The Optics Aren’t Good for Energy Companies Right Now

Ukraine’s prospects for holding out against Russia’s invasion are looking dim. Nevertheless, the actions of the Ukrainian people and the nation’s president, Volodymyr Zelenskyy, have jolted the world order: In three or so days, together they provoked a largely united worldwide stand after 30-plus years of shenanigans in Moscow failed to nudge global political and business leaders to act.

But even though a few major energy companies have made some big announcements about their operations in Russia over the past few days, the wider industry hasn’t shone too brightly since the outbreak of war last week.

As Kerry Washington’s character in her television drama Scandal always reminded us, it’s all about the optics. Somehow, that message was lost on major players within the global energy sector.

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Take the American Petroleum Institute’s (API) blog posted last week. Arguing for an “unleashing” of domestic oil production, the API accused the Joe Biden White House of continuing to “block” energy production. Data from the U.S. Energy Information Agency (EIA) shows that despite new regulations, the production of fossil fuels is hardly stalling. Other than the months during the peak of the pandemic, U.S. oil production has continued to climb and is on target to keep increasing through 2023 — a legacy of former President Barack Obama’s “all-of-the-above” energy policy.

If anything, the API’s critique of the Biden administration also comes across as an excuse to allow more fracking, oil drilling and pipelines:

“At a time of geopolitical strife, America should deploy its ample energy abundance — not restrict it.”

“… few things are more critical right now than providing energy security to American consumers as well as our allies abroad.”

“Finally, the administration should broaden exemptions to its own guidance blocking U.S. financial support for natural gas infrastructure projects overseas. Why hinder trade and commerce both sides want?”

Endless debate over U.S. energy policy aside, such chatter obfuscates the point that independent journalist Judd Legum made yesterday: Energy companies have long had a strong role in keeping Russia’s president, Vladimir Putin, in power.

Legum’s list of receipts is long, so here’s a start: ExxonMobil’s operations in Russia were part of its former CEO Rex Tillerson receiving one of the nation’s highest honors given to foreign citizens. Until recent announcements, international energy companies shared a huge role in extracting Russia’s oil and gas, allowing the country to build hundreds of billions of dollars in foreign currency reserves. As recently as January, the API urged the U.S. Congress to “limit” sanctions on Russia as it lurched toward armed confrontation with Ukraine.

“The reality is that ‘unleashing’ America’s energy would take a long time before it made any meaningful impact in Europe. New fossil fuel projects take years to come online. A more effective way to weaken Russia’s geopolitical influence is to accelerate the transition to clean energy,” Legum concluded. “This would not only help Europe achieve net-zero emissions — and stave off the most catastrophic impacts of climate change — but would also subvert Russia’s attempts to use natural gas as a political weapon.”

Image credit: Markus Spiske via Unsplash