Exxon gets booted from the Dow as extreme weather batters the energy industry
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This week was marked by a constellation of interconnected and familiar crises, from police brutality that spawned more violence to a hurricane, fueled by climate change, battering an epicenter of the oil industry.
Thankfully, this not-so-great summer is nearing its end. Fall might force us inside, but at least we'll have an abundance of squash, orangish leaves, and Zoom Halloween parties. What joy.
Let's get to it, lest I spiral.
Once the most valuable company in the world, Exxon gets ousted from a major stock index
Like an exclusive clique, the Dow Jones Industrial Average is a group from which you definitely do not want to be booted.
- A widely watched index, the Dow is the second-oldest US index and home to 30 publicly traded companies.
The news: On Monday, the Dow said it would oust Exxon, once the world's largest company, reports Markets Insider's Ben Winck.
- The index's oldest member, Exxon had been on the Dow for almost a century.
- The oil giant was one of three companies including Raytheon and Pfizer that got kicked off, as the index tilts further towards tech companies, Winck writes.
- Chevron remains the sole oil company on the Dow.
Why: The shakeup was prompted by Apple's upcoming stock split, which will shrink the tech company's price-per-share.
- "Since the Dow is price-weighted, the tech giant's split erases some of the index's tech leaning," Winck reports.
That's not all: Exxon's departure is also about troubles in the oil industry.
- The dramatic collapse in oil demand, coupled with a growing focus among investors on sustainability, has created a complete "cocktail of disincentives to own energy" stocks, Bank of America analysts said.
- The energy sector comprised about 16% of the S&P 500 in 2008, CNN reports. Today, the energy industry is the index's smallest sector, weighing about 2.3%.
But wait, there's more: It's been a bad few years for Exxon, even compared to other energy companies.
- As CNN reports, "a series of strategic decisions backfired badly, from betting on natural gas at the top of the market to being late to America's shale boom."
- The company, based in Irving, Texas, was worth more than $440 billion in 2014. Today its market cap is about $168 billion.
- As we reported, Exxon has deployed a number of cost-cutting measures, from cutting staff to paring back employee benefits.
- As Bloomberg reported earlier this week, Exxon, along with Chevron, was also dropped by a $91 billion asset manager, as part of the Norwegian manager's efforts to strengthen its climate policy.
Crisis after crisis: Extreme weather continues to rattle the energy industry
Last week, I wrote about wildfires and Hurricane Isaias. And this week? Wildfires and Hurricane Laura.
- Scientists say there's a lot more déjà vu in store. That's because these weather events are tied, in part, to an enduring problem: climate change.
Here's where things stand today.
Hurricane Laura: The storm rammed into Louisiana as a Category 4 hurricane Thursday, killing at least six people and threatening an epicenter of oil refining. It has since dissipated into a tropical depression.
- About half of all US oil refining and natural gas processing capacity is along the Gulf coast, according to the Energy Information Administration.
- In anticipation of the storm, oil producers evacuated more than 300 offshore facilities and shut more than 1.5 million barrels per day of crude output, Reuters reported.
- Hurricanes do weird things to markets: The price of oil reached a five-month high earlier this week in response to the shut-ins, only to fall again on Friday, once the damage to refineries proved limited.
- Companies like Chevron that operate facilities in the region are starting to restore production, Reuters reported.
California blackouts, wildfires: Earlier this month, a heatwave overloaded California's electric grid, forcing the state operator to cut power to tens of thousands of state residents. At the same time, hundreds of wildfires were burning across the state.
- The rolling blackouts — the first to hit the state in almost two decades — are over for now. Regulators are looking into why the state failed to meet power demand.
- Wildfires are still burning in California, though firefighters gained some ground Wednesday.
- Wildfires and blackouts highlight the operating risk for electric utilities, Fitch Ratings said Thursday.
- "A potential decline in ratepayers in those areas where residents and businesses choose not to rebuild, coupled with increased wildfire-related and green economy costs, could pressure utility cash flows in the longer term," the agency said.
Our best stories from the summer
To mark the end of August, we wanted to share some of our favorite energy stories from the summer.
- Top oil salaries revealed: How much giants like BP, Exxon, Chevron and Shell pay employees, from business analysts to petroleum engineers
- Meet the 21 rising stars who are transforming the future of clean energy and taking on a $16 trillion opportunity
- BP just shared a huge strategy update after posting a $17 billion loss. See the 6 key slides that map out the oil giant's future.
- The inside story of how a historic $3.2 billion deal between rival solar giants Sunrun and Vivint Solar came together — and why it could transform the future of power generation
- A decade ago, Big Oil bet on algae as the fuel of the future. Now Exxon is the only major firm still backing the biofuel, which several top algae scientists say is destined to flop.
Got a story idea or tip? Email me here or shoot me a text at 646-768-1657.
4 big stories we didn't cover this week
- Raise: SparkMeter, a startup that provides various grid services in emerging markets, raised $12 million from investors including Bill Gates' Breakthrough Energy Ventures.
- Layoffs: Parsley Energy and Pioneer Natural Resources are planning job cuts, Reuters reported.
- Study: Painting one blade on a wind turbine black can dramatically reduce bird fatalities, a new study shows.
- Transaction: Solar giant SunPower finalized its split from PV panel manufacturer Maxeon Solar Technologies on Thursday, Greentech Media reports.
That's it! Have a great weekend.
- Benji
Ps. Here's me, just now, preparing to move to Brooklyn. Wish me luck!
