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Their fossil fuel business is likely much more profitable than their renewable business. It makes sense for the CEO to be clear about the direction the company

Their fossil fuel business is likely much more profitable than their renewable business. It makes sense for the CEO to be clear about the direction the company will take in the future as well as to focus on their core competencies.

greybox 3y ago
One day soon, when we can no longer grow enough food due to soil erosion, and mass migration to northern Europe & the US will make today's migration problems look like nothing. I'm sure that shells investors will be happy that shell decided to focus on their core competencies.
- datavirtue 3y ago
  Climate change and hundreds of years of crop failures led to the collapse of every bronze age city-state.
bantunes 3y ago
Screw every other implication, right? Shareholder value uber alles
officialchicken 3y ago
Then the CEO should also be clear when their motivations are directly influenced by actions (like removing their predecessor) due to PE firms that are acting as political proxies. Because most HN readers agree that R&D is important and that no single business unit will last forever.
anodari 3y ago
Also, fossil fuel industry will last more a few decades. It is a low risk decision if he is thinking about a short time horizon. Looks he is just trying to save his own ass showing big profits.
jarnagin 3y ago
The tech industry is littered with once-giant megacorps that had an opportunity to pivot as technology progressed, failed to do so for this exact reason, and were usurped by startups with a better vision. In Shell’s case, the writing is already on the wall. With the emergence of EVs and renewable energy, what is the fossil fuel industry going to look like in 20-25 years? How will this decision seem justifiable retrospectively?
- phil21 3y ago
  > what is the fossil fuel industry going to look like in 20-25 years Probably much like it does today, just a bit bigger. At least based on world demographics and current projects under construction.
- idiotsecant 3y ago
  Fossil fuels are likely to play an enormous role in energy for at least the next 50 years. We'll almost certainly still be burning coal at that point, let alone getting rid of natural gas and liquid fuels. EVs need power and without massive transmission and distribution system upgrades if EVs achieve even 25% market saturation the physics don't work as-is. Generation is the easy part but the deeply unsexy real problem is moving that power around. Which is ironic because that problem has nearly exactly zero presence in the minds of politicians and the public. It's yet another example of what happens when complex engineering is turned into sound bites.
A_non_e-moose 3y ago
The closing off and lack of a diversified approach to solving energy problems also reveals the incapability or unwillingness of the CEO to think of the long term success of a corporation now singularly focused on the exploitation of a non-renewable, finite resource. They are now more focused and perhaps more profitable these quarters, but next FYs they will be more vulnerable to other competitors in the energy sector. Short-termism seems to be an unavoidable condition when markets demand higher efficiencies.
- akho 3y ago
  As an investor, I would very much prefer them to focus on what's profitable. I can invest my dividends/buyback cash into long-term successful renewable energy businesses, if that's what I want to be in. There's no need to have Shell make those decisions for me. Now, if there's a synergy in there — somewhere where an oil company is uniquely positioned to implement renewables — that would be nice. I'm not sure if any such thing exists.
  - datavirtue 3y ago
    I'm starting to realize that wind farms are not profitable at all. GE has a good bit of that industry buttoned up but they are not pursuing it. There are other examples of companies walking away from it or avoiding it. It's not out of ideology, corporations scramble for profit.
  - ShrimpHawk 3y ago
    If there were a company that turned literal murder into stock prices people would invest in it.
    - akho 3y ago
      There are hundreds of such companies, and some are quite hot. Your point?
    - akho 3y ago
      Also, oil/energy companies provide the foundation of modern technological civilization. We now see some downsides to that particular method, but “murder” is a jump of Olympic proportions.
dahart 3y ago
This is likely very short-sighted as a pure business decision, you’re ignoring the trends and growth, and CEOs that ignore trends tend to drive companies down, regardless of how much clarity they provide. While oil might be profitable today because it’s an older, entrenched business, the trends for renewables are going up much, much faster than fossil fuels. Global sentiment is shifting, electric vehicle production growth looks to be on the order of 10x yoy what fossil fueled vehicles are doing and accelerating, not even counting the hybrid market. This is to say nothing about the looming environmental crisis that has already begun, the negative PR Shell gets from being callous, and the possibility that regulations could swing hard against fossil fuels very swiftly. Even if money and nothing else is the bottom line, being clearly focused on fossil fuels and staying out of the future markets while other companies race to win them seems like a bad long term strategy.
- tempusalaria 3y ago
  It’s probably better for shell investors if shell focuses on what they are good at and returns the profits to shareholders who can then invest in whatever they want. The goal of a corporation from a shareholder pov is not to maximise total enterprise value but rather to maximise the time value of money that shareholders receive. Shell should only be investing in renewables if they have a durable competitive advantage in doing so over the other investment options of their shareholders. Renewables have generally been horrible investments for these energy companies btw which is one reason they have been reversing course.
- whall6 3y ago
  1. > the trends for renewables are going up much, much faster than fossil fuels What are these trends? 2. Electric Vehicles should never be considered an energy transition effort. You’re just shifting commodities. Instead of burning pentane in your car you’re burning coal and natural gas in a plant. If you want to invest in energy transition, invest in an energy transition company. If you want to work for a company that prioritizes energy transition, work at a company that prioritizes energy transition. Shell is not an energy transition company.
  - 3y ago

greybox 3y ago

One day soon, when we can no longer grow enough food due to soil erosion, and mass migration to northern Europe & the US will make today's migration problems look like nothing. I'm sure that shells investors will be happy that shell decided to focus on their core competencies.

