Digital Transformation in Fueling: Opportunities and Challenges

Current State of Digital Transformation in Fueling

ExxonMobil and Chevron are heavily investing in technology to transform traditional fuels and develop renewable energy solutions. This includes advancements in carbon capture, hydrogen, and renewable diesel, demonstrating a significant shift towards digital transformation in the fueling industry.

"We are investing in technology to transform the molecules derived from oil and natural gas into products that extend our reach into new, high-value, high-growth markets to capture even greater value from our core competitive advantages. 1 Highest first-quarter global refinery throughput (2000-2024) since Exxon and Mobil merger in 1999, based on current refinery circuit. 2 Based on year-end 2023 data. 3 Assuming dilution. Financial Highlights" --- (XOM, press release, 2024/04/26)

"So, we’re in this business for the long haul. We think drop in renewable fuels are going to be part of creating a lower carbon energy system in the future." --- (CVX, earning call, 2024/Q2)

"We're focused on carbon capture and storage, hydrogen, lower emission fuels and lithium. In a fast transition, we'll accelerate investment in these areas to grow earnings and cash flow." --- (XOM, event transcript, 2024/05/29)

"We continued to advance growth opportunities in our traditional and new energies businesses through adding new exploration plays in West Africa and South America, achieving key milestones on the ACES green hydrogen project and commissioning of the Geismar renewable diesel plant expansion, which is expected to come online by the end of the year." --- (CVX, earning call, 2024/Q2)

"The company is commercializing proprietary liquid absorbent process technology that demonstrates transformational performance and is more effective and cost efficient than current commercial solutions to capture CO2 emissions from power generation and industrial point sources." --- (CVX, press release, 2024/04/04)

Key Technologies Driving Digital Transformation

Hybrid cloud, generative AI, automation, and application modernization are key technologies driving digital transformation, as highlighted by IBM, Microsoft, Oracle, and Amazon. These technologies enhance operational efficiencies, drive AI adoption, and transform decision-making processes across various industries.

"are driving the operational efficiencies of productivity so we could create the investment flexibility in driving innovation in core areas of growth that we still see very strong, hybrid cloud, Gen AI, digital transformation, automation, application modernization and that's where our focus area is." --- (IBM, conference, 2024/05/20)

"By combining Cognizant's industry expertise with Microsoft's Copilot capabilities –including Copilot for Microsoft 365 and GitHub Copilot – we will help drive AI adoption and innovation for millions of users across its network. Driving industry-specific transformation is a key goal of partnership, focused on helping businesses reimagine operations in sectors that have not seen significant disruption in decades." --- (MSFT, press release, 2024/04/22)

"With an initial focus on driving digital finance transformation across industries, new generative AI-powered OCI solutions can provide finance teams with real-time data analysis and recommendations, transforming how decisions are made." --- (ORCL, press release, 2024/05/06)

"While these play a key role in scaling their business, more than two-thirds (68%) of business owners surveyed feel that there is room for optimization in their procurement operations and half are worried that if they don't adopt artificial intelligence technologies in 2024, their business will fall behind." --- (AMZN, press release, 2024/05/01)

"Clients continue to prioritize large data and technology transformation projects focused on driving productivity with AI and analytics, which is also reflected in our year-to-year growth in Consulting signings this quarter." --- (IBM, sec filing, 2024/Q1)

Regulatory Impacts and Compliance

Regulatory impacts and compliance in digital transformation within the fueling industry are influenced by jurisdiction-specific policies, evolving ESG standards, and the unpredictability of expenditures required for compliance. Expanded disclosure requirements and government policies like the renewable fuel standard and Low Carbon Fuel Standard further complicate investment decisions and compliance efforts.

"Implementation of jurisdiction-specific policies and programs can be dependent on, and can affect the pace of, technological advancements, the granting of necessary permits by governing authorities, the availability and acceptability of cost-effective, verifiable carbon credits, the availability of suppliers that can meet our sustainability-related standards, evolving regulatory or other requirements affecting ESG standards or other disclosures, and evolving standards for tracking, reporting, marketing and advertising relating to emissions and emission reductions and removals." --- (CVX, sec filing, 2024/Q2)

"ExxonMobil says this proposal is unnecessary, but none of the existing disclosure provide a clear plan on any metrics that impacts the transition on workers and communities or how negative impacts will be mitigated in a comprehensive way." --- (XOM, event transcript, 2024/05/29)

"The level of expenditure required to comply with new or potential climate change-related laws and regulations and the amount of additional investments needed in new or existing technology or facilities, such as carbon capture and storage, is difficult to predict with certainty and is expected to vary depending on the actual laws and regulations enacted, available technology options, customer and consumer preferences, the company’s activities, and market conditions." --- (CVX, sec filing, 2024/Q2)

"If you look at expanded disclosure requirements that Europe is looking for, or if you look at regulation around reducing carbon footprint and not necessarily implementing regulation that's technology agnostic and focused on just reducing carbon intensity, that all makes Europe a much tougher investment proposition." --- (XOM, earning call, 2024/Q1)

"And so we're pleased with both of these. There are markets, maybe to your point about economics that are in some ways heavily influenced by government policy, be it the renewable fuel standard and the Low Carbon Fuel Standard, which affect renewable fuels or some of the things in the investment or the inflation reduction act that affect hydrogen." --- (CVX, earning call, 2024/Q1)

Customer Adoption and Market Trends

EV adoption rates are slower than expected, prompting GM and Ford to adjust strategies, including diverse portfolios and spending adjustments. Tesla is expanding its Supercharger network to meet growing demand as more manufacturers adopt the North American Charging Standard.

