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The industry is not doubling down on the future of fossil fuels. Far from it.
The oil industry is not telling a credible story about its own future. Far from doubling down on the future of oil — as they’d have us believe — and as climate action advocates fear – the most powerful oil producers are planning for obsolescence, but they’re hoping to do it on their own, lucrative, terms.
The end of more than a century of growth in oil use is almost here, but it’s not straightforward.
One of the world’s leading forecasters of energy trends is now emphatic that the amount of oil, gas, and coal used around the world each day will begin to taper off within a few years. According to the International Energy Agency, global oil consumption, currently just over 100 million barrels per day, will peak later this decade at around 102 milllion barrels per day even without any new climate policy measures. We are at “the beginning of the end of the era of fossil fuels,” IEA chief Fatih Birol wrote in September.
None of this is adequate to stay within safe climate limits, but it’s hard to overstate what it means for the oil industry, which has enjoyed almost uninterrupted growth for its 150-odd-year existence.
Oil producers vigorously pushed back on the IEA’s outlook. OPEC+, the oil producers’ cartel, accused the agency of being “ideologically driven.” Chief executives of Exxon and state-controlled Saudi Aramco insisted that demand will continue to grow for decades to come.
But while the biggest and most successful oil producers rail against the IEA’s forecast, hinting that the agency is some kind of woke climate activist, their own actions tell a different story. Oil producers know that their industry is on the cusp of an inexorable decline, and they are preparing for it.
That might seem counter-intuitive given the spate of merger and acquisition news this fall. Last month Exxon made an $65 billion bid for Pioneer Natural Resources, which owns a swathe of Permian shale, and a couple of weeks later Chevron offered $53 billion for Hess Corporation, which includes a chunk of deepwater oil fields off Guyana. “Fossil fuels aren’t going anywhere,” declared The New York Times after the Exxon-Pioneer announcement. Like many other stories, the Times’ article pointed out that Exxon is choosing to invest in more oil, but not renewable energy. Earlier this year Shell cut its target for renewable energy growth. It looks like another vote in favor of oil’s strong future.
But neither the oil industry’s protestations, nor the big U.S. acquisitions, nor the lack of enthusiasm for green investments by oil majors, tells us that oil’s rise will continue for decades. In fact some of these developments point in the opposite direction.
Let’s start with the acquisitions. They’re certainly big; Exxon is preparing to buy Pioneer for shares equivalent to a sixth of Exxon’s own market capitalization; and Chevron’s Hess acquisition is of similarly huge proportions. Big corporate takeovers, however, do not indicate a growing industry. In boom years anyone can raise capital; when things get tough it’s time for “consolidation” because only companies with scale can survive.
To understand how these deals are conservative bets on the future of oil, look at what in the commodities world is called the "production cost curve” — a way of analyzing the financial logic of anything that’s mined or pumped out of the ground.
The curve shows total oil production capacity, ranked horizontally from the cheapest to the most expensive to extract. (The colored dots represent different International Energy Agency scenarios, with the first more climate-aligned and the last being simply “business as usual,” but they’re not particularly important for our purposes.)
The oil industry consists of a panoply of producers, each owning assets with different geological features, chemical compositions, and financial flexibility that put them on different parts of the curve.
Now, the greater the world’s total oil consumption, the more likely it is that prices will be high enough that those at the highest end of the production cost curve — everyone on the steep incline on the curve’s right — can still make money.
But while prices for oil are currently high, the acquisitions are not counting on them remaining so. Wood Mackenzie noted that Chevron’s Guyana fields would have “highly competitive breakeven costs.” Another energy consultancy, Rystad, pointed out that Exxon-Pioneer would have the lowest breakeven costs of any Permian producer; whereas previously they’d only rank second and fourth, respectively. In other words, Chevron and Exxon are rationally trying to position themselves on the left-hand side of the curve — the safe demand zone — where they hope to outlast competitors whose breakeven costs per barrel are too high to survive a world weaning itself off oil.