datavirtue 3y ago
Climate change and hundreds of years of crop failures led to the collapse of every bronze age city-state.

bantunes 3y ago

Screw every other implication, right? Shareholder value uber alles

officialchicken 3y ago

Then the CEO should also be clear when their motivations are directly influenced by actions (like removing their predecessor) due to PE firms that are acting as political proxies. Because most HN readers agree that R&D is important and that no single business unit will last forever.

anodari 3y ago

Also, fossil fuel industry will last more a few decades. It is a low risk decision if he is thinking about a short time horizon. Looks he is just trying to save his own ass showing big profits.

jarnagin 3y ago

The tech industry is littered with once-giant megacorps that had an opportunity to pivot as technology progressed, failed to do so for this exact reason, and were usurped by startups with a better vision. In Shell’s case, the writing is already on the wall. With the emergence of EVs and renewable energy, what is the fossil fuel industry going to look like in 20-25 years? How will this decision seem justifiable retrospectively?

phil21 3y ago
> what is the fossil fuel industry going to look like in 20-25 years Probably much like it does today, just a bit bigger. At least based on world demographics and current projects under construction.
idiotsecant 3y ago
Fossil fuels are likely to play an enormous role in energy for at least the next 50 years. We'll almost certainly still be burning coal at that point, let alone getting rid of natural gas and liquid fuels. EVs need power and without massive transmission and distribution system upgrades if EVs achieve even 25% market saturation the physics don't work as-is. Generation is the easy part but the deeply unsexy real problem is moving that power around. Which is ironic because that problem has nearly exactly zero presence in the minds of politicians and the public. It's yet another example of what happens when complex engineering is turned into sound bites.

A_non_e-moose 3y ago

The closing off and lack of a diversified approach to solving energy problems also reveals the incapability or unwillingness of the CEO to think of the long term success of a corporation now singularly focused on the exploitation of a non-renewable, finite resource. They are now more focused and perhaps more profitable these quarters, but next FYs they will be more vulnerable to other competitors in the energy sector. Short-termism seems to be an unavoidable condition when markets demand higher efficiencies.

akho 3y ago
As an investor, I would very much prefer them to focus on what's profitable. I can invest my dividends/buyback cash into long-term successful renewable energy businesses, if that's what I want to be in. There's no need to have Shell make those decisions for me. Now, if there's a synergy in there — somewhere where an oil company is uniquely positioned to implement renewables — that would be nice. I'm not sure if any such thing exists.
- datavirtue 3y ago
  I'm starting to realize that wind farms are not profitable at all. GE has a good bit of that industry buttoned up but they are not pursuing it. There are other examples of companies walking away from it or avoiding it. It's not out of ideology, corporations scramble for profit.
- ShrimpHawk 3y ago
  If there were a company that turned literal murder into stock prices people would invest in it.
  - akho 3y ago
    There are hundreds of such companies, and some are quite hot. Your point?
  - akho 3y ago
    Also, oil/energy companies provide the foundation of modern technological civilization. We now see some downsides to that particular method, but “murder” is a jump of Olympic proportions.

dahart 3y ago

This is likely very short-sighted as a pure business decision, you’re ignoring the trends and growth, and CEOs that ignore trends tend to drive companies down, regardless of how much clarity they provide. While oil might be profitable today because it’s an older, entrenched business, the trends for renewables are going up much, much faster than fossil fuels. Global sentiment is shifting, electric vehicle production growth looks to be on the order of 10x yoy what fossil fueled vehicles are doing and accelerating, not even counting the hybrid market. This is to say nothing about the looming environmental crisis that has already begun, the negative PR Shell gets from being callous, and the possibility that regulations could swing hard against fossil fuels very swiftly. Even if money and nothing else is the bottom line, being clearly focused on fossil fuels and staying out of the future markets while other companies race to win them seems like a bad long term strategy.

tempusalaria 3y ago
It’s probably better for shell investors if shell focuses on what they are good at and returns the profits to shareholders who can then invest in whatever they want. The goal of a corporation from a shareholder pov is not to maximise total enterprise value but rather to maximise the time value of money that shareholders receive. Shell should only be investing in renewables if they have a durable competitive advantage in doing so over the other investment options of their shareholders. Renewables have generally been horrible investments for these energy companies btw which is one reason they have been reversing course.
whall6 3y ago
1. > the trends for renewables are going up much, much faster than fossil fuels What are these trends? 2. Electric Vehicles should never be considered an energy transition effort. You’re just shifting commodities. Instead of burning pentane in your car you’re burning coal and natural gas in a plant. If you want to invest in energy transition, invest in an energy transition company. If you want to work for a company that prioritizes energy transition, work at a company that prioritizes energy transition. Shell is not an energy transition company.
- 3y ago