Talking Points
- Going it alone: China launched a module of its space station
- President Biden announced a multi-trillion dollar renewal plan
- US cops killed 979 between Floyd's death and Chauvin's verdict
- Human Rights Watch labelled Israel an apartheid state
- In France, already-sweeping anti-terror laws were toughened
- Germany's top court ruled Merkel's climate plan "insufficient"
- Berlin revealed it is keeping tabs on anti-lockdown activists
- Swiss critics of same-sex marriage forced a new referendum
- Apple and Spotify each unveiled paywalls for podcasts
- Alphabet, Facebook, and Apple touted blockbuster profits
Dive deeper
You may have noticed that climate change features prominently in this column. Every week it seems there's some exigent news about icebergs cleaving off their shelves, rivers running dry (or too full), and landmasses heating up. But all of these are, to borrow an oil term, downstream phenomena. This week let's sail upstream to trace the root of the problem.
ExxonMobilised
Exxon Mobil Corporation is not the largest oil company in the world (it's barely a tenth of Saudi Aramco) but it is arguably the most recognisable fossil-fuel brand. And not necessarily for the right reasons - most of us still remember the Exxon Valdez oil disaster (although BP has fought hard to take on the mantle).
Today's self-styled ExxonMobile is a Texas-based tie-up of two Standard Oil fragments that found their way back together 88 years after the big bust-up. The company touches just about every corner of the global oil business but its key focus is upstream: in exploration and extraction. It owns several fragments of the United States of America (59,000 square kilometres of land in all) from within which it pumps the lion's share of 4.3 billion barrels of oil in a single day. Let's not mince our words, this company has been at the tip of the spear of climate change denial and has been found to have knowingly suppressed the facts of its negative impact on the world for decades.
But at the same time, the company we know as ExxonMobil has also had a cherished reputation for stability, fiscal discipline, and reliably chunky dividends . But not any more. Today, ExxonMobil is at war with itself. The casus belli rests on a profound question: what is the role of an oil company in a rapidly decarbonising future?
The insurgents are led by a precocious investment firm, Engine No. 1, which has set its eyes on changing the entire equation that underpins the oil business. Rather than doing it by beating the divestment drum or by chaining themselves to derricks, the investors are using ExxonMobil's own fiscal strategies and legal duties against it. Their flashy promotions and investor decks all carry a rallying cry, "Reenergise Exxon".
Recently, the rebels released an 80-page indictment alleging that ExxonMobil has “significantly underperformed and has failed to adjust its strategy to enhance long-term value”. What, they ask, is the future? And how well positioned is ExxonMobile to make money in it? CEO Darren Wood claimed a year ago that "the longer-term horizon is clear", and we don't think he meant clear in terms of less pollution as internal combustion engines get disrupted by electric vehicles. Wood projected that oil demand would continue to rise until the 2040s, thus allowing ExxonMobil to keep drilling for a few decades hence. But this prognostication doesn't square with the company's disastrous last few years. Since 2010, ExxonMobil has borrowed heavily to fund numerous projects that had sky-high break-even prices (i.e., projects that became unprofitable as oil prices dropped). Its credit rating has been slashed twice, as debt has ballooned from $7b to $63b.
Is is these dubious bets that Engine No. 1 has zeroed in on. The sheen has come off ExxonMobil's business, and its management. This may be partly due to the make-up of the current board: 12 independent directors with fine curricula vitae but scant experience in energy, let alone epochal energy transitions. To this, the activist fund offers a simple solution: replace four of the directors with people who do. That's a presumptuous ask for an investor that holds a trifling $40m stake in a $250B company. But less so for California's public employees' and teachers' pensions, and the New York State Common Retirement Fund. These are the largest pension funds in the country. And they have lent their considerable weight to Engine No. 1.
Carbon Capture and Storage (and other myths)
Now the path forks. ExxonMobil's leadership can either bow to investor pressure and begin a painful transition out of oil. Or, it can posit that the company is obligated to keep creating value for shareholders the only way it knows right now: by drilling until the apocalypse. This week, the company tried to split the difference using the buzz words "carbon capture and storage" (CCS). The company is arguing that CCS will carry ExxonMobil into a bright, decarbonised future. At the centrepiece of this strategy is the Houston CCS Innovation Zone , a fabulous plan to bury 50m tons of carbon every year under the Gulf of Mexico. As the widely-flogged press-packet boasts, this is three times the combined carbon sequestration of every project in operation today.
