Political Changes: Impact on the Oil Industry

Regulatory and Environmental Policy Impacts on Oil Companies

Oil companies are significantly influenced by regulatory and environmental policies. Executive pay structures and investments in carbon capture pose financial risks (XOM). Government policies like the renewable fuel standard and Low Carbon Fuel Standard shape market dynamics (CVX). Regulatory developments and permits critically impact future operations (XOM).

"Instead, the company's existing executive pay structure actually encourages management to reduce oil and gas production, which is the exact opposite of shareholder resources. On the other hand, investing heavily in carbon capture and storage technologies presents a significant financial risk." --- (XOM, event transcript, 2024/05/29)

"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)

"We also added 250,000 barrels per day of refining capacity in early 2023 at a refinery in Belmont, Texas. Additionally, we just closed on the Pioneer transaction and plan to get more barrels out of the ground more efficiently and with a lower environmental footprint than either company could achieve separately, which will help to address the greenhouse gas emissions challenge." --- (XOM, event transcript, 2024/05/29)

"The company’s oil and gas business may increase or decrease depending upon regulatory or market forces, among other factors." --- (CVX, sec filing, 2024/Q1)

"Actual future results, including project plans, schedules, initial capacities, production rates, and resource recoveries could differ materially due to: changes in market conditions affecting the oil and gas industry or long-term oil and gas price levels; political or regulatory developments including obtaining necessary regulatory permits; reservoir performance; the outcome of future exploration efforts; timely completion of development and construction projects; technical or operating factors; and other factors cited under the caption 'Factors Affecting Future Results' on the Investors page of our website at exxonmobil.com and under Item 1A." --- (XOM, press release, 2024/04/12)

Market Reactions to Political Shifts in Oil Industry

Chevron and ExxonMobil are strategically adapting to political shifts by lowering carbon intensity, investing in renewable energy, and maintaining flexibility to shift resources. They acknowledge the economic risks and revenue volatility due to regulatory changes and emphasize their adaptability and workforce readiness for the energy transition.

"We aim to grow our oil and gas business, lower the carbon intensity of our operations and grow lower carbon businesses in renewable fuels, carbon capture and offsets, hydrogen and other emerging technologies. More information about Chevron is available at www.chevron.com. NOTICE" --- (CVX, press release, 2024/05/29)

"Thus, Exxon is exposed to economic risk as governments and consumer brands transition away from single use plastics." --- (XOM, event transcript, 2024/05/29)

"It gives us a lot of optionality and flexibility, to the extent these other new markets work out and demand picks up and we see great opportunities, we can shift more resources into that space." --- (XOM, earning call, 2024/Q1)

"Large swings in commodity prices lead to large swings in revenues and profits." --- (XOM, event transcript, 2024/05/29)

"With respect to the proposal, our history is filled with examples of the company and its employees adapting successfully to societal change, creating or expanding businesses that grew our company and the livelihoods of our employees, while also listening to and supporting communities and spurring local economic growth. Our current workforce has the skills needed to participate in and lead a thoughtful energy transition." --- (XOM, event transcript, 2024/05/29)

Future Outlook of Oil Industry Amid Political Changes

Chevron and ExxonMobil are focusing on reducing carbon emissions and advancing renewable technologies, contingent on policy support and regulatory developments. Despite political changes, the demand for fossil fuels remains, and both companies are preparing to meet this demand while adapting to evolving environmental standards.

"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)

"Similarly, discussion of roadmaps or future plans related to carbon capture, transportation and storage, biofuel, hydrogen, direct air capture, and other future plans to reduce emissions and emission intensity of ExxonMobil, its affiliates, companies it is seeking to acquire and third parties are dependent on future market factors, such as continued technological progress, policy support and timely rule-making and permitting, and represent forward-looking statements." --- (XOM, sec filing, 2024/Q1)

"In addition, historical, current, and forward-looking environmental and other sustainability-related statements may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future, including future rule-making." --- (XOM, sec filing, 2024/Q1)

"Jim Chapman: All right, next question. We saw a number of comments on the fact that the U. S. And the world will continue to need fossil fuel based energy for the foreseeable future. Can you share what ExxonMobil is doing to meet demand?" --- (XOM, event transcript, 2024/05/29)