A man refuels at a gas station last month in Fayetteville, N.C., during a period when a hacking attack shut down a key pipeline. Oil companies confront an uncertain future, facing pressure to move toward greener energy.

A man refuels at a gas station last month in Fayetteville, N.C., during a period when a hacking attack shut down a key pipeline. Oil companies confront an uncertain future, facing pressure to move toward greener energy. / Getty Images

Big Oil is standing on the precipice of something. But no one can agree what it is. A long, slow decline? An abrupt collapse? A remarkable reinvention?

Mounting urgency about climate change has finally reached the boardrooms of Exxon Mobil, BP, Shell and other international oil companies. Under intense pressure, these companies are universally pledging to prepare for a low-carbon or "lower-carbon" future.

But there's no consensus what a future with less oil would look like for companies that have been greatly enriched by the fossil fuels driving climate change.

European companies – such as French multinational Total and British-based BP – are staking big bets on a pivot from oil to renewable power.

Meanwhile, American giants are staking smaller sums of money on more nascent technologies, such as carbon capture, without plans to shift away from crude.

Yet regardless of the amount committed to green energy most oil companies are still directing far more money toward oil- and gas-based investments, a sign they're not expecting an overnight revolution.

Here are three takeaways on the oil industry's potential transformation:

Europeans are betting on a transition to renewables

Companies such as Total in France, BP in Britain, Eni in Italy and Equinor in Norway are making ambitious pledges to switch, over time, from making money off oil to making money off sunshine and wind.

In fact, they no longer even want to be called oil companies, preferring "energy companies."

There are signs of real resources being dedicated to this promised strategic shift toward renewables. BP just bought a pipeline of 9 gigawatts of solar projects in the United States. Total invested billions in a major solar producer in India.

Governments, investors and the general public are increasingly concerned about climate change and calling for action — calling, in fact, for a wholesale transformation of the global economy, which currently relies on fossil fuels for 80% of its power. And European governments are setting particularly stringent policies.

It's not clear if this global transformation will happen rapidly, but if it did, it would wreak havoc on oil companies' profitability. So shareholders are pressuring companies to future-proof their business plans to survive a shift away from oil.

Renewables are one way to do that, which explains the eye-popping targets a few European companies are setting.

But can they meet these targets? Skeptics point out that oil companies trying to make this switch are competing in an increasingly crowded renewable market, outside of their core strengths, and are making pledges under an aggressive timeline.

"The question we're asking on Big Oil right now is, are their renewable ambitions running on empty?" says Gero Farruggio, the head of global renewables at Rystad Energy, an independent energy research company.

Farruggio points out that many companies have been telling investors they'll have significant renewable production by 2030, less than a decade from now.

"The challenge for them will be to acquire that remaining portfolio and then the real challenge ... will be to develop it by the 2030 deadline," he says.

Wind turbines and solar panels get a lot of attention, but they aren't the only options for a post-oil future. Shell has invested in electric vehicle charging stations, for instance. Many companies are also banking on hydrogen or biofuels.

Then there's carbon capture, technology that can prevent carbon dioxide from being released or even pull it out of the atmosphere – which is key to understanding the other half of the European-American divide.

U.S. companies are going another way

While the Europeans are promising a strategic pivot that would upend their core business model, the Americans are placing bets on the power of technology to preserve their current business model — heavily emphasizing carbon capture in their future plans.

This carbon capture path calls for oil production to continue, with carbon capture "balancing out" the new emissions, marking a contrast to the way some European companies are preparing for their oil production to drop over time.

In fact, captured carbon can be injected underground to help extract even more crude oil in a process called enhanced oil recovery.

Occidental Petroleum, an American oil company, has made this technology the core component of its plan to hit net-zero emissions by 2050.

Exxon has also announced $3 billion in carbon capture investments over the next five years.

That's a big shift for the company, but critically, it's not a big slice of its overall capital expenditure:

Similarly, Chevron recently announced a $300 million venture fund dedicated to a range of "low-carbon technologies." That's around 2% of the $14 billion to $16 billion Chevron spends each year on capital expenditures.

Which raises the third big takeaway. ...

The oil and gas industry is betting change will be slow

Climate change activists may have celebrated key victories recently, including an activist hedge that managed to elect three new directors to Exxon's board in a direct rebuke to Exxon's oil-centric investment plans, and a ruling from a Dutch court ordering Royal Dutch Shell to lower emissions.

Yet despite all the excitement, there's this reality: Unless the world's governments and consumers make dramatic changes — triggering a rapid shift in corporate plans — oil and gas companies aren't on track to shift their investments as rapidly as analysts say the planet requires.

Even among European companies, green investments so far have been dwarfed by their investments in oil and gas.

A recent report from the International Energy Agency found that in 2020, the oil and gas industry as a whole spent just 1% of its capital expenditures (money spent on physical things) on clean energy.

The agency noted that based on current trends, that could rise to 4% this year, or "well above 10% for some of the leading European companies." That's significant growth — from a small starting point.

Rystad Energy compared what the European companies spend on new oil and gas development with what they are spending on new renewables. (This comparison excludes the large amounts of money that companies spend to maintain production at their existing oil and gas facilities.)

Based on their current portfolios, if companies do not make major changes, Rystad found they would still be funneling much more money into new fossil fuels than into green energy over the next decade.

Of course, the most climate-focused companies are promising they will make major changes. But they're outliers among the industry as a whole, which is largely banking on the status quo.

Muqsit Ashraf is the head of global energy at the consulting firm Accenture, which recently surveyed 179 oil and gas companies — of all sizes — to check in on whether they planned to change how they do business in preparation for a transition away from oil and gas.

Ashraf notes that oil and gas companies are talking about cutting carbon like never before, with sustainability "front and center" in boardrooms, C suites and dialogues with investors.

But when it comes to transforming the underlying business model?

"Only a very small fraction of companies are truly thinking of a radical reinvention," Ashraf says.

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