Big Oil Goes Looking for a Career Change
(Bloomberg) — For most of the past century, Big Oil executives found it pretty easy to explain to investors how their businesses worked. Just locate more of the commodities that everyone needed, extract and process them as cheaply as possible, and watch the profits flow.That’s all over now. The change has been so profound that the chief executive officer of BP Plc recently found himself hyping the profit potential of another commodity. “People may not know—BP sells coffee. We sold 150 million cups of coffee last year,” Bernard Looney said in an interview in August, referring to beverage kiosks attached to the company’s fuel stations. “This is a very strong business. It’s a growth business.”Perhaps it was tongue-in-cheek, or a way for the leader of the world’s fifth-largest international oil company to emphasize a relationship with consumers. But it’s clear Looney and other oil bosses are struggling to sell their plans for a future in which the world wants more green energy. Last year, for the first time in history, solar and wind made up most of the world’s new power sources, according to BloombergNEF. If the margins on cappuccinos look good right now, that’s an indication of how hard it will be for Big Oil to rapidly ditch its winning formula of drilling, pumping, and refining while spending its way into renewables.“This is a time of energy transition,” says Daniel Yergin, the oil historian and vice chairman at consultant IHS Markit Ltd. “The supermajors were born of the trauma of the late 1990s,” he notes, and now “this global trauma of the pandemic will also be a decisive period.”Legacy energy companies are for the first time sketching out new strategies that in the near future—as soon as 2030, in some cases—would eliminate hydrocarbons. The industry would like everyone to believe it’s turning its back on fossil fuels for the good of the planet. After decades of denying its role in global warming, however, the reality is that Big Oil has been forced to change by green campaigners, local politicians, and pension funds.The green transition is more evident in Europe, but the same forces are hammering the industry in the U.S. In another unmistakable sign of the times, last month Exxon Mobil Corp. was dropped from the Dow Jones Industrial Average for the first time since 1928. In the S&P 500, the energy sector is now the smallest component. (The mostly state-owned oil giants of the Middle East, India, and China are, for now at least, largely carrying on as before.)What is the future of Big Oil without oil? At the extreme of this approach are the pathways sketched out by BP and Italian oil group Eni SpA. These companies claim that in the next decade they will come to resemble a cross between a slimmer version of a traditional oil company and what’s today more like a utility (with, yes, a coffee-selling convenience store chain for drivers of electric vehicles). As the legacy business fades, the theory goes, investments in renewable electricity, biofuels, and EV charging points will pay off.If in the past the biggest names of the industry were known as “international oil companies,” the new jargon describes this approach as creating “integrated energy companies.” Michele Della Vigna, the top oil industry analyst at Goldman Sachs Group Inc., expects to see oil giants attempt the same all-in strategy as before. “We believe the coming decade will see them integrating vertically in gas, already evident, and in power,” he says.Industry executives insist their legacy business is resilient even as they shift away from oil and natural gas, but their actions suggest otherwise. BP and Royal Dutch Shell Plc have already slashed their dividends—for Shell it was the first time in nearly 80 years. Returning profits to shareholders has long been a pillar of oil’s strength on financial markets. And those like Exxon who are keeping their shareholder payments untouched are taking on far more debt to do so.The fossil fuel industry as a whole has taken billions of dollars in writedowns, in part linked to the rise of U.S. shale production and the impact of the coronavirus pandemic. If demand peaks earlier than expected, as some in the industry now fear, the most expensive and polluting oil fields such as tar sands in Canada may never be developed. The term of art for these uneconomic oil resources is stranded assets. The consultants at Rystad Energy AS estimate that 10% of the world’s recoverable oil resources—some 125 billion barrels—could become obsolete.Add it all up, and the Not-So-Big Oil of tomorrow looks greener, smaller, and nimbler—and also less profitable, more indebted, and paying lower dividends. That spells the end of a business model that