Before the coronavirus, the American oil and gas industry was struggling to keep its profits up. The pandemic exacerbated that, and now it’s doing way, way worse. Companies heavily dependent on fracking in Texas and Wyoming could go belly up.
According to Reuters, to avoid losses on the loans they made to fossil fuel companies that may go bankrupt, a group of large banks are preparing to take over the companies themselves. The banks include JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup.
But wait! Aren’t these companies supposed to be climate leaders, now? In February, JP Morgan Chase made a bunch of splashy climate commitments, including a promise to no longer fund drilling in the Arctic. Wells Fargo, Bank of America, and Citigroup have all made noise about their sustainability pledges, too, saying they’ll invest in renewable energy and be more choosy about the energy projects they back.
If these financial institutions care so much about sustainability, they must understand that oil and gas have got to go, right? In theory, the banks could take over these companies and wind them down. But Reuters reports the banks are looking to put private equity companies like the Houston-based firm EnerVest at the helm of managing these companies and continuing to frack and extract oil and gas.
The plan neatly illustrates why, despite some pledges to not ruin the climate, we can’t trust banks to do good on their own. The problem is, the goal of private banks isn’t to take care of people and the planet (although in the long run, that’s a pretty good financial strategy). It’s to protect their investments. And their investments in the oil and gas industry have been considerable. According to Reuters, banks have kicked the American oil and gas industry $US200 ($315) billion in loans leveraged against oil and gas reserves.
As a recent report shows, the four banks that are looking to take over energy companies, JPMorgan Chase, Wells Fargo, Citi, and Bank of America, are the four largest global backers of fossil fuels. To not lose money on those loans, banks will look to make those companies profitable”and unless officials stop them, they’ll probably take advantage of funds in the federal covid-19 stimulus package to do so.
In recent months, climate, environmental, and indigenous organisations with the Stop the Money Pipeline have been pushing banks and other Wall Street institutions to staunch the flow of money to fossil fuel companies. Now, with a bank takeover on the horizon, they’re pressuring federal lawmakers to prevent stimulus bill funding from being used to bail out fossil fuel producers.
The planned takeover couldn’t come at a more absurd time. We need to wean ourselves off fossil fuels as soon as possible, and now is the perfect time to do so. And given the obvious trouble oil and gas companies are in and how cheap it it is to borrow money, there’s never been a better time to wind down production and retire all their assets.