ExxonMobil and Chevron (NYSE:CVX) have amplified their fossil fuel investments in defiance of global appeals for a clean energy transition. The move is highlighted by Exxon's $60 billion merger with Pioneer and Chevron's $53 billion acquisition of Hess (NYSE:HES). These deals indicate the oil majors' continued commitment to profitable oil and gas projects, despite the ongoing global energy transition.
Exxon's Pioneer merger has led to a two-fold increase in oil production in the Permian Basin. Similarly, Chevron's Hess deal has secured a 30% stake in 11 billion barrels of recoverable resources located in Guyana. These developments have unfolded in tandem with a surge in oil and fuel prices during Q3 2023, which saw Chevron and ExxonMobil's combined profits reach $15.6 billion.
Analysts have underscored the extended and costly nature of the clean energy transition, which is further complicated by inflation, borrowing costs, and supply chain issues. Oil and gas analyst Dan D. Kunle suggests that these large-scale investments illustrate the inconsistent pace of the energy transition worldwide. He also urges countries grappling with energy poverty, such as Nigeria, to secure similar investments.
Wells Fargo (NYSE:WFC)'s Roger Read concurs on the high costs associated with the energy transition. He emphasizes that these investments are pivotal for countries struggling with energy poverty and points out that they also underline the ongoing commitment of oil majors to profitable oil and gas projects.
Meanwhile, Darren Woods, CEO of Exxon Mobil Corp (NYSE:XOM)., predicts an escalation in energy prices due to a scarcity of global oil supplies and insufficient fossil fuel investment. Woods anticipates an increase in oil demand following OPEC+ cuts and a projected slowdown in US shale by 2024, indicating that only a few projects are capable of addressing this demand.
Woods also assessed the economic health of the US, China, and Europe as they navigate their respective stages of recovery from the pandemic. He underscored Europe's particular struggle due to the cessation of Russian gas supplies, which has further exacerbated the continent's energy crisis. This analysis aligns with the industry's capital challenges as it confronts resource depletion amidst varying stages of pandemic recovery.
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