced from natural gas can be a low-carbon alternative. According to the report, CEO Darren Woods personally met with White House senior clean energy adviser John Podesta to present ExxonMobil's case.
XOM contends that it can produce hydrogen from natural gas with minimal carbon dioxide emissions, positioning it as a climate-friendly alternative. The company argues that its method is on par with green hydrogen produced from water and renewable energy. If successful, this could open the door for fossil fuel companies to dominate the hydrogen sector, particularly in industries like heavy manufacturing and transportation.
However, environmentalists are skeptical of ExxonMobil's claims, arguing that even low-carbon natural gas processes release significant emissions. They advocate for green hydrogen, which is produced through electrolysis powered by renewable energy sources, resulting in 100% emission-free fuel. The environmentalists worry that subsidizing hydrogen from natural gas could incentivize further fossil fuel production, undermining the original intent of the tax credits.
Zacks Rank & Key Picks
ExxonMobil currently carries a Zack Rank #3 (Hold).
Some better-ranked players in the energy sector are USA Compression Partners, LP USAC and Helix Energy Solutions Group, Inc. HLX, currently sporting a Zacks Rank #1 (Strong Buy), and Core Laboratories Inc CLB, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
USA Compression Partners is one of the largest independent natural gas compression service providers across the United States in terms of fleet horsepower. USAC has witnessed an upward earnings estimate revision for 2024 in the past 30 days.
Helix Energy Solutionsis an international offshore energy company that provides specialty services to the offshore energy industry, with a focus on its growing well intervention and robotic operations. HLX has witnessed an upward earnings estimate revision for 2023 and 2024 over the past 60 days.
Core Laboratories’ strong presence in the emerging shale plays and its global footprint will provide for steady growth rates going forward. CLB’s technology-heavy portfolio of proprietary products and services gives it the opportunity to optimize production from new and existing fields. Core Labs has witnessed an upward earnings estimate revision for 2024 in the past 60 days.
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