Big Oil Is In Trouble

If you are holding stocks or mutual funds that are heavily based on the traditional energy sector, now may be the time to get rid of them. Big Oil is in trouble. 

While climate advocates have long had science on their side, Big Oil has relied on leveraging its financial might and political clout to cast doubt on the practicality of moving the global economy away from fossil fuels and toward a more sustainable path of renewable energy. But that financial might has been eroding for a decade, and in 2020 it took its biggest hit yet.

As the coronavirus pandemic prompted lockdowns, work-from-home arrangements, and curbs on travel and recreation, fuel demand tanked and oil prices collapsed. Traditional energy companies suffered staggering losses and their stock prices slid. Producers walked away from exploration and drilling projects, and banks and portfolio managers looked elsewhere for sound investments

The traditional energy industry has been the worst-performing sector on Wall Street for a decade even before the pandemic hit. In 2020, its backslide was historic. The Energy Select Sector SPDR Fund, whose holdings include ExxonMobil and Chevron, lost more than 50 percent between January and October. By some measures, Big Oil’s downturn, compared to the broader market, was the worst performance of any sector going back to before the Great Depression.

Financial hits are coming from several directions at once, with investment firm Goldman Sachs deciding for the first time to allocate more toward renewables than fossil fuels; automakers following the lead of Tesla and pouring money into developing electric vehicle technology to replace internal combustion engines; and the prices of solar and wind coming down as improvements in batteries and storage technology make them ever more practical.

As more movers and shakers begin to agree with climate advocates for financial as well as environmental reasons, a permanent shift within the energy industry seems to be taking shape.