Exxon Market Value Drops $184 Billion Since 2014 Peak
“Fossil fuels have a PR issue. As long as the market perceives them to be the culprit for carbon emissions, they will have a difficult time.”
ExxonMobil’s stock plunged to a nine-year low on Tuesday after posting poor fourth quarter results, leading the fossil fuel giant to plunge $184 billion since its’ market valuation since its 2014 peak, as per CNN business. Some analysts argue that Exxon’s bad quarter is emblematic of a broader decline in the fossil fuel industry.
“Fossil fuels have a PR issue,” Ben Cook, a portfolio manager at BP Capital Fund Advisors, told CNN. “As long as the market perceives them to be the culprit for carbon emissions, they will have a difficult time.”
Last week, Mad Money host Jim Cramer told CNBC that he’s “done” with fossil fuel stocks because he believes the industry is being pushed into “the death knell phase.”
“I’m done with fossil fuels … they’re just done. We’re starting to see divestment all over the world,” Cramer said. “You’re seeing divestiture by a lot of different funds. It’s going to be a parade. It’s going to be a parade that says, ’Look, these are tobacco and we’re not going to own them.”
“And the reason I think they’re on the wrong side of history has nothing to do with politics and everything to do with the fact that Tesla was up huge today and Exxon’s stock was down after Goldman Sachs, of all places, downgraded the stock from hold to sell,” Cramer said.
Cramer’s comments came weeks after Blackrock CEO Larry Fink, the head of the world’s largest asset manager, announced that his firm will now make climate change central to its investment decisions.
“Climate change has become a defining factor in companies’ long-term prospects … But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.”
Cramer cited Fink’s public announcement and Goldman’s downgrade as further reason to lose confidence in Exxon, arguing that even as fossil fuel stocks carry on in the coming years the industry will eventually decline.
“This is not about what I think. It’s not about my opinions — you have to check your own opinions at the door,” Cramer said. “But when a critical mass of money managers [is] behaving this way, you have to care because their buying and selling is what drives stock prices.”
Broader Impact Of Fossil Fuel’s Decline
The descent of the fossil fuel industry will have ramifications for domestic and foreign policy. ExxonMobil’s enormous wealth, for example, is greater than the GDP of most countries, and has allowed the company to conduct an almost autonomous foreign policy and promote its interests through vast lobbying expenditures. ExxonMobil has exerted more influence abroad than the US State Department on multiple occasions, from operations in Chad and Equatorial Guinea to facing accusations of torture and murder in Indonesia. In 2001, President George W. Bush told the Prime Minister of India, “Nobody tells those guys what to do.”
The oil giant obtained even more brazen influence after President Trump appointed former ExxonMobil CEO, Rex Tillerson, as Secretary of State. Tillerson received a $180 million severance package from the oil conglomerate before becoming America’s chief diplomat.
One of the Trump administration’s first acts was the elimination of a pending SEC rule that would have required fossil fuel companies to disclose information about oil and gas payments to foreign countries. ExxonMobil had previously lobbied against the rule, designed to limit bribery to corrupt governments during Tillerson’s tenure as CEO. Shortly after eliminating the rule, the Trump Administration withdrew from the Extractive Industries Transparency Initiative, another effort to restrain corruption and promote transparency in the fossil fuel sector.
In April 2018 Trump replaced Secretary of State Rex Tillerson with his CIA director Mike Pompeo who is perhaps even more beholden to the oil industry. Pompeo is commonly referred to as “the congressman from Koch” for receiving the single most donations of any legislator from the Koch Brothers in the 2010 election cycle and the Koch brothers are big oil.
In a 1977 interview about ‘oil imperialism’ in the Middle East, the prominent scholar Noam Chomsky argued that State Department staffing reflects the close ties between American foreign policy and the fossil fuel industry.
“Well, if you look at the staffing of the top positions in the State Department, it has been pretty much an oil company preserve,” said Chomsky. “Most of the top people in the Department come from either energy corporations, from the Rockefeller Foundation or from law firms that are very closely linked to oil corporations. The mechanism is very obvious. Say you have a regulatory commission that regulates the railroads. The railroads are going to try to get control over it. Foreign policy is analogous to regulation of affairs affecting international corporations, and therefore they’re going to try to gain control over it, which they’ve largely done.”
Chomsky argued that while oil’s influence over the State Department is massive, American foreign policy is more devoted to serving broad corporate interest than any specific industry:
“The oil companies are the major international corporations,” Chomsky continued. “Since oil has become important, they have virtually owned the State Department. They are the corporations within the American imperialist system that have the greatest concern for American foreign policy. Because they have the largest overseas investments, their influence over foreign policy has always been extremely strong.
“But it would be a mistake to say that the government is controlled by the oil companies. The government policy reflects the over-all interests of American capitalism. So, on occasion, the particular interests of the oil companies may seem rather parochial and short-sighted from the point of view of the larger interests of American capitalism.”
While the transition to clean energy will diminish fossil fuel executives’ power over foreign policy, critics argue that imperialist extraction will continue for essential minerals used in renewable technology unless the public demands accountability.