A Struggle Over the Pace of Greening in the Energy Industry

As the race to generate cleaner energy has escalated in recent years, an uneasy agreement has evolved on a side track: the world needs more oil and gas, at least in the short term.

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As oil CEOs, climate hawks, and government officials convene in Houston on Monday for the industry's flagship annual energy summit, the competing—and sometimes conflicting—imperatives are anticipated to be central issues.

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The current situation is less binary and more complicated than typical for an industry accustomed to dramatic cycles of boom and collapse. Even when the largest corporations report record profits, major uncertainties remain.

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According to Dan Yergin, vice chairman of S&P Global, which organizes the CERAWeek by S&P Global conference, the geopolitical and market realignments that followed Russia's invasion of Ukraine have prompted the sector to re-evaluate how the energy transition will operate.

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"We'll hear firms talking more about decarbonization and low-carbon plans, even as they talk about increasing traditional investment to satisfy the demands of a world that have suddenly become rather anxious about energy supply," Dr. Yergin said.

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Exxon Mobil Corp., Saudi Aramco, and NextEra Energy Inc. CEOs, as well as US officials such as Energy Secretary Jennifer Granholm and White House clean-energy adviser John Podesta, are scheduled to address participants from about 90 nations.

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US authorities are anticipated to use the conference to set out their intentions for implementing the Inflation Reduction Act, which was approved last year and is meant to boost clean-energy investments through tax credits and subsidies.

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The law has sparked enthusiasm among beneficiaries like solar and wind producers, but it has also sparked industry worries that increasing low-carbon expenditures will drive up project prices and disrupt supply networks.

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Little is known about how the legislation will be implemented, but Dr. Yergin, author of "The New Map: Energy, Climate, and the Clash of Nations," believes that government policy will play a much larger role in the current energy transition than previous shifts in history, which were driven by economics and technology.

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Another important topic will be how oil and gas corporations integrate the energy shift into their operations. Conversations with investors last year, according to oil executives, focused less on environmental, social, and corporate-governance requirements, or ESG, which absorbed 2021, and more on financial returns.

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BP PLC scaled back ambitions for an ambitious clean-energy transition a month ago, saying it would invest more in oil and gas production. Exxon and Chevron Corp., which have been more cautious in their low-carbon plans, generated record profits in 2022, supported by the strongest oil-and-gas prices in years, according to BP Chief Executive Bernard Looney.

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The issue of whether those gains can be replicated will loom over the conference, not least because natural-gas prices have dropped 54% in recent months, forcing companies to rethink drilling plans.

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With Western sanctions dividing the global oil and natural gas markets, the conference is likely to address issues such as Russia's greater reliance on China and the strategic relevance of liquefied natural gas supplies from the United States to Europe.

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The experiences of the previous year, according to Mark Brownstein, senior vice president of the Environmental Defense Fund, underscore the need to speed global energy away from fossil fuels, both for climatic stability and to avoid the price volatility that rocked global markets last year.

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"There will be plenty of experts at the conference showing new technology and discussing new business models that are easily accessible to us now to help us expedite the shift," he added.

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Rebekah Hinojosa, a Sierra Club campaign spokesperson, is working to organize a march from the conference through downtown Houston to the headquarters of key energy firms and other institutions engaged in supporting proposed LNG export projects on the Gulf Coast on Wednesday.

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"Gulf Coast residents are tired of being sacrificed for the ongoing fossil-fuel expansion," Ms. Hinojosa added.

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Yet, the political tides appear to be changing slightly in favor of oil businesses.

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Relations between the United States oil industries and the Biden administration deteriorated further last year, as some businesses reported record profits and domestic gasoline prices reached historic highs. According to US officials, firms erroneously concentrated on repaying their investors through share buybacks rather than injecting money into the oil sector to assist relieve prices.

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President Biden, who campaigned on promises to crack down on fracking, said in an off-script moment during his State of the Union speech last month, "We're still going to need oil and gas for a while." He also proposed quadrupling the tax on corporate stock buybacks to encourage companies to invest in oil production.

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According to Dan Pickering, founder, and chief investment officer of Houston-based Pickering Energy Partners, investors' focus on ESG looks to have peaked for the time being, but oil firms have made headway in cutting emissions and are no longer behind the curve. CEOs now favor global decarbonization more than climate-change doubters and advocates for a fast transition away from fossil fuels, he added.

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"There's a lot greater drive for decarbonization internationally, and there's also a much broader recognition that we're'stuck' with hydrocarbons until we can achieve that decarbonization," Mr. Pickering said. "A lot more folks are saying it'll take time."

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