hasn’t changed much since it was pioneered by John Rockefeller: Integrate oil production with refining, and market it under a single umbrella.This formula built an industry that made possible 20th century automobile culture, reshaped cities, produced political dynasties, and defined modern life. With hydrocarbons occupying a central role in the global economy, the model became a cash machine and a darling of long-only shareholders who adored its fat and predictable dividends. Oil interests became a powerful political force. The model was durable enough to survive the oil crisis of the 1970s, the rise of OPEC, wars in the Middle East, and the emergence of the ecological movement in the ’80s.When crude prices plunged in 1998 and the oil giants appeared on the brink, the industry responded in true fashion: doubling down on oil in a series of mergers that created the modern petroleum industry. The five companies that have dominated since then—Exxon, Chevron, Shell, Total, and BP—have been doing roughly the same things their predecessors did decades earlier.This time is different. The existential crisis of the ’90s taught Big Oil how to do the same but better and cheaper. In the 2020s these companies are trying to figure out how to do something completely different—renewable energy—while quickly reducing or offsetting emissions from the oil and gas they sell.“All the companies are swimming in the same water of energy transition,” says Yergin, “but they are adopting different strokes to get to the other side.”The answer from BP is far more radical than from Chevron. But even the smaller steps by American supermajors are remarkable by the standards of a conservative and slow-moving industry. Chevron’s last update to its shareholders in July highlighted an oil project, a deal to buy fuel stations, and investment in solar power. It looks like the end of an era.Which also means “past profitability is no longer a guide to the future,” says Martijn Rats, who covers the energy industry at Morgan Stanley. The writedowns and diminished dividends demonstrate “that the oil majors have entered a new phase.”Many are skeptical of the green drive in this new phase. BP promised to move “Beyond Petroleum” in the ’90s, only to return to business as usual once prices rocketed above $100 a barrel in 2008. If crude and natural gas prices rise again, these skeptics say, Big Oil will go back to basics—perhaps even under pressure from shareholders.The difference this time around is that most top oil executives are adamant there’s no going back. “Our transformation is irreversible,” says Claudio Descalzi, CEO of Eni, the sort of comment that’s widely echoed by his peers. Most senior executives simply don’t believe hydrocarbon prices will ever come back to the above-$100-a-barrel days for any sustained period. And the social, and investor, pressure to tackle climate change is unlikely to abate.And then there’s oil consumption. In BP’s long-term energy outlook, released on Sept. 14, the company acknowledged that the appetite for refined petroleum has all but peaked. “Demand for oil falls over the next 30 years,” BP wrote in its report. “The scale and pace of this decline is driven by the increasing efficiency and electrification of road transportation.”That’s why most of the industry—even Chevron—is spending billions of dollars on renewable electricity generation, particularly investments in solar and wind power. BP has pledged to generate 50 gigawatts of renewable electricity by 2030, up from 2.5GW now. Reaching that goal would mark a tremendous shift; it’s more than the renewable output of some large utilities today. But it’s still a drop in BP’s hydrocarbon bucket, even as that bucket shrinks. In 2019, BP’s oil-and-gas production was the equivalent of 2.6 million barrels per day. By 2030, the company has told investors, daily oil and gas output will drop to 1.5 million barrels. Renewables won’t fill the hole left by the missing million barrels.The question is whether Big Oil can deliver on any of its pledges and make money doing so.Paul Sankey, a veteran oil analyst, has doubts about the supermajors’ ability to rebuild outside their traditional business. “If they can’t make returns in their core competency, what chance do they stand in a new competition?” he says. The new areas that are supposed to become the heart of Big Oil’s future are, at least today, less profitable than the fossil fuels business. Renewable energy usually delivers a return on capital, a typical measure of profitability, of about 8% to 10%. A conventional oil project yields a return of around 15%. One way to generate higher returns is by taking on more debt, something the companies appear to be open to. The supermajors also face