Every so often a peek at the future comes along that seems hard to believe but ultimately makes sense. That was the case with a story in The Washington Post about oil giant BP’s latest steps in adding the production of “clean energy” to its portfolio.
BP may be best-known in Mississippi for the explosion aboard one of its Gulf of Mexico drilling rigs a decade ago and the massive oil leak that followed. But the British company is making a large bet that the future of energy is one that’s less reliant on gasoline.
“Led by a new chief executive, BP is trying to reinvent itself as an energy company in the age of climate change,” the Post reported. “The company is shrinking its oil and gas business, revving up offshore wind power and developing solar and battery storage. It is even considering installing electric car charging kiosks at its gas stations, part of a drive to eliminate or offset its carbon emissions to a net zero level by 2050.”
The company said earlier this month that it is spending $1.1 billion for a half ownership in a wind farm off the shore of Massachusetts and New York. It already owns half of a European solar energy company that is still developing its plans. It owns Great Britain’s largest car-charging network, along with one in China. It even wants to help cities and utilities buy packages of renewable energy and the means to store it.
The company’s CEO said BP will increase its spending on low-carbon energy products by a factor of 10, to $5 billion a year, by the end of the 2020s. By most measuring sticks, that would be a huge investment. But not for Big Oil. That $5 billion amounts to only 40% of BP’s current annual capital spending.
Based on the rising amount of non-oil investing, it sounds as though BP envisions its ultimate rebirth as an electric utility rather than a company that finds natural resources and refines them into gasoline and similar products.
That’s a huge change, and business analysts are right to question whether BP — or any other member of the Big Oil club — can make such a wrenching transformation successfully. It’s a monumental task.
Perhaps the biggest signal of BP’s vision for the future is in its financial statements. This year the company reduced the estimated value of its oil and gas reserves, which basically means they don’t expect to make as much money selling them as originally forecast. That implies less demand for oil, which in turn implies a long-term shift to cars that get power from something other than gasoline.
Despite today’s electric and hybrid cars, the world has not given up on petroleum. But if BP and other firms are correct, the coming years will include a huge transformation in automobiles. This peek at the future makes sense.