Yahoo Finance Shell (SHEL) Faces Dilemma Over Climate Change & Oil Demand
Shell plc SHEL, one of the world's largest oil and gas companies, recently appointed a new CEO, Wael Sawan, who faces a challenging task in balancing the increasing demand for fossil fuels against the pressing need to address climate risks. In the wake of rising global temperatures and increasing concerns about carbon emissions, Shell is under pressure to transition to a cleaner, more sustainable energy future.
In a recent interview with The Wall Street Journal, Sawan said that he is aware of the impending pressure from various stakeholders, regardless of what the company chooses. While expressing his commitment to reducing Shell's emissions and aiding in the development of clean energy sources, he also underpinned his belief in the continued demand for oil and gas in the future.
Importance of Balancing Shell Fossil Fuel Demand With Climate Risks
With the growing world population, the demand for energy is increasing at an unprecedented rate. While fossil fuels like oil and gas have been the primary sources of energy for decades, their use has also contributed significantly to climate change. Some of the most evident effects of climate change are rising sea levels, extreme weather conditions and more frequent natural disasters.
The company is aware of the importance of its transition to a more sustainable energy future. However, the challenge lies in finding the right balance between attaining clean energy transition and maintaining its traditional business of fossil fuels.
Shell's Transition to a Sustainable Energy Future
Shell has acknowledged the need to transition to a more sustainable energy future and has set targets to reduce its carbon emissions. The company has also set a target to reduce the carbon intensity of its products by 20% and 45% within 2030 and 2035, respectively. It has also committed to becoming a net-zero emissions company by 2050.
In order to achieve these targets, Shell is investing heavily in renewable energy sources like wind and solar power. It has set an investment target of $2-$3 billion per year in renewable energy and low-carbon technologies, such as hydrogen fuel cells, and carbon capture and storage technology. The company is also exploring new business models, such as electric vehicle charging and biofuels, to diversify its portfolio and stay ahead of the competition.
Challenges Faced by Shell's New CEO
Sawan faces several challenges in his quest to balance the increasing demand for fossil fuels against the pressing need to address climate change risks. One of the biggest challenges is the company's traditional business of producing and selling fossil fuels. Despite the increasing demand for renewable energy, oil and gas still account for the majority of Shell's revenues.
Another challenge faced by the new CEO is the public perception of the oil and gas industry. Environmental groups and activists have been putting pressure on Shell and other oil and gas companies to reduce their carbon emissions and transition to cleaner energy sources. Shell's reputation has taken a hit in recent years due to its involvement in the extraction of fossil fuels from the Arctic and its sponsorship of events such as the Paris Air Show.
In conclusion, Shell's new CEO faces a challenging task in balancing the increasing demand for fossil fuels against the pressing need to address climate change risks. The company has set ambitious targets to reduce its carbon emissions and is investing heavily in renewable energy sources to achieve these targets. However, the challenge lies in finding the right balance between investing in clean energy and maintaining its traditional business of producing and selling fossil fuels.
Shell, a multinational energy and petrochemical company, headquartered in London, engages in the exploration, extraction, marketing and transportation of crude oil, natural gas and natural gas liquids. It also produces gas-to-liquid fuels and other products.
Zacks Rank and Key Picks
Currently, Shell carries a Zacks Rank #3 (Hold). Investors interested in the energy sector might look at some better-ranked stocks like NGL Energy Partners NGL, sporting a Zacks Rank #1 (Strong Buy), and Energy Transfer ET and Helix Energy Solutions Group HLX, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NGL Energy Partners: The company is worth approximately $367.70 million. Its shares have increased 19.5% in the past year.
NGL is a limited partnership company that operates a vertically-integrated propane business with three segments — retail propane, wholesale supply and marketing, and midstream.
Energy Transfer LP: The company is valued at around $37.10 billion. It delivered an average earnings surprise of 11.43% for the last four quarters and its current dividend yield is 10.18%.
ET currently has a forward P/E ratio of 8.41. In comparison, its industry has an average forward P/E of 9.20, which means the company is trading at a discount to the group.
Helix Energy Solutions Group:The company is valued at around $1.10 billion. In the past year, its shares have increased 52.7%.
HLX currently has a forward P/E ratio of 11.01. In comparison, its industry has an average forward P/E of 11.20, which means the company is trading at a discount to the group.
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