Energy Game Amidst Sudden Policy Shifts: Oil Majors Caught in a Dilemma Between Climate Goals and Production Increases
2025-09-04 14:09:13
Since the Trump administration returned to the White House, energy policy has undergone a fundamental reversal. Centered on an "energy dominance" strategy, the administration has systematically dismantled the climate change regulatory framework, including formally withdrawing from the Paris Agreement, reversing Biden-era carbon emissions rules, and significantly relaxing restrictions on fossil fuel development. White House spokesperson Tyler Rogers emphasized that Trump's goal is to "unleash America's energy potential," while Biden's policies have previously been accused of "stifling the oil and gas industry."
Faced with the Trump administration's radical energy policy shift, global oil giants are facing unprecedented strategic disagreements, with companies making starkly different choices between short-term policy dividends and long-term energy transformation.
Companies like Chevron and ConocoPhillips are choosing to "go with the flow"
These companies have quietly weakened their climate commitments, with actual actions clearly favoring the expansion of traditional oil and gas. Chevron's latest sustainability report only mentions "ongoing emissions reduction efforts," completely deleting its previously stated goal of achieving net-zero upstream emissions by 2050. The report is over 50% shorter than during the Biden administration. ConocoPhillips announced in June that it was officially abandoning its 2050 net-zero operational goal, citing "insufficient low-carbon technology development and policy support." However, insiders revealed that avoiding angering the Trump administration was a key consideration.
ExxonMobil and Occidental Petroleum insist on "transformation and tradition in parallel"
While both companies have responded to calls for increased production, they have clearly maintained their 2050 net-zero commitments and are strengthening their low-carbon strategies through significant investments. Exxon acquired Denbury, a carbon transportation company, for nearly $5 billion, building the largest carbon dioxide pipeline network in the United States and simultaneously advancing multi-billion-dollar hydrogen projects. Occidental Petroleum is focusing on direct air capture (DAC) technology, aiming to extract atmospheric carbon dioxide and use it to enhance oil recovery, thereby producing "carbon-negative crude oil." While expanding fossil fuel production, these companies are emphasizing to investors that "low-carbon technology is at the core of the future energy landscape."
Industry commonality: short-term production increases are irreversible
All major oil and gas companies are increasing their investments in shale oil production and offshore drilling. Chevron's shale oil production increased 12% year-on-year in the second quarter, and Exxon received approval for five new deepwater blocks in the Gulf of Mexico. Analysts point out that under the current policy environment, expansion of traditional businesses is inevitable, but companies are still retaining some low-carbon investments to "hedge against future policy risks."
Behind the Divergence: A Bet on the Future of Two Energy Sources
This strategic split essentially represents a bet between companies on the sustainability of US energy policy. One group is betting on the long-term sustainability of Trump's policies, while the other is preparing for a future Democratic administration or global pressure for carbon neutrality. A Morgan Stanley research report warns: "Excessive leaning in either direction could lead to significant risks. Balancing these factors will be key to the survival of energy giants over the next five years."
The Trump administration's aggressive rollback of climate rules has significantly exceeded the expectations of many energy companies, posing an unprecedented dilemma for industry lobbying groups.
The Environmental Protection Agency (EPA) proposed completely abolishing the "harm determination" principle established in 2009 - this principle is the legal cornerstone of the federal government's carbon emissions regulation. It determines that greenhouse gas emissions pose a threat to public health and the environment and provides a regulatory basis for emission standards for power plants, refineries and automobiles.
The government has also significantly relaxed methane emissions detection and remediation requirements, reducing the monitoring frequency from quarterly to semi-annual or even annually, while shelving the strict electric vehicle promotion standards formulated during the Biden era. Although these measures have reduced compliance costs in the short term, they have left the industry facing significant uncertainty.
While major industry organizations like the American Petroleum Institute (API) support reducing unnecessary regulatory burdens, they privately worry that excessive deregulation could have serious consequences. On the one hand, a regulatory vacuum could lead to more fragmented state regulations, complicating compliance. On the other hand, a future Democratic administration could lead to stricter retaliatory regulations. A more immediate risk is that environmental groups are preparing to file multiple lawsuits challenging the legality of these regulatory rollbacks .
