Few companies have more reason to pay attention to climate change than those in the oil industry. No doubt, then, the giants of the business took notice when the EPA announced new regulations for carbon emissions from power plants recently.
The new statement surely also caught the attention two of the most famous political boosters on the scene right now – the brothers Charles D. Koch and David H. Koch. They've poured money into groups like Americans for Prosperity, which in turn have fought hard against groups that are advocating for environmentally friendly policies.
Common sense says that oil companies have good reasons to fight climate change legislation, which would tax or restrict their product. By that logic, it's no wonder that the Koch brothers are fighting so hard. Their company, Koch Industries, is a conglomerate built around their father's refinery company. Their fortune came from the oil industry, and now they are working to defend it. The industry itself, however, suddenly seems to be leaving them behind.
It's true that ExxonMobil Corporation (NYSE: XOM) and BP plc (NYSE: BP) were both once known for bankrolling research that disputed climate change. Their strategy at that point was an offensive against the science itself. Theoretically, they never needed to quit this strategy. If they were right, and climate change were not real, then they could just fight the political battle indefinitely until the science caught up and proved them correct.
They do not seem to think that they were right.
In fact, BP and ExxonMobil recently joined Royal Dutch Shell (LSE: RDSA) in offering suggestions to President Obama and expressing an eagerness to work on the issue with him.
It goes without saying that there's still very much to gain for the oil giants in the short term as the issue remains bogged down. Every day without a carbon tax is a day without an added expense for Shell, BP, and ExxonMobil, as well as their major competitors, Total S.A. (NYSE: TOT) and Chevron Corporation (NYSE: CVX). None of them, of course, favor phasing out oil entirely anytime soon. But it's becoming increasingly clear that the biggest companies are no longer interested purely in fighting the issue.
There's a sharp divergence between the Koch brothers' goals and those of their publicly traded competitors. Groups like Americans for Prosperity are still working with the old global warming playbook. They seek to undermine climate change research with dissenting views, often using what the opposing side views as bogus research. The five largest oil companies in the world, however, are adopting a new playbook entirely. Rather than fight the issue head on, they seem to be interested in controlling the reaction to it.
Seemingly resigned to the fact that the United States will eventually adopt one or the other, ExxonMobil has come out in favor of a carbon tax rather than a cap-and-trade scheme of the sort seen in parts of Europe. The company also purchased XTO Energy, an alternative energy company, though that move has not been a blockbuster so far.
Perhaps the best prepared for change among the companies is Royal Dutch Shell. Its CEO has publicly called for a carbon tax, but it's equally prepared for government inaction. The company has invested more in drilling in Arctic locations that were previously inaccessible, but have heated up thanks to climate change. By hedging its bets, Shell has put itself in a relatively secure position in a rapidly changing business.
It will take some time for the changing positions of the major oil companies to pay dividends here in the United States. President Obama has shown little willingness to push for climate change reform in a political climate dominated by the economy and debate over the president's signature bill, the Affordable Care Act. The upcoming midterm elections, which will feature voting demographics that lean older and more conservative, seem unlikely to change that. The new EPA regulation may be the first and last major climate change move of Obama's presidency.
That won't stop the oil companies from hedging their bets. The preparations being made by Shell, ExxonMobil, and others do little to dampen their current prospects – while doing much to secure their futures.
Stephen Lovely has no position in any stocks mentioned. The Motley Fool recommends Chevron and Total (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.