So the beginning of the end of oil doesn’t mean game over for Exxon, Chevron, or Saudi Aramco – if they play their cards right. Some oil will be sold for the next couple of decades at least. The trajectory down, however, is unprecedented, and it’s not clear that even the canniest producers won’t get caught out by the speed of transition to electric vehicles, for example.
But what about backing away from green energy? If fossil fuels’ heyday is over, surely everyone should pile into the next big thing?
Not necessarily. Consider where their money comes from. Big oil companies like Exxon and Chevron have plenty of cash, but they have to keep shareholders happy. Those investors are in those companies for various reasons; but one reason some of them actively choose it is for its specific characteristics: long capital-intensive investment cycles and high profits when things go well.
Green energy investments are different. The rates of return can be lower, but risks are also lower, particularly over a longer time horizon.
In fact it’s a conventional tenet of investing that if companies see their entire industry shrinking, they should not necessarily pivot into a new sector that is replacing it. The principles of “shareholder value,” for example, holds that companies should return cash to shareholders if there are no credible investment opportunities, so they can divert that money into new sectors.
That’s exactly what those massive share buyback programs are doing. The world’s biggest oil companies ramped up purchases of their own shares — which returns cash to investors — to the value of more than $135 billion last year, according to investment manager Janus Henderson; Bloomberg estimates it was a more than 10-fold increase on the previous year and many U.S. and European majors are extending or expanding their buybacks this year.
The buybacks, as much as they might be a repellent illustration of windfall profits arising from wars, are being conducted instead of investing in more upstream investment. Of course, this logic doesn't align with the much-repeated idea that “oil companies will have to be involved in the transition,” but neither do the actions of oil companies.
Finally, it pays to question the messenger. It would not be in oil companies’ interests to say out loud that demand is peaking soon, even if they and their investors all know it.
Imagine if Exxon or OPEC+'s secretariat said “yes, oil demand is probably close to peaking; it might plateau for awhile but the era of growth is over.” Money would flow out of the sector. Smaller, more expensive producers would stop investing in finding and producing more oil, which would lead to more volatile price spikes, driving the world to switch to clean energy even faster (JP Morgan says the recent high prices has already provoked “demand destruction” — in part explaining why prices haven’t spiked as much as recent world events might suggest.) Governments and other companies might even step up efforts to cut their dependency on oil. It would become a self-fulfilling prophecy with challenging implications for countries and companies whose existence is based on pumping oil and gas.
OPEC is typically optimistic about oil demand in its own publications. It predicted back in 2006 that oil demand in 2025 would be 113 million barrels per day — a number that’s 10 million above what has ever been reached. (It’s now forecasting that oil demand will reach a similar level — 116 million/day — only 20 years later, in 2045.) But OPEC, and particularly its most powerful member Saudi Arabia, has long been quietly anxious about demand destruction. With the IEA saying recent prices suggest that is already happening now, thanks to the rise of electric vehicles, OPEC has further reason to keep their fretting private.
Oil producers are — again, rationally — planning to extract the last bit of profits from a declining sector, while hoping that energy users everywhere remain dependent upon a volatile, expensive, and polluting – but very profitable – energy source. If newer sovereign producers try to get into the game late (such as Barbados, Senegal, and Mozambique) they might well get caught out by the shrinking oil market. That would leave the cheaper and better-capitalized producers — Gulf countries, or the U.S. majors — to continue selling at a comfortable profit, albeit slightly lower than they’d receive in the pre-peak era.
The oil majors are settling in for a long, comfortable decline.
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The saga of the Greenhouse Gas Reduction Fund takes another turn.
On July 3, just after the House voted to send the reconciliation bill to Trump’s desk, a lawyer for the Department of Justice swiftly sent a letter to the U.S. Court of Appeals for the D.C. Circuit. Once Trump signed the One Big Beautiful Bill Act into law, the letter said, the group of nonprofits suing the government for canceling the biggest clean energy program in the country’s history would no longer have a case.
It was the latest salvo in the saga of the Greenhouse Gas Reduction Fund, former President Joe Biden’s green bank program, which current Environmental Protection Agency Administrator Lee Zeldin has made the target of his “gold bar” scandal. At stake is nearly $20 billion to fight climate change.