As a senior industry lobbyist said: "We are walking a tightrope - meeting the current government's demands for deregulation while avoiding sowing greater regulatory risks in the future." This balancing act is testing the political wisdom and strategic foresight of the entire energy industry.
Despite facing uncertainty in the policy environment, major oil giants still regard carbon management technology as the core of their long-term strategy and respond to the pressure of energy transformation through innovative technological layout .
Occidental Petroleum is vigorously pursuing the commercialization of direct air capture technology. Its large-scale facility in Texas has commenced operations, capturing 500,000 tons of atmospheric carbon dioxide annually. The company innovatively uses this captured CO2 to enhance oil recovery, achieving both carbon sequestration and increased oilfield production, creating a unique "carbon circular economy" model. The CEO stated that this technology "not only meets the need for emissions reductions but also creates new business value."
ExxonMobil has chosen a comprehensive hydrogen energy strategy, announcing an investment of over $10 billion over the next five years in low-carbon hydrogen projects. This includes building the world's largest blue hydrogen production facility in Texas, utilizing natural gas to produce hydrogen combined with carbon capture technology; and developing green hydrogen projects, using renewable energy to electrolyze water to produce hydrogen. The company also spearheaded the formation of the Hydrogen Energy Alliance to promote infrastructure development and the development of technical standards.
To ensure the economic viability of these projects, companies are actively lobbying on multiple fronts. In addition to directly engaging with senior government officials, they are also working through industry organizations to strongly advocate for the continuation and strengthening of the 45Q tax credit, advocating for an increase in the tax credit per ton of carbon captured from the current $50 to $85-100, and for an extension of the credit beyond 2040. The American Petroleum Institute emphasizes that "appropriate policy support is crucial to unlocking hundreds of billions of dollars in low-carbon investment."
Analysts point out that these investments are both a response to energy transition and a strategic positioning for oil giants in the future era of carbon constraints. Despite short-term policy fluctuations, carbon management technology has become a new battleground for oil companies' core competitiveness.
Energy analysts and institutional investors have recently warned that oil majors' current balanced strategy of "adapting to policies while balancing transformation" faces three long-term risks that could impact their competitiveness and valuations over the next decade:
Risk of policy reversals
If the Trump administration's energy policies reverse after the 2028 election, the industry will face severe challenges. Democrats are likely to re-strengthen climate regulation, including reinstating commitments to the Paris Agreement, implementing carbon taxes, and even retroactively penalizing companies for excessive emissions. History shows that, during policy cycles, companies that aggressively expand traditional oil and gas production capacity risk significant stranded assets . According to a Brookings Institution study, if the global carbon price reaches $100 per ton by 2030, US shale oil production could face over $300 billion in asset write-downs.
Investor pressure escalates
Major global asset managers are increasing their scrutiny of climate commitments. For two consecutive years, BlackRock, Vanguard, and other institutions have supported climate-related proposals at their shareholder meetings, demanding that companies disclose the details of their transformation plans. By the first quarter of 2025, 12 energy companies had been excluded from ESG fund investments due to "ambiguous climate targets." At recent shareholder meetings of companies like Chevron, 35% of investors voted for accelerated emissions reductions, a 10 percentage point increase from last year.
Risk of technological backwardness
Overinvestment in traditional oil and gas could cause companies to miss out on breakthroughs in new energy technologies . While ExxonMobil is developing carbon capture, its annual low-carbon R&D investment still accounts for less than 5% of revenue, far lower than European giants Total (12%) and BP (15%). If American companies fall behind in areas like hydrogen and biofuels, they could be forced to pay exorbitant prices for technology licenses from European or Chinese companies, potentially sacrificing their leadership in energy technology.
The Trump administration has approved over 2,000 new oil and gas drilling permits, opened up new territories in Alaska and the Gulf of Mexico, and proposed repealing 78 environmental regulations. According to a R&D energy report, U.S. crude oil production is expected to exceed 14 million barrels per day in 2025, a record high.
The surge in US production has exacerbated the risk of oversupply . Driven by Trump's policies, the loose global supply will continue to suppress the upward potential of oil prices.
Andrew Logan, senior director of the nonprofit Ceres, noted: "This is becoming a moment when the industry must decide where to stand. Short-term policy dividends and long-term energy transformation require completely different strategic layouts. Companies can either bet on continued policy easing or make substantial preparations for a carbon-neutral future. The middle path is becoming increasingly difficult to walk ."
