Exxon (NYSE: XOM) was in the news this morning with an announcement that the oil giant was launching a new lithium mining operation in Arkansas in an effort to supply enough lithium to support the manufacturing of one million electric vehicles by the end of the decade.
In a short piece published by CNBC, journalist Spencer Kimball wrote …
The lithium operation comes as the major oil companies are under pressure to address climate change. While Shell and BP have focused on renewables such as wind and solar, Exxon is investing $17 billion through 2027 to reduce emissions with a focus on carbon capture, hydrogen and biofuels.
While it is true that oil companies are under pressure to address climate change, they’re not really doing much. And that’s OK. They’re in the energy business, not the climate change mitigation business. And I say this as an unapologetic treehugger.
Don’t get me wrong. Big Oil has spent decades fighting efforts to be held accountable for the damage oil production and consumption has done to the planet. As well, Exxon in particular has spent a small fortune convincing policy makers and the general public that human contributions to climate change aren't real, or at the very least, overblown.
While I have no intention of starting a debate over climate change (you’re entitled to find the data on climate change to be sound or unreliable), we know that from 1977 through 2003, Exxon created a number of models that projected the rise in carbon dioxide emissions from the burning of fossil fuels.
This information was highlighted in a January, 2023 article published in the journal Science, entitled: Assessing ExxonMobil’s global warming projections.
Here’s a snippet from the abstract …
Climate projections by the fossil fuel industry have never been assessed. On the basis of company records, we quantitatively evaluated all available global warming projections documented by—and in many cases modeled by—Exxon and ExxonMobil Corp scientists between 1977 and 2003.
We find that most of their projections accurately forecast warming that is consistent with subsequent observations. Their projections were also consistent with, and at least as skillful as, those of independent academic and government models.
Exxon and ExxonMobil Corp also correctly rejected the prospect of a coming ice age, accurately predicted when human-caused global warming would first be detected, and reasonably estimated the “carbon budget” for holding warming below 2°C. On each of these points, however, the company’s public statements about climate science contradicted its own scientific data.
I always thought it would be cool if Exxon would’ve just come and said, “yeah, we know the production and consumption of fossil fuels is contributing to climate change, but this is our business, and if you want to stop using our oil, feel free.”
Sure, such a thing would’ve come off as crass and, for lack of a better word, dickish, but it would’ve at least been honest.
Those who suggest that Big Oil is taking climate change seriously are not being honest with themselves.
The oil industry has spent decades impeding progress on addressing climate change, and any efforts to seek out alternatives to gasoline and diesel have been focused on alternatives, such as biofuels or hydrogen, which still require an internal combustion engine or some form of fossil fuels The former isn’t particularly great for the environment, either.
But again, this is their business, so you can’t really blame them. And in fact, this is not intended to be a criticism of Exxon’s internal and external communications regarding climate change.
This is merely an observation of truth.
And here’s another observation of truth …
Exxon has to answer to its shareholders, not Greenpeace. And if it can make money in the EV game while still producing oil, it will. And that, dear reader, is why Exxon is launching this new lithium mining operation.
The data is clear: the transition from internal combustion to vehicle electrification is well underway. And while we won’t completely see the end of internal combustion anytime soon, little by little, electric vehicles are chipping away at internal combustion’s market share.
By the end of this decade, more than half of all new vehicle sales in the U.S. will be electric, and by 2040, more than 60% of new vehicle sales, globally, will be electric.
It’s actually pretty smart of Exxon to get into the lithium mining game while still maintaining its oil production. It’ll allow the company to maintain profitability as the world comes to terms with the fact that oil use for transportation will begin its decline this decade. The International Energy Agency actually has this decline beginning in 2026, by the way.
Of course, Exxon will always be an energy company focused primarily on oil production, but as shitty as it was for the company to lie about its own analyses that directly tied fossil fuel production and consumption with an increase in climate emissions, if the oil giant can deliver profitability from the EV sector, don’t think for a second that it won’t. And I’m completely fine with that.
That being said, if you’re looking to invest directly into the lithium space, Exxon probably isn’t your best bet, as this latest lithium production project will still only contribute a very small percentage of the company’s revenue.
If you’re looking for something that gives you more exposure to lithium (particularly with a direct connection to the EV sector), Albemarle (NYSE: ALB) and Stellantis (NYSE: STLA) are pretty solid bets.
Bottom line: Big Oil IS getting into the EV game. Whether through the launching of new lithium mining projects or integrating EV charging stations into legacy gas and diesel filling stations, all of the oil majors are beginning to make investments in the EV sector, because EVs are the future. And you can rest assured that Exxon, BP, and all the other billion-dollar behemoths in the oil game are going to embrace this truism, instead of falling victim to it.
Invest accordingly.
