When it comes to renewable energy sources and pursuing a greener future, the movement that started in 2015 with the Paris Agreement—and which has been accelerated by the Covid-19 pandemic—is still very much in full effect. According to the International Energy Agency, the pandemic has led to less investment in fossil fuels and more in green energy, which has served to highlight the palpable shift in the globe towards a more sustainable future, and where companies and investors may be looking going forward. The IEA has forecasted that renewable energy will be providing about 80% of the global growth in demand for electricity between now and the year 2030, prompting the question for many of how will this impact the oil and gas industry, so let’s take a look at a top oil company like Royal Dutch Shell RDSA to see how the oil giant is performing so far this year and how it’s been impacted by the greener global focus.
Shell’s strong start
Shell has had a solid start to 2021, showing sturdy operational and financial performance. Royal Dutch Shell Chief Executive Officer Ben van Beurden explained: “Shell has made a strong start to 2021, generating over $8 billion of cash in the quarter. Our integrated business model is ideally positioned to benefit from recovering demand. As previously announced, the first quarter 2021 dividend per share has been increased by around 4%, in line with our progressive dividend policy. We have reduced net debt by more than $4 billion this quarter, progressing towards the $65 billion milestones to increase shareholder distributions. Our competitive and robust financial performance provides the platform to achieve the goals of our Powering Progress strategy.” In a year that has seen commodity prices on the rise, as well as a recovery in fuel demand, RDSA beat expectations for their Q1 earnings in 2021, which has been important for companies like Shell.
Recently, Shell was ordered by a court in the Hague to decrease their carbon emissions by no less than 45% by 2030, a percentage decrease pursued in comparison to 2019’s carbon emissions. The court is working to align Royal Dutch Shell with the Paris climate agreement, and the decision is expected to have ripple effects across the industry. In response to the ruling, a Shell spokesperson expressed the company’s stance on climate change by saying, “Urgent action is needed on climate change which is why we have accelerated our efforts to become a net-zero emissions energy company by 2050, in step with society, with short-term targets to track our progress.” The Shell spokesperson then went on to say, “We are investing billions of dollars in low-carbon energy, including electric vehicle charging, hydrogen, renewables and biofuels. We want to grow demand for these products and scale up our new energy businesses even more quickly. We will continue to focus on these efforts and fully expect to appeal today’s disappointing court decision.”
If you need a quick recap of the Paris Climate Agreement, here it is: an international agreement which was made between 197 nations back in 2015 focused on drastically reducing global greenhouse gas emissions and to shifting the world’s focus to climate change, thus mitigating its negative impacts. Through the agreement, developed nations and developing nations can work together to achieve a more sustainable future for the earth by creating climate goals for each country and making sure that these are achieved. As a result, many companies today are stepping up their game to align with the new standards set forth by the agreement.
Shell in the markets
Royal Dutch Shell, which trades under RDSA in the markets, has had an interesting performance over both this year and last. In the market chaos of 2020, RDSA shares plummeted by 40% as the company was strained with lockdown measures leading to drastically lower fuel demand across the world. This year, RDSA share prices began the year at 14.615 on the 4th of January and rose by 27.3% to reach a high of 18.610 by the 12th of March.
From there, RDSA share trading prices slowly fell by 14.7% to settle at 15.873 on the 28th of May. Once the company had announced its first-quarter earnings, RDSA share prices shot up by 1.9%, which was a welcome relief for the company as prices are down 9% year-to-date. The future of RDSA in the markets remains unpredictable as the company could have operational and financial impacts from the recent court decision, however, oil prices have risen by about 30% since January and demand is coming back quickly.
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