Houston: Oil and Gas Capital (‘energy transition’ hyperbole falls flat)

By Robert Bradley Jr. -- August 8, 2024

“City leaders should stop pretending Houston will, or should, transition away from oil and gas anytime soon…. Houston should embrace its role in sustaining and improving the lives of literally billions of people globally each day. It’s a legacy worth standing up for… and even celebrating.” (Doug Sheridan, below)

Hyperbole and government subsidies (bribes, to critics) is the lifeline for inferior energies (think dilute, intermittent, resource-intensive wind and solar). Such as been the case since the 1990s in Houston, Texas when Ken Lay of Enron Corp. empowered executive Robert Kelly to create a new renewables business, a story told here.

And shame-on-shame that some Houston business leaders that should know better have embraced low-density, political energies. I am thinking of Bobby Tutor, chair of the Houston Energy Transition Initiative, and Steve Kean of the Greater Houston Partnership. [1] There are others to be sure, but these two certainly head the list.

Tomlinson Hate

On the media front, there is the business editorialist Chris Tomlinson, who is a climate alarmist through-and-through who refuses to consider the weaknesses in his position from the science, economics, and public policy sides. Terribly conflicted, his wife, Shalini Ramanathan, is a multi-millionaire renewable energy rainmaker. Tomlinson himself snidely denounced Chevron’s decision this week in the Houston Chronicle:

“Oil giant’s relocation to Houston skirts climate accountability,” conflicted Chris wrote.

Yippee, another world-class polluter is moving its global headquarters to Houston, bringing a few hundred employees and a fossil fuel business plan unable to adapt to climate change….

Every serious scientist and government recognizes we must reduce carbon emissions to slow global warming and protect life as we know it. Consumers will need to stop burning so much oil and natural gas to produce energy, which means we will need a lot less of them. The oil and gas industry must shrink to prevent the worst of climate change.

What? Climategate to climate models, the climate alarm has a half-century of bad optics and bad predictions. To say that “every serious scientist” knows that reducing CO2 emissions is necessary to “protect life as we know it” is dead-on-arrival argumentation. Little wonder why “climate change” is bad politics in the current election cycle. [2]

Energy Exceptionalism

The story of oil and gas in Houston’s development and growth is both fascinating and compelling. “The wildcatters showed their gratitude to their city through their philanthropy,” University of Houston history professor Joseph Pratt wrote. “They were not the only ones who supported good causes in our region, but many of the foundations in Houston had their beginning in the oil and gas industries.” A century later, with much more oil and gas today that existed a century ago (the story of resourceship), the story is the same.

Sheridan on Chevron

With Chevron relocating its headquarters to Houston, escaping the termite aspirations of Governor Gavin Newson and state agencies in California, Doug Sheridan of EnergyPoint Research wrote this comment that is worth amplifying.

Back in 2021, when virtually everyone became an overnight expert on energy and simply “knew” oil was going to be replaced by renewables, the great minds at the City of Houston, Greater Houston Partnership and other civic organizations got behind the slogan, “Houston—The Energy Transition Capital of the World.”

Of course, there was no factual basis for the claim. It was just easy to say, so they said it. In reality, nothing could have been farther from the truth—no city in the world had more to lose from a transition away from oil and gas than Houston. Anyone who stopped to think had to have known this. But stopping and thinking wasn’t in vogue in 2021.

Even today, there’s an effort to position Houston as some clean energy innovation mecca. We doubt the claim would stand up to scrutiny. For one, we’d wager half the investments labeled “clean energy” are just typical energy technology investments, the kind companies in Houston have been making for decades. Of the other half, we’d guess a material proportion won’t be commercially viable in the end.

Contrast that with what’s going on with oil and gas in the city. By 2025, both of America’s two largest oil and gas companies, ExxonMobil and Chevron, will have moved their headquarters to Houston. And virtually every other petroleum entity in the world of any consequence has a presence in the city, including supermajors Shell, BP, and TotalEnergies, as well as leading NOCs like aramco. Houston today is as much an oil town as ever.

No doubt city leaders, many of them liberal, will attempt to pitch the presence of these oil and gas majors as just more money and expertise to invest in what they habitually like to claim is some big shift to clean and green energy. But that’s not true either. None other than the International Energy Agency (IEA) recently posted a chart showing just how little oil and gas firms are investing in clean energy. For once, the IEA hits on the truth.

So why aren’t oil and gas companies investing in clean energy? The official line is green energy and innovation isn’t a core competency. And that’s true, in so far as firms like to stick to their knitting. But the real reason, and don’t say it out loud, is that these companies understand green forms of energy, especially renewables, are for the most part so inferior they can’t cover their cost of capital. And for real managers, investments that can’t cover their cost of capital are to be avoided—not pursued.

Houstonians should welcome with open arms the arrival of ExxonMobil, Chevron and other oil and gas companies. And city leaders should stop pretending Houston will, or should, transition away from oil and gas anytime soon. As Alex Epstein stresses, oil and gas are essential to human flourishing. Houston should embrace its role in sustaining and improving the lives of literally billions of people globally each day. It’s a legacy worth standing up for… and even celebrating.

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[1] Bobby Tutor was a principal of Goldman Sachs global energy practice and founding head of Tudor, Pickering, Holt & Co., a major energy investment banker. Steve Kean, former CEO of Kinder-Morgan, one of the nation’s leading energy infrastructure companies, heads the Greater Houston Partnership.

Both Tutor and Kean know energy very well, well enough to not buy into climate alarmism and forced energy transformation. Their shift to political energy can only be described as pragmatic and amoral. Go with the political flow, get your share of kudos and government favor for personal and professional gain.

[2] For my long-standing criticisms of the fossil-fuel-misanthropist Tomlinson, see here.