Two things to start: 1. Oil prices continue their upward march. West Texas Intermediate, the US marker, yesterday crossed the $70 a barrel threshold for the first time since October 2018.

2. US officials have recovered $2.3m worth of the ransom payment made to hackers who shut down the Colonial Pipeline last month.

Another Tuesday, another Energy Source. It is just about two weeks since Big Oil’s bad day, when the sector was hit by a string of upsets as both investors and courts flexed their muscles to demand greater action on climate.

But for all the fanfare, not much has changed, writes Justin Jacobs in today’s first item. Neither of America’s oil giants — Exxon and Chevron — are signalling strategic shifts.

Our second item is on a report from Resources for the Future, which breaks down the plethora of scenarios on emissions and energy demand — and underlines the chasm between current trajectories and the shifts needed to meet Paris agreement goals.

Thanks for reading. Please get in touch at  — Myles

The bosses at ExxonMobil and Chevron suffered stinging rebukes to their climate strategies at this year’s shareholder meetings, a sign of the significant shifts affecting Big Oil.

Yet in the wake of those defeats, neither are signalling that they intend to make a strategic about-face of the sort that has seen European rivals, including BP, Shell and Total among others, tie their fortunes to an accelerated transition to cleaner fuels.

Exxon’s chief executive Darren Woods has stayed out of public view since the shareholder meeting, but in a statement to the Financial Times following the vote he highlighted that many of the company’s 3m shareholders “supported the work that we’re doing” on climate and capital spending, before acknowledging a “desire to further these efforts”.

The tiny activist hedge fund Engine No 1 won its audacious campaign, netting three seats on Exxon’s board, a quarter of the total, in part by warning of the “existential risk” posed by a faster shift away from oil than the supermajor’s sanguine expectations of future demand.

Woods’ post-vote comments did not indicate a change of heart since the bitter proxy fight.

He defended a climate strategy focused on reducing operational emissions and laying the groundwork for possible carbon capture and storage while continuing to invest in new oil projects.

Chevron’s chief executive Mike Wirth meanwhile defended his strategy at his first appearance since losing his own shareholder battle during a virtual event hosted by the investment group Bernstein last week.

Shareholders approved a measure, opposed by Wirth and the board, asking Chevron to “substantially” reduce its so-called scope 3 emissions in the “medium- and -long term” — referring to the emissions generated from the sale of its products.

The measure gave Chevron’s management flexibility in how to achieve the goal. Wirth said the board would consider the proposal: “Enough of our shareholders said they wanted to see something happen here that we’ve got to really sit down and look at all the different alternatives.”

But he argued against winding down Chevron’s oil and gas production while pivoting to cleaner fuels — something BP and some other European majors have said they will do to meet their own targets for slashing scope 3 emissions.

If demand did not fall, offloading oil and gas assets to “the dirtiest producer” would result in “more emissions rather than less”, he added.

“My argument would be, you should want the best producers to be meeting the most demand that they can,” Wirth said, noting that Chevron was among the producers with the lowest carbon intensity for each barrel produced.

Some analysts have pointed to BP’s sale of its Alaska business to Hilcorp as a warning of how this shift to higher emitting producers could play out. The environmental group Clean Air Task Force revealed in a recent analysis that Hilcorp, a privately held producer, was among the US’s worst methane emitters, with a leakage rate six times higher than the national average.

Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University, echoed that warning in a sharp Foreign Policy essay, arguing that “forcing oil majors to curb investment only leads to emissions reductions if global oil demand declines, too”.

Otherwise, Bordoff adds, “under-investment creates economic, political, and geopolitical risks that could actually undermine the rapid decarbonisation needed to combat the climate crisis”. (Justin Jacobs)

There remains an enormous gulf between the lofty climate ambitions of countries around the world and existing policies on how to get there.

That is the key takeaway of a report released today by Washington think-tank Resources for the Future, which analyses a host of scenarios set out by different climate and energy bodies.

The chart below compares emissions levels under a select group of climate policy scenarios — ranging from “business as usual” to sweeping policy changes. A host of other scenarios from other organisations can be compared here.

Line chart of Tonnes (billion) showing Global carbon emission reductions hinge on ambitious policy decisions

The different scenarios underline the disconnect between far-reaching climate targets at both the national and international level and the changes that still need to be made to achieve them.

Whether or not those changes are enacted have big impacts on future demand for both fossil fuels and renewables. A few takeaways:

Column chart of Terrawatt Hours (thousand), 2040 showing The extent of renewables Line chart of British thermal units (quadrillion) showing Worldwide oil demand will either plateau or plummet

The transition has reshaped the way the world sees the energy future. GDP and population growth are no longer the key factors shaping how analysts calculate demand pathways: climate policy outweighs everything else.

And those demand pathways have changed significantly over the past decade. So called “business-as-usual” scenarios in recent years showed consumption of all energy sources rising across the board. Now they show fossil fuels plateauing.

(Myles McCormick)