strong competition from incumbents that have already mastered the renewables business, including the likes of Italian utility Enel SpA or its Spanish rival Iberdrola SA.The strategy shift poses a question to investors: Why pour money into legacy players trying to prove a new concept rather than back a utility that’s already making money in the sector? Take an example: Enel today pays a 4.6% dividend yield—virtually the same as Shell’s 4.3%.The supermajors have some advantages as they move into greener sources. One is the size of their balance sheet, which allows them to invest more and faster than many of the renewables players. Another is they can learn from the mistakes that others made before them. In theory, the oil giants are also well suited to manage big projects.And green projects can help legacy giants because renewables are, surprisingly, the steadier sector. “Volatility is lower compared to the oil-and-gas sector, and thus more stable,” says Atul Arya, a consultant who used to work at BP in business strategy.In the end, that less-profitable stability from solar and wind resources will matter. Because even the oil giants most committed to turning green won’t complete their long goodbye to oil and gas anytime soon. The supermajors will depend on fossil fuels for the next 10 to 20 years, at the very least, to generate enough cash to keep shareholders happy and have some money left to invest in clean-energy projects. And perhaps, as Looney of BP says, in more coffee, too. For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Brake failure, ‘egregious disregard for safety’ caused NY limo crash that killed 20 people, NTSB says
ALBANY, N.Y. – A disastrous stretch limousine crash that killed 20 people was likely caused by an owner who showed an “egregious disregard for safety” by putting the vehicle on the road despite failing a state inspection that cited issues with the brake system, according to the National Transportation Safety Board.
The federal board met virtually Tuesday to finalize its report on the probable cause of the fatal Oct. 6, 2018 crash in Schoharie, New York, which killed the driver, all 17 passengers and two bystanders when the 2001 Ford Excursion limousine blew through a stop sign and struck a parked SUV in the Apple Barrel Country Store’s parking lot.
The limousine, which was owned by Prestige Limousine of Saratoga County, appeared to suffer brake failure and reached speeds of 100 mph as it descended a steep hill toward the “T” intersection of Routes 30 and 30A where the crash occurred, the NTSB found.
NTSB members and investigators were highly critical of Prestige, noting the vehicle was ordered out of service by the New York Department of Transportation prior to the crash because of issues with the brake system.
Oct. 2019: NTSB issues new safety recommendations for limo seating, seat belts
Drone video: Deadly limo crash site in upstate New York
But the NTSB saved criticism for a pair of inspection shops — a Mavis Discount Tire outpost and Wilton Tire Center — that previously inspected the stretch limousine without proper authority to do so, as well as the state of New York for failing to seize the vehicle’s license plates prior to the crash.
The board also expressed anger with Schoharie County District Attorney Susan Mallery and the New York State Police, accusing them of impeding federal investigators’ access to the limousine and other evidence in the months following the crash.
“Prestige Limousine, Mavis Discount Tire and the state of New York failed to adequately protect 20 innocent lives,” NTSB member Michael Graham said during the meeting.
The board voted to approve the final report around 2 p.m. Tuesday. It is expected to be released publicly later in the day.
Crash killed family, friends celebrating birthday
The fatal crash happened the afternoon of Oct. 6, 2018, after a group of friends and family members — including four sisters and three of their husbands — secured the stretch limo from Prestige the morning of the crash after a reservation with a different company fell through.
The group boarded the limousine in the city of Amsterdam, about 35 miles west of Albany, and headed toward Brewery Ommegang in Cooperstown to celebrate the 30th birthday of Amy Steenburg, one of the sisters.
Prestige’s operator, Nauman Hussain, 30, is facing 20 counts of criminally negligent homicide and second-degree manslaughter, though his attorneys have engaged in plea-bargain negotiations with the Schoharie County district attorney.
The NTSB’s report found the probable cause of the crash was the failure of the brake system, caused by Prestige’s neglect of the vehicle and failure to keep it off the road despite being ordered out of service by the state.
