In 2024, big oil retreats from renewables became increasingly apparent as major European energy companies shifted focus back to oil and gas, prioritizing short-term financial gains over long-term climate pledges. In favour of higher-margin oil and gas projects, BP and Shell drastically cut their investments in renewable energy initiatives. In December, BP, which had set high targets for the expansion of renewable energy this decade, declared that it would transfer the majority of its offshore wind projects to a joint venture with JERA of Japan. Shell, which had previously pledged to become the biggest energy provider in the world, reduced its carbon reduction goals, stopped new offshore wind projects, and withdrew from the European and Chinese power markets.

The layoffs came at a time when governments postponed implementing renewable energy policies due to rising energy prices brought on by Russia’s invasion of Ukraine in 2022. With their continued concentration on oil and gas, U.S. competitors Exxon and Chevron outpaced European firms like BP and Shell regarding share performance. In 2024, BP, Shell, and Equinor cut their combined low-carbon investments by 8%, according to analyst Rohan Bowater.

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Geopolitical and Economic Pressures on the Energy Transition

Economic difficulties and geopolitical tensions made the transformation in the energy sector even more difficult. Inflation, supply chain bottlenecks, the ongoing conflict in Ukraine, and political unrest throughout Europe all hampered the growth of renewable energy. For instance, Equinor stressed a selective approach to future projects and spoke of “demanding times” for offshore wind. Hopes for a worldwide agreement to phase out coal, gas, and oil were shattered at the UN climate summit in Baku, Azerbaijan when host President Ilham Aliyev hailed fossil fuels as “a gift from God.”

There is a risk of more upheaval should Donald Trump return to the White House in 2025 and vow to revoke President Biden’s green energy initiatives. Trump has named oil magnate Chris Wright as his energy secretary and pledged to remove the United States from international climate initiatives. China, the world’s largest importer of crude oil, is working to boost its struggling economy, which could raise demand for oil globally.

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Challenges and Risks for the Fossil Fuel Focus

Energy companies face substantial market and financial risks as they increase their focus on gas and oil. With the use of petrol and diesel plateauing, China’s oil demand growth seems to be slowing. While other nations, led by the United States, are raising their oil output, OPEC and its allies have postponed efforts to reverse supply cuts. Consequently, oil businesses are anticipated to face more stringent financial constraints in 2025. According to LSEG forecasts, the net debt of the top five Western oil corporations is expected to increase from $92 billion in 2022 to $148 billion in 2024.

Given that 2024 is predicted to be the hottest year on record and that global carbon emissions will reach a new high, big oil retreats from renewables are raising serious concerns about global efforts to mitigate climate change. While the broader energy sector prepares for a turbulent 2025, Shell has reaffirmed its commitment to achieving net-zero emissions by 2050 despite these challenges.

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