It's also complete hogwash. As Professor David Victor , a leading author for the Intergovernmental Panel on Climate Change said, “Here’s the sad truth on this PR exercise. ExxonMobil’s Houston project does not exist. Nor are there any signs that the vision, for which the firm has offered barely more detail than a college book report, is being readied for investment. The project’s $100 billion-plus price tag isn’t something ExxonMobil plans to pay for itself – instead, it wants massive government support." CCS has been tried, and abandoned, again and again all over the world due to meagre efficacy and shocking cost blowouts. As one energy insider noted dryly, "the problem is that CCS has been 15 years away from commercial scale-up for the past 15 years".
Unfortunately for ExxonMobile, its activist investors aren't taking the bait. Instead they've attacked the modelling that showed CCS reducing emissions by 15-20% by 2025. Or as the Engine No. 1 report puts it , "ExxonMobil has sought to obscure long-term risk by distorting its long-term emissions trajectory. Even by its own limited standards, ExxonMobil has gone backwards and aims to do worse in 2025 than 2010."
And if that's not bad enough, for ExxonMobil's CCS projects to actually take off, there would need to be robust incentives in the form of a carbon tax. But such a carbon tax would also further attenuate ExxonMobil's primary business model.
In other words, the company is offering a white elephant, kept on life-support in a lab for purely promotional purposes, with no hope of ever being released in the wild. Such fun and games may be fine in the financial markets, but they're certainly not fine for the planet. We can't lose another decade to such palaver: there's a lot more than money at stake, and ExxonMobil must do better.
Worldlywise
A genocide by any other name
It is an odd thing to say, but this has been a big week in genocide news. First, to Washington, where President Joe Biden has finally made good on a long-dangled promise to recognise the Armenian Genocide . In 1915, the collapsing Ottoman empire killed well over a million Armenians. The vast majority were sent under armed guard – shackled and waterless – on death marches into the Syrian desert. At least 800,000 people, walked for days and weeks until they died of exhaustion or dehydration; or were shot if they fell behind or resisted. But for decades, it has been politically inconvenient to recognise this as genocide, not least because of Turkey's membership in the North Atlantic Treaty Organisation. Little wonder then that Turkey's Erdogan responded in kind , by threatening to recognise America's own slaughter, dispossession, and internment of its native population as genocide.
France copped it too. A report commissioned by the Rwandan government, compiled by a Washington DC law firm, found that France bore "significant responsibility" for the Rwandan genocide. The former colonial masters had leant their aegis to the Hutu president Juvenal Habyarimana. They were thus "indispensable collaborators" in building the institutions that set the scene for the bloodbath of 1994-95. It is beholden on contemporary France to make public its records on the relationship.
75 years after the term was first coined, the definition of genocide hasn't changed. But the political calculus has. Cold War rivalries, colonial projects, and diplomatic exigencies have warped our perspective of what is and isn't considered a genocide . The Land Cruiser War in Darfur? Too remote to understand. Srebrenica? A result of ancient hatreds. The ongoing bloodletting in Myanmar? Plain old ethnic cleansing. It seems inevitable that all of these will, in time, be recognised for what they are. For now, it is good that at least some of the most howlingly obvious genocides of the past are finally being labelled correctly.
And now for something completely different
January 1999 Britney Spears released her first studio album ...Baby One More Time . It went double platinum, topped the charts in a dozen countries, and sold 10 million copies in its first year. The eponymous lead track from the album remains one of the best-selling singles of all time. She was a breakout star at the tender age of 17. Though she didn’t emerge from the clouds. Her parents Lynne Bridges and Jamie Spears had encouraged her from a young age to pursue a career in acting or singing. She was pushed, some say to the point of exploitation, through advertisements and television shows before finally landing a record deal.