Congress created the program as part of the Inflation Reduction Act in 2022. It authorized Biden’s EPA to award that $20 billion to a handful of nonprofits that would then offer low-cost loans to individuals and organizations for solar installations, building efficiency upgrades, and other efforts to reduce emissions. The agency announced the recipients last summer, before its September deadline to get the funds out.
Then Trump took office and ordered his agency heads to pause and review all funding for Inflation Reduction Act programs.
In early March, buoyed by a covert video of a former EPA employee making an unfortunate and widely misunderstood comparison of the effort to award the funding to “throwing gold bars off the edge” of the Titanic, Zeldin notified the recipients that he was terminating their grant agreements. He cited “substantial concerns” regarding “program integrity, the award process, programmatic fraud, waste, and abuse, and misalignment with agency’s priorities.”
In court proceedings over the decision, the government has yet to cite any specific acts of fraud, waste, or abuse that justified the termination — a fact that the initial judge overseeing the case pointed out in mid-April when she ordered a preliminary injunction blocking the EPA from canceling the grants. But the EPA quickly appealed to the D.C. Circuit Court, which stayed the lower court’s injunction. The money remains frozen at Citibank, which had been overseeing its disbursement, as the parties await the appeals court’s decision.
As all of this was playing out, Congress wrote and passed the One Big Beautiful Bill Act. The new law rescinds the “unobligated” funding — money that hasn’t yet been spent or contracted out — from nearly 50 Inflation Reduction Act programs, including the Greenhouse Gas Reduction Fund. According to an estimate from the Congressional Budget Office, the remaining balance in the fund was just $19 million.
The Trump administration, however, is arguing in court that the OBBBA doesn’t just recoup that $19 million, but also the billions in awards at issue in the lawsuit. Congress has rescinded “the appropriated funds that plaintiffs sought to reinstate through this action,” Principal Deputy Assistant Attorney General Yaakov Roth wrote in his July 3 letter, implying that the awards were no longer officially “obligated” and that all of the money would have to be returned. Therefore, “it is more clear than ever that the district court’s preliminary injunction must be reversed,” he wrote.
Roth cited a statement that Shelley Moore Capito, chair of the Senate Environment and Public Works Committee, made on the floor of the Senate in June. She said she agreed with Zeldin’s decision to cancel the Greenhouse Gas Reduction Fund grants, and that it was Congress’ intent to rescind the funds that “had been obligated but were subsequently de-obligated” — about $17 billion in total. She did not acknowledge that Zeldin’s decision was being actively litigated in court.
On Monday, attorneys for the plaintiffs fired back with a message to the court that the reconciliation bill does not, in fact, change anything about the case. They argued that the EPA broke the law by canceling the grants, and that the OBBBA can’t retroactively absolve the agency. They also served up a conflicting statement that Capito made about the fund to Politico in November. “We’re not gonna go claw back money,” she said. “That’s a ridiculous thought.”
Capito’s colleague Sheldon Whitehouse, a Democrat, offered additional evidence on the floor of the Senate Wednesday. He cited the Congressional Budget Office’s score of the repeal of the program of $19 million, noting that it was the amount “EPA had remaining to oversee the program” and that “at no point in our discussions with the majority, directly or in our several conversations with the Parliamentarian, was this score disputed.” Whitehouse also called up a previous statement made by Republican Representative Morgan Griffith, a member of the House Energy and Commerce Committee, during a markup of the bill. “I just want to point out that these provisions that we are talking about only apply as far, as this bill is concerned, to the unobligated balances,” Griffith said.
Regardless, it will be up to the D.C. Circuit Court as to whether the lower court’s injunction was warranted. If it agrees, the nonprofit awardees may still, in fact, be able to get the money flowing for clean energy projects.
“Wishful thinking on the part of DOJ does not moot the ongoing litigation,” Whitehouse said.
A renewable energy project can only start construction if it can get connected to the grid.
The clock is ticking for clean energy developers. With the signing of the One Big Beautiful Bill Act, wind and solar developers have to start construction (whatever that means) in the next 12 months and be operating no later than the end of 2027 to qualify for federal tax credits.
