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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; Bloombergestimates 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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Current conditions: Yosemite could get 9 inches of snow between now and Sunday • Temperatures will rise to as high as 104 degrees Fahrenheit in Ashgabat, Turkmenistan, as Central and Southeast Asia continue to bake in a heatwave • Hail, tornadoes, and severe thunderstorms will pummel the U.S. Heartland into early next week.
It was a busy week of earnings calls for the clean energy sector, which, as a whole, saw investment dip by nearly $8 billion in the first three months of the year. Tariffs — especially as they impact the battery supply chain — as well as changes to federal policy under the new administration and electricity demand were the major themes of the week, my colleague Matthew Zeitlin wrote.
Like companies across many different sectors, inverter and battery maker Enphase, turbine manufacturer GE Vernova, Tesla, and the utility NextEra all mentioned the tariffs in their earnings reports and calls. Enphase, for one, is bracing for as much as 8% knocked off its gross margin by the third quarter, while Tesla’s highly-anticipated call managed expectations for the rest of the year, with the company citing the difficulty measuring “the impacts of global trade policy on the automotive and energy supply chains, our cost structure, and demand for durable goods and related services.” Meanwhile, on Thursday, Xcel Energy — which recently reached settlements for its role in the ignition of the most destructive wildfire in Colorado history and the largest wildfire in Texas history — reported missing first-quarter estimates and feeling the squeeze of high interest rates at a time of soaring, data-center-driven electricity demand.
The Department of Justice’s lawyers warned the Department of Transportation that its case against New York City’s congestion pricing program is likely a loser. We know this because someone mistakenly uploaded the DOJ’s memo into the court record for the Metropolitan Transportation Authority’s lawsuit challenging Transportation Secretary Sean Duffy’s actions. Whoops.
As my colleague Emily Pontecorvo reports, the leaked memo was dated before Duffy announced “he would put a moratorium on any new federal approvals for transit projects in Manhattan until the state shut down the tolling program.” But as Emily goes on to say, the memo “warns that continuing down this route could open up both the department and Duffy personally to further probes.” The New York Times adds that the DOT has since replaced the DOJ lawyers who authored the memo and plans to transfer the case to the civil division of the Justice Department in Washington.
More than 100 new cars and vehicles are expected to debut at the 2025 Shanghai Auto Show, which began on Wednesday and runs through next Friday. Of the approximately 1,300 total vehicles on display, 70% are new energy vehicles, according to Gu Chunting, the vice chairman of the Council for the Promotion of International Trade Shanghai, one of the event’s organizers.
The show is already off to an exciting start. Volkswagen is showcasing 50 new models, including three electrified concept vehicles specifically targeted at the Chinese market: the ID. Aura sedan, the ID. Evo SUV, and ID. Era three-row SUV, a hybrid with over 621 miles of range. BYD’s Denza line also premiered its Z, a luxury electric vehicle designed to compete with Tesla and Porsche. “Beauty is in the eye of the beholder, of course, but most people will find the Denza Z to be drop dead gorgeous,” Clean Technica raved.
That’s not all. The Faw Group, a Chinese state-owned car manufacturer, showed off a flying vehicle with a range of 124 miles, while fellow Chinese automaker Changan Automobile announced an autonomous flying car that reportedly already has government approval to transport passengers, per IoT World Today. France’s Le Monde was wowed by China’s innovations all around: “Gone are the days when the vast exhibition space had one hall dedicated to foreign brands and another for Chinese ones. Today, each Chinese group occupies a hall, showcasing domestic brands and leaving only some space for foreigners around the edges.”
Volkswagen
In a private ceremony Thursday night, President Trump signed an executive order to “unleash” deep-sea mining. The order — which directs the secretaries of Interior and Commerce to accelerate “the process of renewing and issuing seabed mineral exploration licenses and commercial recovery permits” for the U.S. Outer Continental Shelf and “areas beyond national jurisdiction”— is an attempt to offset China’s dominance of the critical minerals supply chain. Deep-sea mining operations harvest “nodules” that take millions of years to form and contain minerals like nickel, copper, cobalt, and manganese necessary for lithium-ion batteries for electric vehicles, among other applications. “For too long, we’ve been over reliant on foreign sources, and today this historic announcement marks a big step in the right direction to onshore these resources that are critical to national homeland security,” a senior administration official told reporters on Thursday, as reported by CNN.
