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Comment by cinntaile | Hacker News Reader

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.

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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.

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.

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.

If there were a company that turned literal murder into stock prices people would invest in it.

There are hundreds of such companies, and some are quite hot. Your point?

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.

Raytheon? Lockheed Martin?

As a fellow investor, I started investing in RDS a couple years ago because I liked the opportunity for them using their oil war chest to springboard into renewables. Being an "energy company" rather than an "oil company". It's been doing pretty good, up 20%, but if they're just going to be another oil company, I'll probably put my money elsewhere.

Why not ask them for the war chest money, and decide on your renewables allocation yourself? This whole “we're green now” approach is a very transparent plan of the management to remain in control of the “war chest”.

Who is going to threaten them in the energy sector? Their main competitors are other fossil fuel giants with a similar strategy.

"Short-termism seems to be an unavoidable condition when markets demand higher efficiencies."

That's not a market failure, but poorly chosen bonus / reward structure (from society's point of view).

What if the bulk of CEO / board members' salaries & bonusses where structured as company share value, cashable no earlier than say, 20y from now? 'Pocket money' now for living expenses, a rich pension later if company does well long term.

That would surely change the incentives. As opposed to "add short-term share value, cash cheque, jump ship" as seems usual for CEOs these days.

Also it depends on whether Shell defines itself as oil company, or energy company. "Oil company"? Ok. No need to expect much from them concerning the energy transition. 1.5% of overall expenditure didn't match with "Shell continues its path as a leader in the energy transition" anyway.

Personally I think oil companies have a shrinking time window in which they'll continue to be profitable. After which market conditions & politics have changed, assets will be restructured, and (mostly small) shareholders + society at large will be left holding the bag. If you happen to be one of them: get out before the big boys do! Your funds are better used elsewhere.

> What if the bulk of CEO / board members' salaries & bonusses where structured as company share value, cashable no earlier than say, 20y from now? 'Pocket money' now for living expenses, a rich pension later if company does well long term.

Pretty interesting concept actually! Much like stock as a golden cage retainer for tech workers. Who would have to be lobbied for that to go ahead?

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.

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

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?

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.

> 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.

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.

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.

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.

>you're burning coal and natural gas in a plant"

Where do you live that you don't have access to nuclear, solar, and wind? It's been a couple years since solar started being cheaper to produce than coal.

I live in Texas where a majority of the fuel mix is fossil fuels (~40% natural gas and ~15% coal).

https://www.ercot.com/gridmktinfo/dashboards/fuelmix

That's a slim majority, making the statement about a car running on coal a half-truth, and increasingly incorrect.

Don't get me wrong, I think it's good to know where your power comes from, I just want to make don't dismiss the technology because of half-truths.

Screw every other implication, right? Shareholder value uber alles

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.

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.

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