‘Green’ BP is backsliding on climate targets and failing to invest in renewables

Society is apparently calling for more oil... but is that true or is BP simply kowtowing to gas-guzzling shareholders, asks James Moore

BP’s corporate colours are green but does the company’s behaviour pass the eco-test? (Getty)

So goodbye “green” BP? Was it ever really that way? The oil major, as these companies do, likes to produce a bewildering array of different numbers to describe its profits. Earnings before interest, taxes, depreciation and amortisation, adjusted profits, underlying profits, good old-fashioned pre-tax profits, they all have one thing in common this time around. They were all huge. The most commonly quoted was “underlying profits”. They came in at a record $28bn (£23bn) over 12 months.

We should probably debate whether quoting a company’s favoured measure, as always seems to happen, is the right thing to do but that’s one for another day. There was a much bigger story in the numbers: BP is dramatically scaling back what had been viewed as one of the most ambitious low-carbon transformation programmes in the industry.

CEO Bernard Looney, with his electric vehicles and what have you, is such an apparent greenie that he was recently derogatorily referred to as a “husky hugger” by one columnist.

To judge by the latest news, the huskies in the boardroom to soothe stressed execs are on hold. There was a second release from BP on the day of its results, covering its “transformation”. It was, as you might imagine, full of self-congratulatory pap. Look we’re doing this, and this, and this!

It was only when the reader reached the bottom part of the release that the scorpion’s sting became clear. A previous target of reducing oil and gas production by 40 per cent by 2030 has been scaled back to 25 per cent.

“We need continuing near-term investment into today’s energy system – which depends on oil and gas,” said Looney, justifying the move. Society wants oil. So we’re going to serve it up.

But is it really society behind this? Or is it something else. BP has been looking wanting by comparison to America’s unreconstructed oil giants, returning 55.5 per cent since the start of last year (per broker AJ Bell) against 92.9 per cent for the unreconstructed Exxon Mobil. Those are the sort of numbers that make institutional shareholders antsy when they’re poring over their spreadsheets.

They don’t really have any cause for complaint. Common Wealth, a think tank, argues that BP paid out 14 times more to shareholders via dividends and share buybacks than it spent on investment in low-carbon energy. Capital expenditure on oil and gas was eight times that of renewables.

The company also gets an oily mark on its report card from me for its grouping low carbon earnings with those from gas. It is still sometimes claimed that gas is a “clean” fuel. That is true only by comparison to coal, or oil and its derivatives. Burning the stuff still pours carbon into our atmosphere, still results in a heating planet, with all the attendant problems. BP is making pots of money from it.

It is true, partly because of Russia’s illegal war in Ukraine, that the world is in the midst of an energy crisis that has pumped up wholesale prices and done the same for the profits of oil majors like BP, Shell and the rest. The calls for higher windfall taxes are only going to grow louder as a result. Justifiably so.

This, however, is ultimately going to prove temporary. It will ease. In fact, while energy prices are expected to remain elevated throughout the rest of the year, they have come down by quite a bit. They are not below pre-war highs. This helps to explain why BP’s backsliding is so reductive.

“The pivot back toward oil and gas – and the prioritisation of shareholders over renewable investment – confirms a critical lesson: the for-profit corporation is poorly equipped to deliver the energy transition at the required speed. Its incentives and purpose dangerously misalign with the needs of people and planet,” says think tank Common Wealth’s director Mathew Lawrence.

It is hard to disagree with that. Looney is basically saying, you know what, the planet can take one for the team. I need some extra sweeties to spoil my shareholders with.

Get set for more summer heatwaves. And for more economic damage. The defenders of big oil like to claim it is a necessary evil and that its critics should pipe down because it will take time to deliver on renewable energy projects. That comes from short-term thinking. These people conveniently forget that there will be a high economic price to pay for our addiction to hydrocarbons. A high price full stop. It is a coming storm, which threatens to make the current crisis look like a mere springtime shower.