Deep-sea mining is controversial due to how little we know about the ocean’s abyss, including the potential impact of large-scale mining operations on marine biodiversity and carbon sequestration. The United States has largely abstained from the deliberations of the United Nations’ International Seabed Authority, which determines whether and how to mine the seabed for critical minerals. The industrial mining of international waters, as cued up by Trump’s executive order, is opposed by “nearly all other nations,” The New York Times writes, and is “likely to provoke an outcry from America’s rivals and allies alike.”
It has already been a tragic year for wildfires, with more than 57,000 acres of Los Angeles and the surrounding hillsides burned in January. Now, AccuWeather is predicting that fires in the U.S. could “rapidly escalate” and burn up to 9 million acres total this year, well above the historic average of 7 million acres and close to the 8.9 million acres that burned in 2024.
Specifically, AccuWeather predicts an extreme fire season in the Northwest, northern Rockies, Southwest, and South Central states, particularly as late summer and fall approach. “There was plenty of rain and snow across Northern California this winter. All of that moisture has supported a lot of lush vegetation growth this spring,” AccuWeather’s lead long-range expert, Paul Pastelok, said. “That grass and brush will dry out and become potential fuel for wildfires this fall,” when any “trigger mechanism … could cause big wildfire problems.”
AccuWeather
Slate Auto, a three-year-old Jeff Bezos-backed startup, has announced an EV truck that will cost less than $20,000 after the federal tax credit and before customization. “It’s the Burger King of trucks,” writes Car and Driver, because “it’s affordable” and “lets customers ‘have it their way’ with a lengthy accessory list, including one that turns this pickup into an SUV.”
Three weeks after “Liberation Day,” Matador Resources says it’s adjusting its ambitions for the year.
America’s oil and gas industry is beginning to pull back on investments in the face of tariffs and immense oil price instability — or at least one oil and gas company is.
While oil and gas executives have been grousing about low prices and inconsistent policy to any reporter (or Federal Reserve Bank) who will listen, there’s been little actual data about how the industry is thinking about what investments to make or not make. That changed on Wednesday when the shale driller Matador Resources reported its first quarter earnings. The company said that it would drop one rig from its fleet of nine, cutting $100 million of capital costs.
“In response to recent commodity price volatility, Matador has decided to adjust its drilling and completion activity for 2025 to provide for more optionality,” the company said in its earnings release.
In February, Matador was projecting that its capital expenditures in 2025 would be between $1.4 and $1.65 billion.This week, it lowered that outlook to $1.3 to $1.55 billion. “We’re very open to and want to have reason to grow again,” Matador’s chief executive Joseph Foran said on the company’s earnings call Thursday. “This is primarily a timing matter. Is this a temporary thing on oil prices? Or is this a new world we live in?”
Mizuho Securities analyst William Janela wrote in a note to clients Thursday morning that, as the first oil exploration and production company to report its earnings this go-round, Matador would be “somewhat of a litmus test for the sector: we don't believe the market was expecting E&Ps to announce activity reductions this soon, but MTDR's update could signal more cuts to come from peers over the next few weeks.”
West Texas Intermediate crude oil prices are currently sitting at just below $63, up from around $60 in the wake of President Donald Trump’s “Liberation Day” tariff announcements. While the current price is off its lows, it’s still well short of the almost $84 a barrel crude prices were at around this time last year.
The price decline could be attributable to any number of factors — macroeconomic uncertainty due to the trade war, production hikes by foreign producers — but whatever the cause, it has made an awkward situation for the Trump administration’s energy strategy.