The split of giants: strategic differentiation has already emerged
Faced with the Trump administration's radical energy policy shift, global oil giants are facing unprecedented strategic disagreements, with companies making starkly different choices between short-term policy dividends and long-term energy transformation.
Companies like Chevron and ConocoPhillips are choosing to "go with the flow"
These companies have quietly weakened their climate commitments, with actual actions clearly favoring the expansion of traditional oil and gas. Chevron's latest sustainability report only mentions "ongoing emissions reduction efforts," completely deleting its previously stated goal of achieving net-zero upstream emissions by 2050. The report is over 50% shorter than during the Biden administration. ConocoPhillips announced in June that it was officially abandoning its 2050 net-zero operational goal, citing "insufficient low-carbon technology development and policy support." However, insiders revealed that avoiding angering the Trump administration was a key consideration.
ExxonMobil and Occidental Petroleum insist on "transformation and tradition in parallel"
While both companies have responded to calls for increased production, they have clearly maintained their 2050 net-zero commitments and are strengthening their low-carbon strategies through significant investments. Exxon acquired Denbury, a carbon transportation company, for nearly $5 billion, building the largest carbon dioxide pipeline network in the United States and simultaneously advancing multi-billion-dollar hydrogen projects. Occidental Petroleum is focusing on direct air capture (DAC) technology, aiming to extract atmospheric carbon dioxide and use it to enhance oil recovery, thereby producing "carbon-negative crude oil." While expanding fossil fuel production, these companies are emphasizing to investors that "low-carbon technology is at the core of the future energy landscape."
Industry commonality: short-term production increases are irreversible
All major oil and gas companies are increasing their investments in shale oil production and offshore drilling. Chevron's shale oil production increased 12% year-on-year in the second quarter, and Exxon received approval for five new deepwater blocks in the Gulf of Mexico. Analysts point out that under the current policy environment, expansion of traditional businesses is inevitable, but companies are still retaining some low-carbon investments to "hedge against future policy risks."
Behind the Divergence: A Bet on the Future of Two Energy Sources
This strategic split essentially represents a bet between companies on the sustainability of US energy policy. One group is betting on the long-term sustainability of Trump's policies, while the other is preparing for a future Democratic administration or global pressure for carbon neutrality. A Morgan Stanley research report warns: "Excessive leaning in either direction could lead to significant risks. Balancing these factors will be key to the survival of energy giants over the next five years."
Regulatory Game: Industry Lobbying Faces a Dilemma
The Trump administration's aggressive rollback of climate rules has significantly exceeded the expectations of many energy companies, posing an unprecedented dilemma for industry lobbying groups.
The Environmental Protection Agency (EPA) proposed completely abolishing the "harm determination" principle established in 2009 - this principle is the legal cornerstone of the federal government's carbon emissions regulation. It determines that greenhouse gas emissions pose a threat to public health and the environment and provides a regulatory basis for emission standards for power plants, refineries and automobiles.
The government has also significantly relaxed methane emissions detection and remediation requirements, reducing the monitoring frequency from quarterly to semi-annual or even annually, while shelving the strict electric vehicle promotion standards formulated during the Biden era. Although these measures have reduced compliance costs in the short term, they have left the industry facing significant uncertainty.
While major industry organizations like the American Petroleum Institute (API) support reducing unnecessary regulatory burdens, they privately worry that excessive deregulation could have serious consequences. On the one hand, a regulatory vacuum could lead to more fragmented state regulations, complicating compliance. On the other hand, a future Democratic administration could lead to stricter retaliatory regulations. A more immediate risk is that environmental groups are preparing to file multiple lawsuits challenging the legality of these regulatory rollbacks .
As a senior industry lobbyist said: "We are walking a tightrope - meeting the current government's demands for deregulation while avoiding sowing greater regulatory risks in the future." This balancing act is testing the political wisdom and strategic foresight of the entire energy industry.
Technological breakthrough: Carbon capture becomes a strategic focus
Despite facing uncertainty in the policy environment, major oil giants still regard carbon management technology as the core of their long-term strategy and respond to the pressure of energy transformation through innovative technological layout .
