Meeting the temperature goals of the Paris Agreement necessitates large reductions in greenhouse gas emissions. The emissions of the global oil industry contribute significantly to global warming, and the traditional business models of oil companies are incompatible with a sustainable energy transition. International oil companies (IOCs), which include some of the largest and most powerful corporations in the world, continue to generate enormous profits from fossil fuels while facing growing public criticism and pressure to change in response to the climate crisis. There is no clear pathway to a more sustainable future. To address this issue, this thesis explores from several angles what meeting the goals of the Paris Agreement might mean for IOCs.
The thesis first examines how professionals working in the oil industry make sense of the contradiction between the IOC business model and the urgency of climate change mitigation. A novel framework of employee responses to the oil-climate tension is developed based on in-depth interviews with 12 professionals. Against this background, the thesis explores potential outcomes for IOCs’ business models and geopolitical and market positions. Insights from industry interviews are combined with literature to produce comprehensive typologies of the strategy and diversification options available for IOCs in a sustainable energy transition. The options are discussed in the context of their business potential, ability to reduce carbon emissions, and strategic fit to oil industry skills and assets. The geopolitical positions of IOCs in the energy transition are researched through 12 further expert interviews. Potential changes in IOC market positions in the energy transition are explored with a novel proof-of-concept model of the upstream oil market and an original data set constructed from publicly available sources.
This thesis makes clear that while IOCs can contribute to the energy transition through diversification, changes to the core fossil fuel business are also needed for alignment with the Paris Agreement goals. IOCs stand to lose out in the energy transition, as a sustained decrease in oil demand would lead them to lose both market share and geopolitical influence relative to national oil companies. Overall, the oil industry is not on track to meet the goals of the Paris Agreement and needs to prepare better for the scenarios studied in this thesis.