The report found the state DOT’s “ineffective oversight” of the limousine industry and failure to adequately track vehicle repairs also contributed to the disaster.
It also cited the state Department of Motor Vehicles’ inability to properly oversee the state inspection system, which allowed the limousine to be inspected less frequently and less rigorously for a period of time because it was improperly registered.
NTSB’s report made 22 findings, including:
The limo had a brake system that was corroded and inadequately maintained. It had never been upgraded when the vehicle was altered, or “stretched,” from a basic SUV to a limousine.
The limo would have been able to safely stop prior to reaching the intersection where the crash occurred if the brakes had been functioning properly.
The limo driver, Scott Lisinicchia, failed to disclose medical ailments and prescriptions while undergoing a medical exam for a commercial driver’s license. He also failed to disclose his “habitual” marijuana use, which would have prevented him from getting the license.
NTSB directs ire toward Prestige, state
The federal investigators accused Prestige of showing a blatant disregard for the safety of its passengers.
Prosecutors have accused Hussain of knowingly putting the limo back on the road after the DOT placed an out-of-service sticker on the vehicle earlier in 2018 that was meant to keep it off the road, in part because the brake system was not up to par.
Prestige also did not obtain a state operating authority certificate prior to putting the limo on the road as required.
Following the crash, the state DOT suggested it did not have authority under state law to seize the limo’s license plates despite knowing it didn’t have operating authority and failed the inspection.
At the meeting Tuesday, NTSB investigators said they disagreed. In their opinion, the DOT did have that authority, even before lawmakers clarified the law in 2019.
The DMV, meanwhile, did not immediately catch that Prestige had failed to properly register the limousine as a bus, which would have triggered the more-frequent, more-expansive inspection process by the DOT sooner.
Instead, Prestige had been able for a period of time to get the limo inspected at Mavis Discount Tire and Wilton Tire Center, neither of which have authority to inspect stretch limos.
“They (the state agencies) were supposed to be enforcing this and instead they sat on bureaucratic red tape,” NTSB Vice Chairman Bruce Landsberg said.
NTSB Chairman Robert Sumwalt pointed out the DOT had raised issues with Prestige more than a dozen times over the years and placed it out of service.
If the DOT didn’t believe it had authority to revoke the limo’s plates, Sumwalt said he had a hard time blaming the agency.
“I think we’re taking an unfair swipe at the New York DOT,” he said before ultimately agreeing to the findings.
DMV spokeswoman Lisa Koumjian and DOT spokesman Joe Morrissey issued a joint statement Tuesday saying the agencies did as much as they could given the law. After the crash, the law was expanded to more clearly give DOT authority to revoke plates.
“We exercised the full authority granted to us under the law and ordered that vehicle off the road multiple times, but as NTSB’s own reports on this crash reaffirm, Prestige repeatedly violated New York State law and was never authorized at any time to operate for-hire commercial passenger vehicle service in the State,” according to the joint statement.
Criminal investigation delayed NTSB
The NTSB is a federal board tasked with investigating major traffic and transportation incidents that result in significant fatalities. The board has congressional authority to investigate crashes and recommend legal changes that could help prevent future disasters.
The board repeatedly clashed with the Schoharie district attorney and New York State Police, who did not immediately provide access to the limousine in the months following the crash as they continued with their criminal investigation of Hussain.
Sumwalt opened the virtual meeting Tuesday with a lengthy criticism of the prosecutor and State Police, suggesting the access clash helped delay the federal report for about a year.
The delay had a significant effect on the NTSB investigation: In part because it didn’t have full access to the limo’s brake system, the NTSB couldn’t say exactly why the brake system appeared to have failed.
“Unfortunately, the parallel criminal investigation conducted by the Schoharie County District Attorney’s Office and the NYSP significantly impeded and curtailed our typical investigatory efforts,” Sumwalt said.
