OPINION: The price of oil zipped past $72 per barrel for Brent blend earlier this week, giving a newfound confidence to drillers worldwide.

Opec and its allies helped the surge by only gently increasing production despite rising demand due to global economic recovery.


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The number of rigs working in the US has doubled since last August, making cost inflation more of a worry than an idle workforce.

The sense of industry optimism was symbolised by Equinor, ExxonMobil and Petrogal recently giving the go-ahead to the $8 billion Bacalhau first-phase project in Brazil.

Strong demand outlook

“Not every country in the world is on a full recovery mode yet, but at the moment no hiccup seems able to reverse the bullish momentum ushered in by strong summer demand,” said Norwegian consultancy Rystad Energy.

Bank of America predicted global oil demand would grow at an “unprecedented pace” over the coming quarters.

Engine for change

Despite this rosy picture, however, the backcloth is one of considerable unease for Western oil majors as they digest the impact of a series of setbacks on the climate agenda.

Perhaps the biggest impact was felt in the US with ExxonMobil being roughed up by Engine No 1 at its 26 May annual general meeting.

Who is safe from smart activist investor groups if a tiny organisation of 22 staff can force one the size of ExxonMobil — with a 70,000-strong workforce — to hand over three seats on its board?

Scratch beneath the surface, however, and you see that the Engine No 1 hedge fund has some serious movers and shakers behind it.

Gregory Goff, Kaisa Hietala and Alexander Karsner, who have all won seats on the ExxonMobil board, have strong reputations on Wall Street or experience in the energy sector.

They are not climate activists: they are primarily motivated by the view that ExxonMobil's share price is underperforming because the Texas-based oil giant's strategy is not aligned with the current sentiment around the energy transition.

If climate was previously low on the agenda of the world’s largest independently quoted oil company, that is not the situation now.

Shell's court loss

Slightly less headline-grabbing than Engine No 1's victory but arguably more important was Shell’s recent loss in a Dutch court to the Friends of the Earth environmental group.

The Anglo-Dutch supermajor, which likes to project itself as a leader in the energy transition, witnessed legal precedent being made.

Shell must now take responsibility for its own carbon emissions as well as those of its customers to ensure they are in line with the goals of the Paris Agreement on climate change.

The need to look out for the wider societal needs overrides a company’s own financial interests, said the court.

The judgment has potentially enormous implications for the global oil industry as it suggests that no company can wait for political and economic policymakers to set the low-carbon agenda.

Shell must cut its emissions by 45% by 2030, against 2019 levels, with its current plans for carbon reduction deemed too opaque by the court in The Hague.

But will other international courts come to similar conclusions?

Nigerian oil officials recently called on African nations to continue fast-tracking oil and gas developments and ignore the “doomsday narrative”, and Russia’s Gazprom warned jokingly that the West would come to rely on “hostile regimes” for its supplies.

Engine No 1 and others are building up a head of steam on the energy transition path. But the argument over fossil fuel use will rage for a long while yet.

(This is an Upstream opinion article.)