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The energy industry is gathering this week in Houston, Texas, for the annual CERAWeek by S&P Global conference. The confab’s 8,000 attendees are there to hear about the latest in next-wave emissions-reduction technologies as much as to listen to speeches from titans of oil and gas.
Amidst the panels and demonstrations, one message came through: Fossil fuels aren’t going anywhere anytime soon.
At the same time, execs emphasized their commitment to offsetting emissions.
The dual message is both an attempt to get the world to acknowledge its persistent reliance on reasonably priced oil and gas and a PR pitch that the industry is doing its part to help fight climate change.
Pierce Norton, CEO of pipeline operator ONEOK, said that demand for energy is only going to grow — a sentiment echoed throughout the conference. He also highlighted that demand is increasing even more rapidly because of the computing power needed for artificial intelligence and painted a picture of “energy addition” rather than “energy transition.”
“The country started out actually using wood,” he said during an interview at CERAWeek. “And then we added coal, we added natural gas, we added nuclear, and then now you've got geothermal, you've got renewables, which is solar and wind.”
The pushback against the energy transition from the industry gained steam late last year when ExxonMobil CEO Darren Woods emphasized the global need for oil and gas at the United Nations-sponsored climate conference COP28 in Dubai. (It’s a sentiment he repeated in an interview with Yahoo Finance this week.)
His comments in Dubai happened to precede a near-term low in underlying oil prices in mid-December. Since then, WTI crude is up by more than 20%.
And energy stocks have started to catch up. In the past month, the S&P Energy Index has rallied by about 8% — the best performance among the industry groups in the S&P 500.
The sector had been lagging, in part, because investors were focused on AI, said Neal Dingmann, managing director of energy research at Truist, in a phone interview last week. Now, the AI frenzy has begun to falter to some extent, oil prices (CL=F) are rising, and energy shares are bouncing back.
“Most of my investors, generalists, now realize my group will never go back to high-growth days,” Dingmann said. “As rates stabilize and other sectors don’t go straight up, we’ve started to see investors come back.”
As for the for-profit emission offsetting projects, companies — and shareholders — won’t see those profits anytime soon, even with the boost given to the endeavors as a result of the Inflation Reduction Act.
Exxon has deals with fertilizer maker CF Industries, industrial gas manufacturer Linde, and steelmaker Nucor to capture carbon dioxide that’s a byproduct of their fabrication processes and bury it underground. It’s part of a business the industry calls carbon capture, utilization, and sequestration — or CCUS. Those projects are scheduled to come online in 2025 and 2026.
The problem, however, is that they aren't yet financially viable, many executives say — putting a big question mark around its future.
For shareholders, all of this comes back to the original message: Oil and gas isn’t going anywhere, either in terms of global demand or as the main source of industry profits.
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