At the 2024 CERAWeek, energy executives made an unprecedented call to rethink the energy transition, signaling a departure from the industry’s previous enthusiasm for shifting from oil and gas to electricity. What began as a collective ambition among the energy giants to embrace renewables has now taken a dramatic turn. A year later, Big Oil is retreating from the energy transition, returning to its roots—oil and gas.
BP, a company once at the forefront of the push to transition into renewable energy, has now taken the lead in signaling the end of this era. Under the leadership of former CEO Bernard Looney, BP had been among the most vocal advocates for embracing solar and wind energy. Looney famously remarked, “I lived in America long enough to know that when you’re getting an electric F-150, the world is going electric,” referring to the electric Ford F-150. However, the reality has been starkly different. While the electric vehicle (EV) market grows, Ford and other American automakers have reported significant losses on their EV investments, suggesting that the global transition to electric power may not be as inevitable as once believed.
Aramco’s CEO Amin Nasser encapsulated the shift in thinking at last year’s CERAWeek, stating, “We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately.” This sentiment was echoed by Sheikh Nawaf al-Sabah, CEO of Kuwait Petroleum Corporation, who highlighted that while the world’s population is expected to grow by 25% by 2050, energy demand will rise at an even faster rate.
The growing demand for energy presents a significant challenge for the transition advocates. Wind and solar power, despite their environmental appeal, are not currently able to meet the rapidly increasing energy needs. The recent energy crisis in Europe, exacerbated by low wind speeds and surging natural gas demand, serves as a cautionary example. It underscores the fact that renewables may not be as reliable or scalable as originally hoped.
As the industry faces these realities, it’s becoming clear that the optimism around wind and solar energy has been overstated. Big Oil, which once poured billions into renewable energy projects, is gradually retreating from these investments. European oil giants, in particular, have suffered substantial losses from their heavy bets on wind and solar, while American companies have fared better by focusing on carbon capture and emissions reduction rather than large-scale renewable energy projects. The divergence in stock prices between European and American oil companies is a testament to the success of the more cautious American approach.
Shell, another major player, was among the first to reverse its commitment to renewables, refocusing on its core business of oil and gas. This shift received a legal boost after a Dutch court ruled in Shell’s favor against environmentalists who had demanded a reduction in oil and gas production. While the case continues to be challenged, the ruling marks a significant victory for the company and for the broader oil industry.
As Big Oil moves away from its ambitious transition plans, it is clear that the energy giants are prioritizing profitability over environmental goals. Shareholders, who are primarily focused on returns, are pushing for a return to oil and gas production. Despite growing environmental pressures, the industry is finding that the old, tested methods—oil and gas—remain the most profitable and reliable path forward.