The iShares U.S. Oil & Gas Exploration & Production ETF, which tracks the American oil and gas exploration industry, is down 9% for the year and more than 13% since “Liberation Day,” while the rest of the market has almost recovered as the Trump administration has indicated it may ease up on some of his more drastic tariff policies.
If other drillers follow Matador’s investment slowdown, it could imperil Trump’s broader energy policy goals.
Trump has both encouraged other countries to produce more oil (and bragged about lower oil prices) while also exhorting American drillers to “drill, baby, drill,”with enticements ranging from kneecapping emissions standards to a reduced regulatory burden.
As Heatmap has written, these goals sit in conflict with each other. Energy executives told the Federal Reserve Bank of Dallas that they need oil prices ranging from $61 to $70 a barrelin order to profitably drill new wells. If prices fall further, “what would happen is ‘Delay, baby, delay,’”Wood Mackenzie analyst Fraser McKay wrote Wednesday. “We now expect global upstream development spend to fall year-on-year for the first time since 2020.”
A $65 per barrel price “dents” margins for drillers, meaning “growth capex and discretionary spend will be delayed,” McKay wrote.
Matador also announced that it had authorized $400 million worth of buybacks, and itsstock price rose some 4% on the earnings announcement, indicating that Wall Street will reward drillers who pull back on drilling and ramp up shareholder payouts.
“We’ve got the tools in the toolbox, including the share repurchase, to make Matador more value quarter by quarter,” Foran said. Rather than “blindly” pouring capital into growth, Matador would aim for a “measured pace,” he explained. “And if you mean what you say about a measured pace, that means when prices get a little lower, you take a few more moments to think about what you’re doing and don’t rush into things.”
At San Francisco Climate Week, everything is normal — until it very much isn’t.
San Francisco Climate Week started off on Monday with an existential bang. Addressing an invite-only crowd at the Exploratorium, a science museum on the city’s waterfront, former vice president and long-time climate advocate Al Gore put the significance and threat of this political moment — and what it means for the climate — in the most extreme terms possible. That is to say, he compared the current administration under President Trump to Nazi Germany.
“I understand very well why it is wrong to compare Adolf Hitler’s Third Reich to any other movement. It was uniquely evil,” Gore conceded before going on: “But there are important lessons from the history of that emergent evil.” Just as German philosophers in the aftermath of World War II found that the Nazis “attacked the very heart of the distinction between true and false,” Gore said, so too is Trump’s administration “trying to create their own preferred version of reality,” in which we can keep burning fossil fuels forever. With his voice rising and gestures increasing in vigor, Gore ended his speech on a crescendo. “We have to protect our future. And if you doubt for one moment, ever, that we as human beings have that capacity to muster sufficient political will to solve this crisis, just remember that political will is itself a renewable resource.”
The crowd went wild. Former House Speaker Nancy Pelosi took the stage and reminded the crowd that Gore has been telling us this for decades — maybe it’s time we listen. But I missed all that. Because just a few miles away, things were getting a little more in the weeds at the somewhat less exclusive venture capital-led panel entitled “The Economics of Climate Tech: Building Resilient, Scalable, and Sustainable Startups.” Here, I learned about a new iron-sodium battery chemistry and innovations in transformers for data centers, microgrids, and EV charging infrastructure.
I heard Tom Chi, founding partner of At One Ventures, utter sentences such as “parity dies because of capex inertia,” referring to the need to make clean tech not only equivalent to but cheaper than fossil-fuels on a unit economics basis. Such is the duality of climate week during the Trump administration — occasionally lofty in both its alarm and its excitement, but more often than not simply business-as-usual, interrupted by bouts of heady doom or motivational proclamations.
Some panels, like the one I moderated on the future of weather forecasting using artificial intelligence, made it a full hour without discussing Trump, tariffs, or tax credits at all. So far, that’s held true for a number of talks on how AI can be a boon to climate tech. It makes sense — the administration is excited about AI, and there’s really no indication that Trump has given any thought to either the positive or negative climate externalities of it.