Mallery, the Schoharie County district attorney, said she could not respond to the NTSB’s criticism until Hussain’s criminal case concludes but noted district attorneys and the federal board “have different obligations and responsibilities which we both must adhere to.”
Beau Duffy, a spokesman for State Police, noted the NTSB was allowed to view State Police’s inspections of the limo prior to gaining access for their own investigation.
“Since the day of the crash, the NTSB has been fully aware that the criminal case is the priority, and the vehicle had to be fully processed by the State Police and the defense before they could conduct a hands-on examination,” Duffy said in a statement.
Victims’ families pushed for change
The NTSB’s findings regarding the limousine’s brakes are in line with a state-hired expert, who found the vehicle suffered “catastrophic brake failure” as it traveled down the steep hill.
The board also took issue with Lisinicchia, the driver, who did not disclose his medical conditions that required prescriptions when he applied from a commercial driver’s license. He also checked a box denying he uses illicit drugs, though a toxicology report found marijuana in his system at the time of his death.
Since the crash, the victims’ families have joined together to push for reforms to he limousine industry and New York traffic law.
After lawmakers did little to enact reform in 2019, the families broke through in 2020, convincing the state Legislature to enact a series of new measures, including a law requiring all limousines to have a seatbelt for each rear passenger.
New limos will be required to meet the seatbelt requirement on or after Jan. 1, 2021, while existing limos will have to be retrofitted by 2023, according to the new law.
The families of the victims have filed various civil lawsuits against Hussain; his father, Shahed, who owns the company; the Mavis Discount Tire shop that inspected the limousine and performed brake work; and the state of New York.
Follow Jon Campbell on Twitter: @JonCampbellGAN.
This article originally appeared on New York State Team: NTSB: Brake failure, ‘egregious disregard’ caused deadly NY limo crash
Barry Jenkins will direct ‘The Lion King’ sequel for Walt Disney
As the second-highest grossing movie of 2019, it was only a matter of time until The Lion King roared again. And now, Walt Disney has announced that a new Hollywood king will be continuing the story started by Jon Favreau in the photorealistic remake of the 1994 cartoon favorite. Moonlight auteur, Barry Jenkins, is set to direct the second installment, and the director confirmed his involvement on Twitter.
Of course, the original cartoon Lion King also had its various sequels and spinoffs — including the direct-to-video continuation, The Lion King II: Simba’s Pride and an animated series based around Simba’s pals, Timon and Pumbaa. But Deadline is reporting that Jenkins’s film will be a wholly original story, unlike the Favreau feature, which hewed closely (perhaps too closely) to its predecessor. The website suggests that Jenkins is planning a follow-up that’s closer in spirit to The Godfather Part II, incorporating flashback material that illustrates how Simba’s beloved father, Mufasa, came to power. “The story will further explore the mythology of the characters, including Mufasa’s origin story,” Deadline states.
Jenkins didn’t tease any additional plot details on Twitter, but the congratulations quickly came rolling in, even as some wondered whether he should have been aiming higher.
Holy cow, man. I’m excited for my kids to fall in love with this. Congratulations!
— tom_quinn (@tom_quinn) September 29, 2020
Congratulations! This is incredibly well deserved, and I’m so excited to see what you make!
— Josiahx (@Josiahx) September 29, 2020
Barry Jenkins directing Lion King 2 is much more disheartening and even more embarrassing than Ben Wheatley directing Tomb Raider 2. “But wait – maybe he’ll make a great Lion King 2!” No he won’t.
— Will Sloan (@WillSloanEsq) September 29, 2020
no disrespect to selling out, but i simply cannot fathom choosing a *CGI lion king sequel* as your money project. barry jenkins could do anything! anything!
