Hydrogen Education Foundation announces 6 contestants for $1M H2 Refuel H-Prize
STEAG investing €100M in a total of 90 MW of grid energy storage systems with LG Chem Li-ion batteries

Opinion: Political Climate Shifting Against The Oil And Gas Industry

by Nick Cunningham of Oilprice.com

Oil and gas companies have had a tough time over the past year trying to weather the storm of falling oil prices. But the political and financial winds are moving in the wrong direction for the industry, raising more “above ground” problems at a time that they can ill-afford it.

Drilling oil and gas wells requires a lot of money. For companies that have seen their revenues vanish because of collapsing oil prices, access to credit is obviously critically important. But US financial regulators are growing concerned about a pile of energy debt that is deteriorating in quality. A report from the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Federal Reserve singled out the oil and gas sector when it concluded that credit risk was rising across the United States.

For example, there is at least $34.2 billion in loans in the banking sector that have a credit rating suggesting they are “substandard,” “doubtful,” or “loss.” That figure is up from just $6.9 billion in 2014. Put another way, about 12 percent of all loans to oil and gas companies are rated “substandard” or worse.

Low oil prices are undermining the ability of some companies to pay back their debt. However, increased oversight from banking regulators could force banks to take corrective measures, which could mean reducing their exposure to high-risk energy debt. Such a development does not bode well for oil and gas drillers. Tighter credit conditions—which could also be impacted by a pending rate increase by the Federal Reserve in December—will make drilling more expensive.

In the political arena, things are not any better, with last week being a particularly rough one for the energy sector.

First, the attorney general in New York announced an investigation into ExxonMobil, for what it sees as evidence that the company lied about the dangers of climate change. The probe comes on the heels of reports from InsideClimate News that the oil major’s own scientists knew about the threat of climate change decades ago. But, according to the report, ExxonMobil buried the science and instead began funding think tanks and scientific research to sow doubt about climate change.

Critics of ExxonMobil have called for an investigation by the US Justice Department, a chorus that includes three democratic presidential candidates and a growing number of members of Congress. But the NY attorney general investigation has taken the scandal to a new level. Att. General Eric T. Schneiderman subpoenaed financial records, emails and other documents from the Texas-based oil major. The investigation, as The New York Times put it, “focuses on whether statements the company made to investors about climate risks as recently as this year were consistent with the company’s own long-running scientific research.” ExxonMobil confirmed receipt of the subpoena and was still forming a response on November 4. But Kenneth Cohen, vice president for public affairs at ExxonMobil, denied the allegations. “We unequivocally reject the allegations that Exxon Mobil has suppressed climate change research,” he said.

Finally, President Obama rejected the Keystone XL pipeline on November 6, which will only come as news to readers living under a rock. The immediate reaction is to look at the effect on oil markets; analysis that has been beaten to death over the past seven years. Still, as of the fourth quarter of 2015, there’s good reason to think that the rejection hurts oil sands producers because of limited pipeline capacity. Even Keystone XL’s proponents agree. Joe Oliver, the former Canadian minister of natural resources and minister of finance under Prime Minister Stephen Harper, wrote in the Financial Post about the urgent need for new pipelines. He says that Canadian oil producers would lose $100 billion over the next 15 years if no new pipelines are built. The business atmosphere is likely to get much tougher for Canadian oil now that a new government has promised a more rigorous environmental review for pipelines.

But the political fallout from Keystone XL is probably more significant than the immediate effect on oil markets. The project was rejected because of its impact on greenhouse gas emissions, a potential precedent for climate change action. The world may look back on this point as the first in a series of moves in which fossil fuel projects must climb an ever steeper political hill in terms of gaining approval. As alternative energy projects become cheaper and cheaper, the political establishment is finding that taking on the energy industry is not as intimidating as it once was.

Bloomberg published a pretty glaring chart that sums up how the industry has for years overestimated its long-term prospects. Based on last week’s developments, which included the launch of an investigation into the world’s largest oil company and the rejection of the most politicized energy project to date, the “above ground” problems for the energy industry are growing much worse. That could complicate the future fortunes of oil and gas companies.

Nick Cunningham is a Vermont-based writer on energy and environmental issues. You can follow him on twitter at @nickcunningham1.

Article Source: http://oilprice.com/Energy/Energy-General/Political-Climate-Shifting-Against-The-Oil-And-Gas-Industry.html



The real question is are we going to address our own ECONOMIC SUICIDE from Global Warming.


ABSOLUTELY the Keystone Pipeline should be shut down and the Whole TAR SAND Fields should be shut down. They should have NEVER been Exploited.

Is the CEO class a bunch of MORONS? That's the question.
If they REQUIRE Government Oversight to Protect the continuation of the species on the planet then there's something WRONG with Capitalism.


We pay so much in costs associated with fossil fuels that are not part of the price of gasoline or heating oil or natural gas. The pollution is most obvious, and society bears the brunt of that cost through taxation of individuals. The other of course is our insistence that the middle east is where we need to militarily intervene because it is our national interest, because there is still a lot of oil there.

Mike999: If investment is made in alternatives and done cleanly, our economy will be fine. You see, the survival of the fossil energy giants means nothing to our economy. It may mean everything to their economy, but these are not one and the same. There are more jobs in renewables. Economies of scales is an economic law and is never not true. Lessons and improvements are always had as more join in an endeavor (new industries). Don't let the fear mongering get to you. Continued improvement is what we need to strive for. And, yes, the CEO class is a bunch of MORONS, and weak and sniveling ones at that. What strong and intelligent person seeks obscene levels of wealth. The answer is none. If you are strong and intelligent you are fine in this world and are in no need of the protection the power of wealth brings.


The oil industry has a long history of lying to protect their profits. Remember when they put LEAD in their gas and how long it took to get it out? Even from the start they knew it was bad stuff, the inventor certainly knew - to assuage fears he would publicly rub TEL on his bare hands - and privately spend the next year recovering from the effects.




The world resources are finite, that includes finance. Oil companies issue bonds then money flows there and not where it may be more needed and do more good.

Dr. Strange Love

The Federal Reserve has recently issued unfavorable language in their assessment of the gas/oil development industry. This is not good news for the debt issued as it will cost more. It is becoming more and more a risky bet for the debt holders. Those bonds will carry higher and higher yields. There is too much competition from within their own sector and from new greener alternatives. This is good thing.

The comments to this entry are closed.