But projects can only get built if they can get connected to the grid. Those decisions are often out of the hands of state, local, or even federal policymakers, and are instead left up to utilities, independent system operators, or regional transmission organizations, which then have to study things like the transmission infrastructure needed for the project before they can grant a project permission to link up.
This process, from requesting interconnection to commercial operation, used to take two years on average as of 2008; by 2023, it took almost five years, according to the National Renewable Energy Laboratory. This creates what we call the interconnection queue, where likely thousands of gigawatts of proposed projects are languishing, unable to start construction. The inability to quickly process these requests adds to the already hefty burden of state, local, and federal permitting and siting — and could mean that developers will be locked out of tax credits regardless of how quickly they move.
There’s no better example of the tension between clean energy goals and the process of getting projects into service than the Mid-Atlantic, home to the 13-state electricity market known as PJM Interconnection. Many states in the region have mandates to substantially decarbonize their electricity systems, whereas PJM is actively seeking to bring new gas-fired generation onto the grid in order to meet its skyrocketing projections of future demand.
This mismatch between current supply and present-and-future demand has led to the price for “capacity” in PJM — i.e. what the grid operator has greed to pay in exchange for the ability to call on generators when they’re most needed — jumping by over $10 billion, leading to utility bill hikes across the system.
“There is definitely tension,” Abe Silverman, a senior research scholar at Johns Hopkins University and former general counsel for New Jersey’s utility regulator, told me.
While Silverman doesn’t think that PJM is “philosophically” opposed to adding new resources, including renewables, to the grid, “they don’t have urgency you might want them to have. It’s a banal problem of administrative competency rather than an agenda to stymie new resources coming on the grid.”
PJM is in the midst of a multiyear project to overhaul its interconnection queue. According to a spokesperson, there are around 44,500 megawatts of proposed projects that have interconnection agreements and could move on to construction. Of these, I calculated that about 39,000 megawatts are solar, wind, or storage. Another 63,000 megawatts of projects are in the interconnection queue without an agreement, and will be processed by the end of next year, the spokesperson said, likely making it impossible for wind and solar projects to be “placed in service” by 2028.
Even among the projects with agreements, “there probably will be some winnowing of that down,” Mark Repsher, a partner at PA Consulting Group, told me. “My guess is, of that 44,000 megawatts that have interconnection agreements, they may have other challenges getting online in the next two years.”
PJM has attempted to place the blame for project delays largely at the feet of siting, permitting, and operations challenges.
“Some [projects] are moving to construction, but others are feeling the headwinds of siting and permitting challenges and supply chain backlogs,” PJM’s executive vice president of operations, planning, and security Aftab Khan said in a June statement giving an update on interconnection reforms.
And on high prices, PJM has been increasingly open about blaming “premature” retirements of fossil fuel power plants.
In May, PJM said in a statement in response to a Department of Energy order to keep a dual-fuel oil and natural gas plant in Pennsylvania open that it “has repeatedly documented and voiced its concerns over the growing risk of a supply and demand imbalance driven by the confluence of generator retirements and demand growth. Such an imbalance could have serious ramifications for reliability and affordability for consumers.”
Just days earlier, in a statement ahead of a Federal Energy Regulatory Commission conference, PJM CEO Manu Asthana had fretted about “growing resource adequacy concerns” based on demand growth, the cost of building new generation, and, in a direct shot at federal and state policies that encouraged renewables and discouraged fossil fuels, “premature, primarily policy-driven retirements of resources continue to outpace the development of new generation.”
The Trump administration has echoed these worries for the whole nation’s electrical grid, writing in a report issued this week that “if current retirement schedules and incremental additions remain unchanged, most regions will face unacceptable reliability risks.” So has the North American Electric Reliability Corporation, which argued in a 2024 report that most of the U.S. and Canada “faces mounting resource adequacy challenges over the next 10 years as surging demand growth continues and thermal generators announce plans for retirement.”