At the zenith of her career Spears was the most successful pop star on the planet. The decline was swift: the breakdown of her marriage, losing custody of her sons, well-documented struggles with mental health. She was placed under a conservatorship (a legal guardianship usually reserved for the infirm or elderly) administered by her father. In the interim years she’s released albums to less fanfare, and has generally eschewed the limelight . The rest is history, or up until recently it was.
In the last few years the #freebritney movement emerged among her diehard fans. They view conservatorship as a legal manacle used by a father to imprison his daughter. True, she has no meaningful access to the vast resources she has accumulated (and continues to, she never stopped touring). Is Jamie Spears using the law to muzzle and control one of the greatest musical talents of her generation? Soon, we may know. Lawyers acting on her behalf requested that she be given the opportunity to address her conservatorship and her father’s role in court directly. It’s been granted .
The media interest may not be as tabloid (in the pejorative sense) as during noughties but it is certainly no less intense. Let’s hope that something has been learned about how women are characterised and caricatured in the media since 2009.
The best of times
Microbes with a macro impact
Two breakthroughs involving microorganisms are paving the way for a more sustainable world. The first is the discovery of a bacteria in a Brazillian copper mine which can quite literally eat copper ions. Analysis of the microbe found that it could be used to process copper in place of the toxic chemicals. The second breakthrough involves using bacteria to create a microplastic-catching net which can be used in polluted waters. Not only does it catch the harmful plastics, but it also allows them to be reused in new products.
Belize at ease
A coalition of conservation groups have bought a 950km2 piece of Belize forest , saving it from potential destruction. The forest is home to a plethora of animals, including wild cats, birds, and even endangered tapirs. On top of that, a sacred Mayan site dating back to 800AD is also located on the property. And so, the forest’s pristine condition, as well as its biodiversity and history, will remain intact for years to come.
The worst of times
Suicides surge in Syria
Suicides in northwest Syria are rising sharply as conflict continues to damage the country. In a report by Save the Children, the number of people taking their own lives has risen by 86% since the beginning of last year. Worryingly, one in five of those who attempt or commit suicide are under the age of 18. The rise is just one effect of the region’s poverty, child marriage, as well as lack of education and employment.
Exit ban
Beijing is once again expanding its grip on Hong Kong in the name of crushing dissent. On Wednesday, an immigration bill was passed allowing residents to be blocked from entering or exiting the city. Additionally, authorities can implement the ban without a court order and cannot be appealed. The city-state’s government has claimed it will only be used on inbound flights and to target illegal immigrants. However, the legislation itself does not include either of these stated limitations.
Weekend Reading
The image
The quote
“ Your emperor with no clothes has stolen the banner of victory. All your authorities are occupiers and traitors ”
– Kremlin critic Aleksei Navalny appears gaunt but defiant in a Russian court.
The numbers
10.48 per 1,000
- A reputable newspaper published claims that China’s population declined in 2020. Beijing’s statistics bureau fired back, announcing that they’ve kept growing and can expect to reverse around 2030. Are they coming or going?
3 new seats
- Meanwhile in the US Latino residents of the Sun-Belt states have been left pondering whether they were counted at all in the last census. The blossoming Latino populations of Florida, Texas, and Arizona assumed that they would be allocated two new Federal House of Representatives seats each. Instead they’ve received three between them . As they say, if it doesn’t get counted, it doesn’t get done. .
The headline
" Iranian Ships Swarned U.S. Coast Guard Vessels in Persian Gulf, Navy Says " – The Wall Street Journal. We've got our map out trying to find the shred of American coastline that abuts the Gulf!
The special mention
Our special mention of the week is an absolute doozy. This Florida school is refusing to hire any teacher who has had a coronavirus vaccination . Try not to think about that too long – it hurts.
A few choice long-reads
- There is politics and there is politics. Read this impassioned piece from Foreign Affairs as to how Chinese students get caught in the crossfire.
- Here's a question for you: just how radical is Joe Biden? Financial Times delivers.
- Life is short. Especially for the wealthy. Bloomberg looks at the new-found sense of mortality in America's ruling class.
Tom Wharton @trwinwriting