But rapid data center buildout and the attendant renewables boom that it may (or may not) bring will certainly be influenced by the administration’s fluctuating policies, an issue that was briefly discussed during another panel: “AI x Energy: Gridlocked or Grid Unlocked?” Here, representatives from Softbank, Pacific Gas & Electric, and the data center builder and operator Switch touched on how market uncertainty is making it difficult to procure energy for data centers — and to figure out the cost of building a data center, period.
“There is a lot of refiguring and rereading contracts and looking at the potential exposure to things like the escalation in the cost of steel for construction projects,” Skyler Holloway of Switch said. Pinning down a price on the energy required to power data centers is also a bottleneck, Gillian Clegg, vice president of energy policy and procurement at PG&E explained. “For projects that want to connect between now and 2030, any kind of uncertainty or delay means that the generation doesn't get to the market,” Clegg said. “Maybe the load gets there first, and you have an out of balance situation.”
Everyone acknowledges that uncertainty is bad for business, and that delays related to funding, contracts, and construction can kill otherwise viable companies. But unsurprisingly, nobody here has admitted that said uncertainty might put them out of business, or even deeply in the red.Every panel I attend, I find myself wondering whether a founder or investor is finally going to raise their voice, à la Al Gore, and tell the audience that while their company’s business model is well and good, the Trump administration’s illogical antipathy towards green-coded tech and ill-conceived trade war is throwing the underlying logic — sound as it may have been just a year ago — into disarray.
None of the seven energy, food, and agricultural startups that presented at the nonprofit climate investor Elemental Impact’s main show, for instance, discussed the impacts of the administration’s policies on their businesses. Rather, they maintained a consistently upbeat tone as they described the promise of their concepts — which ranged from harnessing ocean energy to developing plant-based fertilizers to using robotics for electronics recycling — and the momentum building behind them. Nuclear and geothermal companies, seemingly poised to be the clean tech winners of Chris Wright’s Department of Energy, have been especially optimistic this week.
But really, what else can climate tech companies and investors be expected to do right now besides, well, rise and grind? It’s not like anybody has answers as to what’s coming down the policy pike. In a number of more casual conversations this week, a common sentiment I heard was that it’s not necessarily a bad time to be an early-stage startup — keep your head down, focus on research and prototyping, and reassess the political environment when you’re ready to build a pilot or demonstration plant. As for later-stage companies and venture capital firms, they’re likely working to ensure that their business models and portfolios really aren’t dependent on government subsidies, grants, or policies — as they keep assuring me is the case.
Even that might not be enough these days though. Chi said he’s always tailored his investments with At One Ventures towards companies that are viable based on unit economics alone, no subsidies and no green premium. So he wasn’t initially worried about his portfolio when Trump was elected. “None of our business models were invalidated by the election,” he said. “The only way that we could be in trouble is if they mess it up so bad that it ruins all of business, not just climate …”
Oops.
If there’s one dictum that I would expect to hold, though, it’s that the startups that make it through this period will likely be around for the long haul. I’ve been hearing that sentiment since the election, and Mona ElNagger, a partner at Valo Ventures, echoed it once again this week. “Microsoft and Apple were founded in the mid 1970s, which was a time of severe recession and stagflation. Amazon started at the tail end of a big recession in the early 1990s,” ElNagger reminded the audience at the Economics of Climate Tech panel, which she moderated. “Companies that survive and actually thrive in such periods share a common thread of resilience.”
As that panel wrapped up, things got existential once more as Chi’s talk moved from describing his investment thesis to the moment at large. “This time period in history is going to bring us tragedy after tragedy, and it’s really that moment that we’re going to understand the deep underlying structure of half of the world that we’ve built, and also the character of who we are,” Chi told the audience. It was unclear whether we were even talking about climate tech anymore. Chi continued, “It’s in that time period that we are going to step up and become whatever we are meant to be or not at all.”
The crowd sat there, a little stunned. Were we, in this very moment, becoming who we were meant to be? I took a bite of my free sushi as the networking and hobnobbing began.