State officials and clean energy advocates have instead placed the blame for higher costs and impending reliability gaps on PJM’s struggles to connect projects, how the electricity market is designed, and the operator’s perceived coolness towards renewables.
Pennsylvania Governor Josh Shapiro told The New York Times in June that the state should “re-examine” its membership in PJM following last year’s steep price hikes. In February, Virginia Governor Glenn Youngkin wrote a letter calling for Asthana to be fired. (He will leave the transmission organization by the end of the year, although PJM says the decision was made before Youngkin’s letter.)
That conflict will likely only escalate as developers rush to start projects — which they can only do if they can get an interconnection services agreement from PJM.
In contrast to Silverman, Tyson Slocum, director of Public Citizen’s energy program, told me that “PJM, internally and operationally, believes that renewables are a drag on the grid and that dispatchable generation, particularly fossil fuels and nuclear, are essential.”
In May, for instance, PJM announced that it had selected 51 projects for its “Reliability Resource Initiative,” a one-time special process for adding generation to the grid over the next five to six years. The winning bids overwhelmingly involved expanding existing gas-fired plants or building new ones.
The main barrier to getting the projects built that have already worked their way through the queue, Repsher told me, is “primarily permitting.” But even with new barriers thrown up by the OBBBA, “there’s going to be appetite for these projects,” thanks to high demand, Repsher said. “It’s really just navigating all the logistical hurdles.”
Some leaders of PJM states are working on the permitting and deployment side of the equation while also criticizing the electricity market. Pennsylvania’s Shapiro has proposed legislation that would set up a centralized state entity to handle siting for energy projects. Maryland Governor Wes Moore signed legislation in May that would accelerate permitting for energy projects, including preempting local regulations for siting solar.
New Jersey, on the other hand, is procuring storage projects directly.
The state has a mandate stemming from its Clean Energy Act of 2018 to add 2,000 megawatts of energy storage by 2030. In June, New Jersey’s utility regulator started a process to procure at least half of that through utility-scale projects, funded through an existing utility-bill-surcharge.
New Jersey regulators described energy storage as “the most significant source of near-term capacity,” citing specifically the fact that storage makes up the “bulk” of proposed energy capacity in New Jersey with interconnection approval from PJM.
While the regulator issued its order before OBBBA passed, the focus on storage ended up being advantageous. The bill treats energy storage far more generously than wind and solar, meaning that New Jersey could potentially expand its generation capacity with projects that are more likely to pencil due to continued access to tax credits. The state is also explicitly working around the interconnection queue, not raging against it: “PJM interconnection delays do not pose a significant obstacle to a Phase 1 transmission-scale storage procurement target of 1,000 MW,” the order said.
In the end, PJM and the states may be stuck together, and their best hope could be finding some way to work together — and they may not have any other choice.
“A well-functioning RTO is the best way to achieve both low rates for consumers and carbon emissions reductions,” Evan Vaughan, the executive director of MAREC Action, a trade group representing Mid-Atlantic solar, wind, and storage developers, told me. “I think governors in PJM understand that, and I think that they’re pushing on PJM.”
“I would characterize the passage of this bill as adding fuel to the fire that was already under states and developers — and even energy offtakers — to get more projects deployed in the region.”
On Neil Jacobs’ confirmation hearing, OBBBA costs, and Saudi Aramco
Current conditions: Temperatures are climbing toward 100 degrees Fahrenheit in central and eastern Texas, complicating recovery efforts after the floods • More than 10,000 people have been evacuated in southwestern China due to flooding from the remnants of Typhoon Danas • Mebane, North Carolina, has less than two days of drinking water left after its water treatment plant sustained damage from Tropical Storm Chantal.
Neil Jacobs, President Trump’s nominee to head the National Oceanic and Atmospheric Administration, fielded questions from the Senate Commerce, Science, and Transportation Committee on Wednesday about how to prevent future catastrophes like the Texas floods, Politico reports. “If confirmed, I want to ensure that staffing weather service offices is a top priority,” Jacobs said, even as the administration has cut more than 2,000 staff positions this year. Jacobs also told senators that he supports the president’s 2026 budget, which would further cut $2.2 billion from NOAA, including funding for the maintenance of weather models that accurately forecast the Texas storms. During the hearing, Jacobs acknowledged that humans have an “influence” on the climate, and said he’d direct NOAA to embrace “new technologies” and partner with industry “to advance global observing systems.”
