Why Shell Loves Peak Oil

Plus: Google’s Europe problem isn’t going away ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 15, 2023

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Good morning.

Aliens. Told you so. NASA announced Wednesday that data from a recent mission revealed the presence of phosphorus in the oceans under the icy surface of one of Saturn’s tiny moons. It’s the final piece of the chemical element puzzle required for life to form, scientists say, after NASA previously identified the other five essential elements — oxygen, sulfur, carbon, hydrogen, and nitrogen — on the moon.

Hey, maybe that explains the origin of all those recently NASA-confirmed UFO’s, errr, sorry UAP’s (that’s: Unidentified Aerial Phenomenon).

Morning Brief

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Shell makes oil while the sun shines.

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The EU sharpens its Google-shears.

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Sweden targets the BeyHive in the inflation blame game.

Energy

Shell Changes Course on Oil Production Cut Promises

(Photo Credit: Marc Rentschler/Unsplash)

Peak Oil will be very kind to Shell.

The British oil and gas giant announced on Wednesday that it’s going to keep oil production steady this decade after all. That marks a gear-change from two years ago, when the company said it would cut oil production by 1-2% every year until 2030 — although Shell did some incredible logical acrobatics to argue otherwise. This comes just as the International Energy Agency announced a prediction that peak oil demand is now in sight.

Get It While It’s Hot

Shell’s 2021 promise to reduce oil production was made by former CEO Ben van Beurden, who also promised to get Shell to net zero by 2050. Van Beurden was replaced in January by Wael Sawan, who placed investor rewards front and foremost on Wednesday. Sawan promised to cut back on spending, boost the company’s dividend, and launch share buybacks later this year, saying: “We will invest in the models that work—those with the highest returns that play to our strengths.”

There may be a little bit of time pressure playing into Sawan’s decision as well. In a report published on Wednesday, the IEA said it expects global oil demand to peak in 2028:

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The IEA expects demand for oil as a transport fuel to peak even earlier, in 2026. “The shift to a clean energy economy is picking up pace, with a peak in global oil demand in sight before the end of this decade as electric vehicles, energy efficiency and other technologies advance,” IEA Executive Director Fatih Birol said in a statement.

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Right now, however, companies are all in on gas and oil according to the IEA, with global investment into exploration, extraction, and production on track to hit its highest level since 2015.

“Oil producers need to pay careful attention to the gathering pace of change and calibrate their investment decisions to ensure an orderly transition,” Birol said. In other words, that peak has a sharp ledge.

Drilling Your Cake and Eating It: While Sawan aggressively courts Wall Street, Shell maintains it’s staying true to its climate pledges. Shell claimed that it has in fact already fulfilled its 2021 oil production reduction promise, because seven months after making that promise it sold off a $9.5 billion stake in a Texas oil project. “Our target of a reduction in oil production by 2030 has not changed. We’ve just met it eight years early,” a spokesperson said. If they sell the whole company, does that count as achieving net zero?

– Isobel Asher Hamilton

Tech

EU Moves To Break Up Google’s Ad Tech Business

If there’s one thing that gets under Google’s skin more than ChatGPT, it’s… well nothing does, really. But EU antitrust hawk Margrethe Vestager would probably be a close second.

On Wednesday, the European Commission said it has “concerns” that Google has abused its market dominance in the ad tech industry — echoing an accusation leveled against the tech giant by the US DOJ in January. In the past, EU concerns about Google’s dominion in various sectors have translated to multi-billion dollar fines. This time around, if Google’s conduct is found to be illegal the EU is making noises about forcing the Silicon Valley giant to spin off part of its business.

Here We Go Again

In 2017, Commissioner Vestager fined Google €2.4 billion for giving its shopping service a leg-up over rivals. Google appealed the decision but ultimately lost in 2021. Then, in 2018, Vestager slapped Google with a €4.3 billion fine for antitrust abuses related to its Android operating system. Again, Google tried to appeal but without success.

Google’s ads business, which generated $69.7 billion in revenue in Q2, is her biggest target yet. In a statement released on Wednesday, Vestager said that essentially Google controls too many links in the digital ad supply chain:

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At the beginning of the chain, you have Google’s services for advertisers (called Google Ads and DV 360) which help advertisers get ad placement. At the end of the chain is Google’s service for publishers (called DFP), which helps publishers fill up their sidebars with ads for that vacuum cleaner you already bought two weeks ago.

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Then in the middle of the chain is Google’s ad exchange, AdX. Ad exchanges are where algorithmically-powered auctions for digital ad space are held.

Vestager believes Google has run afoul of EU laws by using its market position on the buying and selling ends of the chain to give AdX a boost over rival ad exchanges, something which Vestager says has allowed AdX to keep its exchange fees relatively high.

Bardcore Legislation: Google may also have to keep a close eye on European courts over the next few months, as the EU voted in favor of a new AI Act on Wednesday. The act introduces some rules around generative AI, the buzzy tech that companies including Google are pushing forward as fast as they can, but it also regulates forms of AI which are less prominent in the current hype-cycle — including a ban on police using live facial recognition.

– Isobel Asher Hamilton

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Macroeconomics

Is Beyoncé Responsible for Sweden’s Surprisingly High Inflation?

Who run the world? Everyone knows it’s Beyoncé, but now a handful of Nordic economists have confirmed it.

Sweden’s inflation rate exceeded expectations in May, according to data revealed by its government on Wednesday. And now economists at Danske Bank are pointing fingers at Queen Bey. Seriously.

Crazy in Love

Normally, local economies would welcome the arrival of touring pop superstars. Taylor Swift’s current Eras Tour, for example, is expected to pump roughly $4.6 billion into local US economies, according to a recent Fortune report. But the BeyHive — a.k.a. Beyoncé’s biggest fans — are notoriously devoted to the former member of Destiny’s Child. So much so that they’re willing to travel the world over to witness live renditions of their favorite radio hits, paying exorbitant prices on not just stadium tickets, but airfare and hotel rooms in the process. And therein lies the problem, Danske Bank economists said Wednesday.

See, Beyoncé kicked off her worldwide Renaissance tour with two sold-out performances in Stockholm last month. And, well, BeyHive adherents have something of Stockholm Syndrome when it comes to following Queen Bey’s every move:

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Some 46,000 fans attended each night of Beyoncé’s Stockholm stint, spurring a hotel price surge that rippled beyond city limits and swarming local restaurants — thanks especially to US fans seizing the opportunity to gorge on a friendly US Dollar-Swedish Krona exchange rate.

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The country’s core inflation measure hit 8.2% in May, according to Sweden Statistics, just 0.2% lower than April’s rates and missing the 7.8% mark that many had expected. Restaurants and hotels contributed 0.3% and recreation and culture added another 0.2% to the inflation figure, the agency said.

Sweden has a Problem: “Beyoncé is responsible for the extra upside surprise this month,” Danske’s chief economist in Sweden Michael Grahn said. “It’s quite astonishing for a single event. We haven’t seen this before.” Grahn also estimates the Beyoncé tour accounted for 0.2% of the increase. Unfortunately for Sweden, Bruce Springsteen is slated to play three nights in Gothenburg at the end of the month. The Nordic nation may have to issue a strong message to touring pop stars: You may break our economy, but you won’t break our soul.

– Brian Boyle

Extra Upside

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Hold my beer: Modelo ends Bud Light’s decades-long run as America’s most sold beer.

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Blocked and reported: A Boulder, Colorado office landlord evicts Twitter after three months of missing rent.

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