Windfall oil taxes demanded in UK, as Aramco becomes world’s largest company

Source: Jack Taylor / Getty Images News via Getty Images

By David Callaway, Callaway Climate Insights

LONDON (Callaway Climate Insights) — The growth of Saudi oil giant Aramco to become the world’s most valuable stock last week, surpassing even Apple (AAPL) with a market cap of more than $2.4 trillion, and soaring inflation has turned the spotlight of government fury with oil companies back toward the idea of a windfall tax on profits here in the UK.

With fuel prices at record highs and inflation topping 9% this week, energy companies become easy scapegoats for politicians willing to risk long-term energy investment for quick headlines. The difference is the Conservative government here in the UK has a history of one-off taxes on oil companies, and banks for that matter, dating back to the days of Margaret Thatcher.

Boris Johnson’s government stopped short this week of saying it will follow through with a windfall tax, calling it an “ideologically unconservative thing to do,” but threatened international oil companies such as BP (BP) and Shell (SHEL) that it would initiate one unless they could show dramatically more investment in North Sea exploration, and renewable strategies, as soon as possible.

Normally, we’d dismiss this type of talk as political grandstanding. But given some of short-sighted directions ruling governments can go in times of great crisis, we’re not so sure this time. Combined with a need for a carbon price to make fossil fuels more expensive in the long run, the political appeal of such a move becomes more interesting. Indeed, the UK Treasury described it as “politically inevitable.”

Any windfall tax will be closely watched by other governments as a potential tool to raise money for popular services during tough economic times, if not to drive the transition from fossil fuels altogether.

More insights below . . . .

Zeus: A food ‘apocalypse’ will make Russian energy crisis the least of our worries

. . . . Russian disruption of Ukrainian wheat supplies and global inflation have yet to impact economies in ways that fuel prices have, but could be far worse, with the UK’s central banker warning this week of a “food apocalypse,” writes David Callaway. The impact is already being felt in the meatless world of climate friendly food products, such as Beyond Meat (BYND) and Oatly (OTLY), whose stocks are down more than 50% since the Russian invasion. And while food shortages will be an economic hurdle in countries like the U.S. and UK, they could become life-threatening in parts of the Middle East and Africa that depend on Ukrainian agriculture. . . .

Read the full Zeus column

Thursday’s subscriber insights: Heatwaves to put U.S. grids to the test

. . . . With a Northeast heatwave on its way this weekend and a super-hot summer predicted, there are many worries the U.S. power grid will not be able to handle it. That — and the increasing number of renewable sources needing a nimble distribution system — is all the more reason for big spending on reliable power delivery. Read more. . . .

. . . . You probably saw those houses that were washed away on North Carolina’s Outer Banks last week due to beach erosion and rising sea levels. If they were insured, that means big payouts by insurance companies. In a business heavily dependent on predictable risk, climate is making things complicated. Very complicated. Read more. . . .

. . . . 10-four, good buddy! Tractor-trailer rigs, with their belching diesel exhausts, seem an obvious thing to go electric. But the long-haul business has a big problem: battery range. Here’s where things stand and a peek into the future. Read more. . . .

. . . . Putting his money where his mouth is: Michael Bloomberg is funding projects to promote clean energy in 10 developing countries and wants to close every coal-fired power plant in the U.S. Will it make a difference? Well, money talks. Read more. . . .

Editor’s picks: Strategic petroleum reserves sink; Tesla cut from S&P 500 ESG index

U.S. Strategic Petroleum Reserve at lowest level since 1987

The U.S. Strategic Petroleum Reserve stockpiles are at their lowest levels since 1987 — about 538 million barrels. According to data from the U.S. Dept. of Energy cited by Reuters, the amount of crude oil in the U.S. Strategic Petroleum Reserve dropped by 5 million barrels in the week up to May 13. About 3.9 million barrels of sour crude was released into the market, while about 1.1 million barrels of sweet crude was issued. The Strategic Petroleum Reserve is a U.S. government complex of four sites with deep underground storage caverns created in salt domes along the Texas and Louisiana Gulf Coasts. The SPR was filled to its then 727 million barrel storage capacity in December, 2009.

Tesla cut from S&P 500 ESG Index

Revolutionary EV maker Tesla (TSLA), despite its mission to replace the internal combustion engine, has been kicked to the curb in the latest rebalancing of the S&P 500 ESG Index. S&P Dow Jones Indices says Tesla was ineligible for index inclusion due to its low S&P DJI ESG Score, which fell in the bottom 25% of its global GICS industry group peers. “While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens,” Margaret Dorn, senior director and head of ESG Indices, North America writes in a blog post for S&P Dow Jones Indices. We note that Elon Musk,Tesla CEO and would-be Twitter owner, tweeted in April: “I am increasingly convinced that corporate ESG is the Devil Incarnate.” Tesla joins Berkshire Hathaway (BRK.B), Johnson & Johnson (JNJ) and Meta Platforms (FB), which have again met the index methodology’s chopping block.

Job impacts of transitioning to a green economy

Transitioning to a green economy will require many industries to change their activities, raising concerns about the elimination of occupations and the need for significant retraining of the workforce, say the authors of Transitioning to a Green Economy: Radical Transformation or Building Upon Existing Skills? Yet, they add, if skills embodied in current economic tasks can be reapplied to activities that facilitate a green transition, the retraining challenge might be lessened. “… a transition to a green economy may require more that firms reconfigure their workforces than individual workers reconfigure their skill sets.” Authors: Shade T. Shutters, Arizona State University School of Complex Adaptive Systems; José Lobo, Arizona State University.

Words to live by . . . .

“Saving our planet, lifting people out of poverty, advancing economic growth… these are one and the same fight. We must connect the dots between climate change, water scarcity, energy shortages, global health, food security, and women’s empowerment.” — Ban Ki-moon, former Secretary-General of the United Nations.

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