— Gavia Baker-Whitelaw (@Hello_Tailor) September 29, 2020
To that last point, those concerned about a Lion King sequel eating up all of Jenkins’s creative time should maybe adopt Timon and Pumbaa’s problem-free philosophy. The Oscar-nominated director still has a little bit of anything and everything on his plate, starting with a planned biopic of celebrated Black choreographer Alvin Ailey for Searchlight, which is owned by Disney. He also recently completed production on an Amazon series based on the Pulitzer-prize winning history The Underground Railroad by Colson Whitehead, and Steven Soderbergh recently announced that Jenkins will be overseeing a revival of The Knick, re-teaming him with his Moonlight collaborator André Holland. With all those projects in the works, you might say he’s no passing craze.
The Lion King is currently streaming on Disney+.
Read more from Yahoo Entertainment:
Fire in California Wine Country Forces Evacuation of Entire Town
(Bloomberg) — A wildfire that jumped across California’s famed Napa Valley forced the evacuation of an entire wine country resort town and threatened thousands of homes in a region devastated by blazes just three years ago.
The Glass Fire north of San Francisco reached more than 42,500 acres as of Tuesday morning, nearly quadrupling in size over 24 hours, and is 0% contained, according to the California Department of Forestry and Fire Protection, or Cal Fire. A second fire that erupted in Shasta County has killed at least three people.
The blazes broke out after a weekend of hot weather with dry winds in Northern California, which has already been buffeted by a record wildfire season. The gusts have now faded in that region but are gaining strength in the southern part of the state. Officials on Monday and Tuesday began deploying firefighters and equipment to Southern California in hopes of quickly stopping any new fires there.
Utility giant PG&E Corp., which cut service to about 195,000 people in an attempt to keep its equipment from sparking blazes, said late Monday that it has largely restored power to those customers. But about 37,000 households and businesses are now without electricity because of the latest round of fires.
In Napa wine country, the entire town of Calistoga was told to leave late Monday night, with more evacuation orders Tuesday in the area of Angwin. At least 68,000 people are under evacuation orders in Sonoma County, according to the sheriff’s office. Governor Gavin Newsom urged people to listen to warnings and leave immediately when asked.
“So many of the people that have lost their lives were just cautious in terms of taking seriously those orders,” Newsom said in a media briefing Monday. “We really, really cannot say it enough. Please heed local law enforcement. Please listen to them when they raise that alarm bell.”
California has been battered for weeks by rounds of extreme weather that state officials say have been fueled by climate change. Last month, a record-breaking heat wave triggered the state’s first rotating power outages since the 2001 energy crisis — and was followed just three weeks later by another one. More than 8,000 wildfires have burned a record 3.7 million acres this year, choking cities with smoke, killing at least 29 people and destroying more than 7,000 structures.
On Tuesday, more than 18,700 firefighters were battling 27 major blazes across the state. The 25 counties that have suffered fires this year account for nearly three-quarters of California’s population and over two-thirds of state employment, according to the Governor’s Office of Business and Economic Development.
Shares of PG&E — which went bankrupt last year after its equipment ignited catastrophic fires — were little changed Tuesday after tumbling the most in three months on Monday. The company said in a statement that it has no information indicating that its equipment was involved in the start of either the Glass Fire or the Zogg Fire in Shasta County.
The causes of the blazes remain under investigation.
The Glass Fire broke out early Sunday in the hills east of Napa Valley, and embers flew across the valley floor, carrying the fire to the hills on the western side. The fire is now raging northeast of Santa Rosa, the area devastated by the 2017 Tubbs Fire, among the most destructive in California history. Properties damaged in the famed vineyard region included the Chateau Boswell estate, the Meadowood resort and the Castello di Amorosa winery.
At least 80 residences were destroyed in Napa and Sonoma counties, while more than 10,700 structures are under threat, according to Cal Fire.
About 180 miles north, the Zogg Fire burned at least 40,300 acres, prompting more evacuations.
California’s peak wildfire season traditionally runs from September through November. It has grown longer and less predictable in recent years, with blazes coming as late as December.
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