Jacobs previously served as the acting NOAA administrator from 2019 through the end of Trump’s first term, and is perhaps best remembered for his role in the “Sharpiegate” press conference, in which he modified a map of Hurricane Dorian’s storm track to match Trump’s mistaken claim that it would hit southern Alabama. The NOAA Science Council subsequently investigated Jacobs and found he had violated the organization’s scientific integrity policy.
The Republican budget reconciliation bill could increase household energy costs by $170 per year by 2035 and $353 per year by 2040, according to a new analysis by Evergreen Action, a climate policy group. “Biden-era provisions, now cut by the GOP spending plan, were making it more affordable for families to install solar panels to lower utility bills,” the report found. The law also cut building energy efficiency credits that had helped Americans reduce their bills by an estimated $1,250 per year. Instead, the One Big Beautiful Bill Act will increase wholesale electricity prices almost 75% by 2035, as well as eliminate 760,000 jobs by the end of the decade. Separately, an analysis by the nonpartisan think tank Center for American Progress found that the OBBBA could increase average electricity costs by $110 per household as soon as next year, and up to $200 annually in some states.
EIA
Saudi Arabia’s state-owned oil company Saudi Aramco is in talks with Commonwealth LNG in Louisiana to buy liquified natural gas, Reuters reports. The discussion is reportedly for 2 million tons per year of the facility’s 9.4 million-ton annual export capacity, which would help “cement Aramco’s push into the global LNG market as it accelerates efforts to diversify beyond crude oil exports” and be the “strongest signal yet that Aramco intends to take a material position in the U.S. LNG sector,” OilPrice.com notes. LNG demand is expected to grow 50% globally by 2030, but as my colleague Emily Pontecorvo has reported, President Trump’s tariffs could make it harder for LNG projects still in early development, like Commonwealth, to succeed. “For the moment, U.S. LNG is still interesting,” Anne-Sophie Corbeau, a research scholar focused on natural gas at Columbia University’s Center on Global Energy Policy, told Emily. “But if costs increase too much, maybe people will start to wonder.”
Ford confirmed this week that its $3 billion electric vehicle battery plant in Michigan will still qualify for federal tax credits due to eleventh-hour tweaks to the bill’s language, The New York Times reports. Though Ford had said it would build its factory regardless of what happened to the credits, the company’s executive chairman had previously called them “crucial” to the construction of the facility and the employment of the 1,700 people expected to work there. Ford’s battery plant is located in Michigan’s Calhoun County, which Trump won by a margin of 56%. The last-minute tweaks to save the credits to the benefit of Ford “suggest that at least some Republican lawmakers were aware that cuts in the bill would strike their constituents the hardest,” the Times writes.
Italy and Spain are on track to shutter their last remaining mainland coal power plants in the next several months, marking “a major milestone in Europe’s transition to a predominantly renewables-based power system by 2035,” Beyond Fossil Fuels reported Wednesday. To date, 15 European countries now have coal-free grids following Ireland’s move away from coal in 2025.
Italy is set to complete its transition from coal by the end of the summer with the closure of its last two plants, in keeping with the government’s 2017 phase-out target of 2025. Two coal plants in Sardinia will remain operational until 2028 due to complications with an undersea grid connection cable. In Spain, the nation’s largest coal plant will be entirely converted to fossil gas by the end of the year, while two smaller plants are also on track to shut down in the immediate future. Once they do, Spain’s only coal-power plant will be in the Balearic Islands, with an expected phase-out date of 2030.
“Climate change makes this a battle with a ratchet. There are some things you just can’t come back from. The ratchet has clicked, and there is no return. So it is urgent — it is time for us all to wake up and fight.” — Senator Sheldon Whitehouse of Rhode Island in his 300th climate speech on the Senate floor Wednesday night.