Occidental Petroleum is vigorously pursuing the commercialization of direct air capture technology. Its large-scale facility in Texas has commenced operations, capturing 500,000 tons of atmospheric carbon dioxide annually. The company innovatively uses this captured CO2 to enhance oil recovery, achieving both carbon sequestration and increased oilfield production, creating a unique "carbon circular economy" model. The CEO stated that this technology "not only meets the need for emissions reductions but also creates new business value."
ExxonMobil has chosen a comprehensive hydrogen energy strategy, announcing an investment of over $10 billion over the next five years in low-carbon hydrogen projects. This includes building the world's largest blue hydrogen production facility in Texas, utilizing natural gas to produce hydrogen combined with carbon capture technology; and developing green hydrogen projects, using renewable energy to electrolyze water to produce hydrogen. The company also spearheaded the formation of the Hydrogen Energy Alliance to promote infrastructure development and the development of technical standards.
To ensure the economic viability of these projects, companies are actively lobbying on multiple fronts. In addition to directly engaging with senior government officials, they are also working through industry organizations to strongly advocate for the continuation and strengthening of the 45Q tax credit, advocating for an increase in the tax credit per ton of carbon captured from the current $50 to $85-100, and for an extension of the credit beyond 2040. The American Petroleum Institute emphasizes that "appropriate policy support is crucial to unlocking hundreds of billions of dollars in low-carbon investment."
Analysts point out that these investments are both a response to energy transition and a strategic positioning for oil giants in the future era of carbon constraints. Despite short-term policy fluctuations, carbon management technology has become a new battleground for oil companies' core competitiveness.
Long-term risks: policy fluctuations and investor pressure
Energy analysts and institutional investors have recently warned that oil majors' current balanced strategy of "adapting to policies while balancing transformation" faces three long-term risks that could impact their competitiveness and valuations over the next decade:
Risk of policy reversals
If the Trump administration's energy policies reverse after the 2028 election, the industry will face severe challenges. Democrats are likely to re-strengthen climate regulation, including reinstating commitments to the Paris Agreement, implementing carbon taxes, and even retroactively penalizing companies for excessive emissions. History shows that, during policy cycles, companies that aggressively expand traditional oil and gas production capacity risk significant stranded assets . According to a Brookings Institution study, if the global carbon price reaches $100 per ton by 2030, US shale oil production could face over $300 billion in asset write-downs.
Investor pressure escalates
Major global asset managers are increasing their scrutiny of climate commitments. For two consecutive years, BlackRock, Vanguard, and other institutions have supported climate-related proposals at their shareholder meetings, demanding that companies disclose the details of their transformation plans. By the first quarter of 2025, 12 energy companies had been excluded from ESG fund investments due to "ambiguous climate targets." At recent shareholder meetings of companies like Chevron, 35% of investors voted for accelerated emissions reductions, a 10 percentage point increase from last year.
Risk of technological backwardness
Overinvestment in traditional oil and gas could cause companies to miss out on breakthroughs in new energy technologies . While ExxonMobil is developing carbon capture, its annual low-carbon R&D investment still accounts for less than 5% of revenue, far lower than European giants Total (12%) and BP (15%). If American companies fall behind in areas like hydrogen and biofuels, they could be forced to pay exorbitant prices for technology licenses from European or Chinese companies, potentially sacrificing their leadership in energy technology.
Oil price linkage risk warning: Two-way volatility intensifies amid policy divergence and geopolitical conflicts
The Trump administration has approved over 2,000 new oil and gas drilling permits, opened up new territories in Alaska and the Gulf of Mexico, and proposed repealing 78 environmental regulations. According to a R&D energy report, U.S. crude oil production is expected to exceed 14 million barrels per day in 2025, a record high.
The surge in US production has exacerbated the risk of oversupply . Driven by Trump's policies, the loose global supply will continue to suppress the upward potential of oil prices.
Andrew Logan, senior director of the nonprofit Ceres, noted: "This is becoming a moment when the industry must decide where to stand. Short-term policy dividends and long-term energy transformation require completely different strategic layouts. Companies can either bet on continued policy easing or make substantial preparations for a carbon-neutral future. The middle path is becoming increasingly difficult to walk ."
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