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Big Oil plummets down the Fortune Global 500, dragged by the pandemic

August 4, 2021, 8:38 AM UTC

The latest Fortune Global 500 list—which, for the uninitiated, is a rank of the world’s 500 largest companies by annual revenue—was published this week, and there are some big numbers to note on fossil fuel and carbon industries. 

First, all six airlines present on last year’s list—Delta Airlines, American Airlines, United Airlines, Lufthansa, International Airlines Group and Airfrance-KLM—have dropped off. Each of the six reported revenue declines of at least 60% in 2020.

Next, oil majors have slid to their lowest ranks yet. ExxonMobil, Royal Dutch Shell, BP and Saudi Aramco all plummeted, falling 12, 14, 10 and 8 places respectively. 

Exxon, which twice ranked No.1 on the Global 500, is now at its lowest point to date, coming in at No. 23. Meanwhile, Saudi Aramco ended its two-year streak of being the most profitable company on the list, reporting a 44% fall in annual profits last year.

All told, oil refiners suffered an average 36% revenue drop in the past year. But these declines, from airlines to oil, are likely tied more to the pandemic drag on demand than to increased climate change awareness. The downturn might not last long.

In China—which weathered the pandemic better than the West—state-owned refiners PetroChina and Sinopec remain high on the Global 500, ranking fourth and fifth respectively. Sinopec fell three places, but PetroChina stayed put. PetroChina actually reported its highest quarterly earnings for seven years in the first quarter of 2021 and both Chinese companies are predicting sky-high profits for the first half of the year. Even Western oil giants are already rebuilding revenue—and rewarding investors—buoyed by surging oil prices.

In the long term, we know oil revenues have to fall as the world transitions to net-zero. Groups like the International Energy Agency have warned a peak in oil demand is imminent, coming by the end of the decade, and various regulatory pressures are forcing Big Oil to reconsider a fossil-fueled future.

But no oil major wants to believe the party is over just yet. Sinopec, Chevron, Aramco, BP, Exxon are all investing in dubiouscarbon capture” projects to prolong burning fossil fuels and increase oil extraction. The giants of Big Oil will undoubtedly regain some standing in the Global 500 rankings as the U.S. and Europe emerge from the pandemic. But how oil majors bob up and down the list as they reluctantly switch to cleaner fuels (most are investing in hydrogen) will be compelling to watch.

More below.

Eamon Barrett
– eamon.barrett@fortune.com

CARBON COPY

Up in smoke

Wildfires are obliterating forests across Europe and North America in scenes that are all too familiar. Wildfires are becoming more frequent and more intense as climate change dries out the foliage. The fires are also highlighting the limitations of using carbon offsets to achieve corporate net-zero goals. Fires in the U.S. are burning through forests that Microsoft and BP invested in to secure carbon credits. When those trees burn, the carbon they stored is released back into the atmosphere. FT

Plastic problems

The U.S. sends much more plastic to landfill than it does to recycling but, even then, it’s an open secret that many U.S. recycling initiatives simply export waste to Asia, where a lot of the garbage ends up in landfills anyway. Financially speaking, plastic companies have little incentive to really invest in recycling initiatives. It generally costs more to process and reuse plastic than it does to simply make new plastic. Despite that, major plastics producers have invested millions in new recycling tech but, so far, those projects have flopped. Ultimately the best way to eliminate plastic waste remains reducing plastic use. Reuters

In the lobby

The oil and gas industry is stepping up efforts to lobby against impending rules in the U.S. that would require companies to disclose climate risks to the Securities and Exchange Commission (SEC). The SEC is currently deliberating whether companies should be required to disclose Scope 3 carbon emissions—that is, emissions from across their value chain. Oil giants would rather not, since Scope 3 emissions account for the majority of carbon pollution in the industry and are much harder to mitigate. In a letter to the SEC, BP said oil companies should be allowed to determine how to calculate emissions themselves. FT

Hydrogen wind

Japan is building a wind farm off of the coast of Hokkaido that it hopes will help the nation develop so-called green hydrogen. Japan has big hopes for the future of hydrogen as an alternative, clean fuel source. You might have missed it but, Japan has used the Tokyo 2020 Olympics to highlight the fuel’s applications. The Olympic flame is burning hydrogen this year. But hydrogen is often made in a process that burns fossil fuels. Green hydrogen is produced with clean, renewable energy, like wind. Japan hopes the Hokkaido project will produce enough hydrogen to fuel over 10,000 vehicles. Nikkei

IN CASE YOU MISSED IT

SEC chair: public companies may soon need to disclose their carbon footprints by Declan Harty and Katherine Dunn

Big Oil is making big profits again. Here’s what they’re doing with the cash by Katherine Dunn

How the pandemic fueled the rise of the ‘Buy Nothing’ economy by Beth Kowitt

Ethereum risks it all on going green by Adam Bluestein

Alaska Airlines pioneers A.I. to plan flight routes, saving fuel and time by Jeremy Kahn

CLOSING NUMBER

20%

In Sweden, roughly 20% of new multistory buildings are made out of wood, rather than concrete, as local real estate developers invest in construction projects made of more eco-friendly materials. According to an executive at Swedish developer Folkhem, using timber instead of concrete halves a project’s carbon emissions and, of course, the material is renewable. Swedish forests regrow the equivalent volume of wood used in a large, 13-story complex within 20 minutes. 

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