Big Oil ‘risks being seen as the new tobacco’

1. BP/Shell: Cop outs?

The middle of the Cop26 climate conference was not an ideal moment to boast that the oil business can be “spectacularly lucrative”, said Nils Pratley in The Guardian. Delivering the oil major’s quarterly results following the recent global surge in power prices, BP’s Irish boss Bernard Looney cheerfully described it as “a cash machine”. “

The oil majors risk being seen as the new tobacco,” said Alex Brummer in the Daily Mail. Still, BP is in a better place than its Anglo-Dutch rival Shell, which is “under fire” – both legally and financially. Last week, the giant Dutch pension fund ABP dumped billions of euros in shares as it divested itself of fossil fuel holdings.

Now a US activist hedge fund, Daniel Loeb’s Third Point, is gunning for break-up. Loeb wants to divide Shell into a legacy oil, refining and chemicals company; and a separate gas and renewables business – surely an exercise in “using climate change as an excuse to try and extort short-term value”. The crucial difference between oil and tobacco producers is that, without oil, the world economy “would come to a shuddering halt”, endangering billions of people. But there’s a moral imperative for Big Oil to use its big coffers “to speed up the path to net zero”. If Shell continues foot-dragging, it risks becoming a “pariah” stock.

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Explained: the ‘net zero-aligned financial centre’

2. EY: nice work...

We live in uncertain times. Fantastic news if you’re a Big Four accountant, said Farah Ghouri on City AM. Partners at EY (formerly Ernst & Young) have pocketed record sums this year – taking nearly £750,000 in profits each, following a big revenue jump. Chair Hywel Ball attributed the jump to “high levels of demand... as companies adapted to the realities of Covid”, prompting a flurry of M&A activity. Looking ahead, he thinks there’s further hay to be made from “ESG reporting” and “strategy and technology consulting”.

Compared with some of its peers, EY’s payday is modest, said Michael O’Dwyer in the FT. Deloitte has handed partners more than £1m on average; partners at PwC got £868,000. Still, it makes a change from all the bad headlines. EY’s international reputation was “tarnished” by the implosion of its German client, Wirecard, and it is under investigation by the UK regulator over its audits of three collapsed companies: NMC Health, Thomas Cook and London Capital & Finance. The company has pledged to invest about $2bn globally to improve the quality of its audits.

3. Microsoft: king of the world

Bill Gates’ baby “didn’t get a look-in” when Facebook, Apple, Amazon, Netflix and Google “were lumped together in an acronym to describe the highest-flying tech firms”, said Jennifer Saba on Reuters Breakingviews. Who’s laughing now? The software giant, now run by Satya Nadella, has trounced the “Faangs” to become the world’s most valuable company – toppling Apple. The latter has been dogged by supply chain issues affecting sales of iPhones. By contrast, Microsoft has been “firing on all cylinders”.

“Shortages are everywhere. But luckily for Microsoft, not in the internet cloud,” said Alistair Osborne in The Times. There’s not much in it: Microsoft’s giant $2.459trn value is just a nudge ahead of Apple’s $2.456trn, but both are comfortably ahead of the “sub two trillion” third and fourth rankers, Alphabet and Amazon. Having just broken the $1trn barrier, Tesla’s restless boss, Elon Musk, now has something new “to shoot for”.

Tesla joins the $1trn club