"The first question is, recent market trends seem to indicate that EV sales are slowing compared to their ICE and hybrid counterparts. What action, if any, is GM taking to assist with consumer adoption?" --- (GM, event transcript, 2024/06/04)

"RECENT DEVELOPMENTS Electric Vehicle Market Although we continue to invest in our electric vehicle strategy, we have observed lower-than-anticipated industrywide electric vehicle adoption rates and near-term pricing pressures, which has led us, and may in the future lead us, to adjust our spending, production, and/or product launches to better match the pace of electric vehicle adoption." --- (F, sec filing, 2024/Q2)

"In particular, as other automotive manufacturers have announced their adoption of the North American Charging Standard (“NACS”) and agreements with us to utilize our Superchargers, we must correspondingly expand our network in order to ensure adequate availability to meet customer demands." --- (TSLA, sec filing, 2024/Q2)

"Mary Barra: Thanks for that question. We anticipated there would be ebbs and flows in EV adoption and we are well positioned to offer customers a diverse and desirable portfolio of ICE, ground up, EVs ramping up now and plug in hybrids coming in 2027 to match supply with demand to ensure we remain competitive." --- (GM, event transcript, 2024/06/04)

"Early majority customers are really different than the early adopters, particularly in retail." --- (F, earning call, 2024/Q2)

Operational Efficiencies and Cost Savings

Operational efficiencies and cost savings in the fueling industry have led to significant financial benefits. ExxonMobil reported increased earnings of $320 million and $50 million due to these efficiencies and divestments. Chevron highlighted ongoing efforts to enhance efficiencies, reduce unit costs, and improve productivity through better cycle times and capital utilization.

"Structural Cost Savings – Increased earnings by $320 million, due to operational efficiencies and divestments." --- (XOM, sec filing, 2024/Q2)

"And, we’re confident that we’ll continue to find new ways to increase efficiencies and reduce unit cost." --- (CVX, earning call, 2024/Q2)

"Structural Cost Savings – Increased earnings by $50 million, primarily from operational efficiencies." --- (XOM, sec filing, 2024/Q2)

"We’re going to see very disciplined out of the budget is a budget. But the nice thing is we’re getting -- because of the improved cycle times, improved efficiencies, we’re getting more productivity out of the equipments, we’re getting more production per unit of capital input and that really is the story here." --- (CVX, earning call, 2024/Q2)

"+0.2 Activity/Other +1.6 +1.8 Structural Cost Savings -9.7 -1.0 -10.7 This press release also references Structural Cost Savings, which describes decreases in cash opex excluding energy and production taxes as a result of operational efficiencies, workforce reductions, divestment-related reductions, and other cost-savings measures, that are expected to be sustainable compared to 2019 levels." --- (XOM, press release, 2024/08/02)

Competitive Landscape and Industry Players

ExxonMobil and Chevron are leveraging their competitive advantages, technology capabilities, and strategic investments to maintain leadership in the fueling industry. ExxonMobil focuses on low-cost supply and innovative technologies, while Chevron emphasizes responsible development and high-return exploration opportunities, positioning both companies strongly in the digital transformation landscape.

"Obviously, there's a few more things that we're working on and we'll continue to assess every one of the assets in the portfolio, make sure that they are competitively advantaged. And, you know, frankly, as we look at new investments, we force those investments to compete on an industry-wide basis and make sure that they're advantaged versus the industry and therefore can be a supply product at low cost of supply." --- (XOM, earning call, 2024/Q2)

"The environment is very important to the people and the state as well. And I think their goal has been to be a leader in responsible development and to recognize the important economic contribution that our industry makes to the states." --- (CVX, earning call, 2024/Q1)

"As always, by drawing on our unique combination of competitive advantages. We shared with you a variety of technologies and products we're developing to more effectively meet existing needs, while helping the world achieve a lower carbon future. Two examples where I see significant new market potential are Proxxima and carbon materials." --- (XOM, earning call, 2024/Q2)

"are optimized for high returns. As one of the largest leaseholders in the basin, we’re well-positioned for the future with leading technology capability and attractive exploration opportunities near existing infrastructure and in frontier areas." --- (CVX, earning call, 2024/Q2)

"And feed to your point, feed advantages play an important role in that. So that's yet again another advantage that we have versus the typical industry player, but that is reflective of the broader strategy that we have." --- (XOM, earning call, 2024/01/31)

Future Outlook and Emerging Challenges

ExxonMobil acknowledges the limitations in projecting future policy and technology advancements necessary for achieving net zero by 2050, highlighting significant challenges in digital transformation. Meanwhile, Chevron demonstrates progress in advancing a lower carbon future through innovations in production, technology, and renewable fuels, indicating a proactive approach to overcoming these challenges.

"However, the Global Outlook does not attempt to project the degree of required future policy and technology advancement and deployment for the world, or ExxonMobil, to meet net zero by 2050." --- (XOM, press release, 2024/04/26)

"We are working to advance a lower carbon future. Our recent achievements across production, technology, and renewable fuels demonstrate our progress." --- (CVX, Twitter, 2024/05/03)

"As future policies and technology advancements emerge, they will be incorporated into the Outlook, and the Company's business plans will be updated accordingly." --- (XOM, press release, 2024/08/02)

"However, the Outlook does not attempt to project the degree of required future policy and technology advancement and deployment for the world, or ExxonMobil, to meet net zero by 2050." --- (XOM, sec filing, 2024/Q1)

"As such, the Outlook does not project the degree of required future policy and technology advancement and deployment for the world, or ExxonMobil, to meet net zero by 2050." --- (XOM, sec filing, 2024/Q2)