Recently the official website of the family Foundation the Rockefeller Foundation (RFF) has reported that all investments in oil and coal will be phased out in the near future — fund as quickly as possible try to withdraw money from companies engaged in mining. One of these assets refers to the largest Corporation, ExxonMobil.
Investment in oil production is losing appeal?
Its solution to the Fund of the Rockefeller family explains as follows:
- in a time when the international community is seeking ways to offset the dependence on fossil fuels, no economic or ethical appropriate to continue to preserve capital in these companies;
- there are no reasons to continue the exploration of new oil fields. The existing deposits, in the opinion of the fund, must be held to save humanity and the ecosystem survival in future decades;
- the fund made a mistake since the 1980-ies to give ExxonMobil the opportunity to mislead the world community of its supposed concern about environmental issues and climate change, while the company has spent millions on the development of its own infrastructure.
The fund has already given the order to withdraw assets from all the extractive oil and coal companies, leaving in the direction of a 1% investment of the total fund portfolio.
We already wrote about the fact that world oil reserves are steadily approaching the critical point, and the current oil prices only exacerbate the situation on the world market. Economic laws state that the value of the resource in the market is determined by its rarity — the less of the resource, the more expensive it is, however, in the situation with oil this pattern is destroyed by the artificial influence of the OPEC countries. Trying to fill its budget today due to large production volumes, exporting countries are slowly but surely tightening the noose around the neck of its future — where will their power be, when in 40 years we run out of field? Statistics show that even the sovereign funds of Saudi Arabia at the current deficit of its budget will last for 5-7 years.
Investments in oil production are less promising than in nuclear power, electricity, hydrogen technologies or other alternative energy sources. So we recommend serious investors to pay attention to long-term investment in developing high-tech startups, including working towards alternative energy.
ExxonMobil has denied the charges — as the representative of the company stated: “of course they withdraw their assets from ExxonMobil, because they also finance a conspiracy against us” (it seems that we are talking about the attempts of the fund to prevent a future energy disaster).
The history of the Rockefeller fund foundation
His activity, John D. Rockefeller (the man who became the first in the history of mankind a dollar billionaire), we started trading food (wheat, meat), but with the advent of the kerosene lamp in the 1850s, began to grow, the demand for oil. In 1870 there was a company standard Oil, which was initially engaged in oil refining, but later began to invest in oil fields.
With the aim of optimising the work of future corporation Rockefeller developed the charter, and the first wages were paid not in money but in shares of the company. With income growth, Rockefeller continued to buy up smaller oil companies that did not like the competitors, but the selection they had — Rockefeller was able to negotiate with the railway companies, significantly reducing transportation costs.
Investment in oil production has brought millions – to the 1880-th the company became the largest in the world, but the Sherman act monopoly and forced to divide standard Oil in 1890, into several parts. There were 34 new oil companies, almost all of the current major oil corporations of the US — the heirs of standard Oil, including ExxonMobil and Chevron.
The Rockefeller Foundation was established in 1913 with the purpose of charity. Investment in oil production and other assets make a profit which goes to the development of science and financing programs for the conservation of the environment.
How the oil giants survive
Despite the fact that the Fund of Rockefeller family motivates the curtailment of investments in oil production, with good intentions, this decision may go to the Fund to benefit from low oil prices large oil Corporation at the end of 2015 year showed serious losses. A loss of only 5 major corporations (Hess, Murphy Oil Corp, Andarko, ConocoPhillips, Occidental Petrileum) amounted to more than 14 billion USD.
How the biggest oil giants survive in such conditions:
1. ExxonMobil (USA)
The last 1.5 years have brought the company a loss of 25% of its market capitalization — the company is now worth about nearly 330 billion USD. And, although the company’s revenue for the year fell by 48%, net profit for the first three quarters of 2015, amounted to 13.4 billion USD. For the year to 16.5 billion.
Regarding the success of the company stems from the fact that 15% of the income the company brings not the production but the processing of oil. Also, the corporation pursues a prudent investment policy: testing has allowed to identify several “trim levels”. For example, decreasing of oil below $ 100 for barrel part of the project is frozen, the next level cut — off of 70-75 dollars.
2. Chevron (USA)
The reduction in the capitalization of the company amounted to 1.5 years (to January 2016) 36% net profit for the 3rd quarter of 2015, decreased by 67% (to 5.3 billion USD), and in the 4th quarter, the company reported a loss.
To minimize its costs, the company cuts the costs of geological surveys and reduce staff by 7 thousand people from 65 thousand employees in the Corporation.
3. Total (France)
The value of the company for 1.5 year decreased to 103.5 billion dollars (37%). Total income for 2015 has increased in comparison with 2014, 20% to 5,087 billion USD.
The company’s success in lowering the cost of oil production and costs (investment and wages), but the company leadership chose not to save. As a result, the growth in the value of securities for the first 3 months of 2016.
4. ВР (UK)
The company fell by almost half — 47%, capitalization in January of 2016 amounted to 94.3 billion USD. For the first 3 quarter, the company reported a net loss of 3.1 billion dollars, at the end of the year, the loss amounted to 6.5 billion dollars.
The company has almost the biggest costs in Europe for oil extraction because of its location in the sea — the cost of production is around 55-60 dollars per barrel. So far, the company has cut all investment in oil production and is selling assets worth 3-5 billion dollars. Corporation has not a bright prospects.
5. Eni (Italy)
The loss of capitalization was 52% (to 52.4 billion USD). Losses for 2014 year amounted to 4.7 billion dollars, 2015 — of 8.82 billion dollars.
For the sake of saving the corporation cut wages and refused to repurchase their shares. Error of corporations began a massive expansion of the oil market in Europe just before the global decline in oil prices.
6. Stratoil (Norway)
The capitalization of the company for 1.5 years fell by 62% (up to 38.8 billion USD). Loss for the 2015 amounted to 4.28 billion dollars.
The company has also cut investment in oil production, refusing to hire oil offshore platforms — penalty for breaking contracts with the major loss was more profitable than continued production.