Oil Majors’ Retreat from Renewables: Prudent Policy or Commercial Miscalculation?

On February 24, British Petroleum (BP) announced that it was scrapping its 2030 target of 50 Gigawatts (GWs) of renewable generation capacity, instead emphasizing a renewed focus on fossil fuels. The news follows the firm’s elimination, in late 2024, of its plans to cut oil & gas production by the end of the decade—previously, the most ambitious commitments made by any large petrochemical producer.

The move is a reaction to investor pressure on BP, which has recently seen lower profits and share prices than competitors, and an attempt to capitalize on bullish market sentiments on hydrocarbons. BP plans to increase its oil & gas investments to US$10 billion a year—a 20% increase—while reducing yearly renewable financing by over US$5 billion. Rival producers, such as Shell and Equinor, have also scaled back green energy investments to accommodate greater fossil fuel spending.

By scaling back their commitments, BP, Shell, and Equinor have bet big on fossil fuels remaining the foundational energy inputs of the world economy. These moves have followed recent political and macroeconomic shifts, which have framed renewables as a temporary deviation from the norm. BP’s announcement best encapsulates this view; the major justified its pivot by claiming it had moved “too far, too fast” in transitioning, and claimed that its faith in green energy had been “misplaced.”

However, the core assumption underlying these strategic shifts—that renewable energy is an unprofitable, transient distraction—is incorrect. Data indicate that the energy ecosystems of nearly all Organisation for Economic Co-operation and Development (OECD) countries have crossed the point of departure from fossil fuel dominance in recent years. Globally, the renewable share of the energy mix is expected to reach 50% by 2030, up from approximately 30% today. Annual investment in electrification outstripped that allocated to hydrocarbons in 2024, with over a third of total US$3 trillion global investment in energy dedicated to renewable power, grids, and storage. The trend is expected to continue. Between 2024 and 2030, China and the European Union (EU) alone are forecast to install an additional 3,207 Gigawatts (GW) and 552 GW of renewables, respectively.

Pivotally, clean energy prices—previously a major barrier to demand—have fallen, with peak solar Photovoltaics (PV) and onshore wind generation already cheaper per Megawatt-Hour (mWh) than alternatives across several countries. Renewable technologies that were formerly dependent on subsidization and policy support now have established robust supply chains, strong demand, and the independent economic viability necessary for markets to favor their adoption over oil & gas alternatives. Perspectives have also changed: 2024 saw an increase in planned hydropower investment, and a hesitant, but global shift away from the post-Fukushima disillusionment with nuclear energy, including in Japan itself.

The transition toward renewable, smart energy sources has not slowed; it is rapidly accelerating. While green energy spending has become entrenched and institutionalized, and renewables inextricably embedded in all major economies, the case for increased hydrocarbon investment has grown tenuous. The foundations have already shifted.

Oil majors, under significant pressure from investors and buoyed by political enthusiasm for fossil fuels, are doubling down on conventional assets in the hopes of achieving greater revenue. For much of the 2010s, this strategic change could have been commercially viable, as renewable energy sources remained niche, required significant regulatory support, and were not produced at scale. Emphasizing hydrocarbons would have been politically unpopular, but large producers could rely on steady, unchanging demand from traditional, centralized grids and industrial consumers.

This is no longer the case. Coal, oil, and natural gas—until recently the mainstay of electricity grids—are now increasingly “legacy” assets, used to shore up renewables and provide stability. Grids themselves are fragmenting, shifting from outdated, centralized systems of distribution to decentralized networks of generation and storage owned by consumers, enterprises, and industries. Underlying these factors is that renewables have proliferated because they have steadily become cheap, independent, and abundantly available sources of clean energy. While short-term returns are feasible, sustained investment in hydrocarbons alone is no longer a feasible strategy for petrochemical producers.

Consequently, what was possibly good commercial practice in the 2010s is a potentially disastrous misstep for majors today. Participation in, and leadership of, the energy transition is not optional for oil & gas firms, as it arguably is for other market participants; it is a requirement for their continued relevance. As economic factors increase the returns on green energy investment, and firms and industries—under pressure from regulators and consumers—seek to decarbonize their operations, demand for clean electricity will continue to grow at pace. Moreover, with per MWh oil & gas prices persistently undercut by ever-cheaper solar and wind over the coming decades, the demand base for conventional fuels will be significantly reduced.

Dedicated investment in renewable energy is not simply good optics for those under pressure to decarbonize, but also a prerequisite of the new energy ecosystem. The calculus is no longer solely reputational, but commercial—seizing the opportunity to invest in green electricity and power-to-X fuels is now the path to significant, long-lasting windfalls, rather than a barrier to profitability.

The recommendation to all energy majors is simple: stay the course. While short-term profits could be propped up by boosting hydrocarbon production today, the economic fundamentals underpinning the global energy market have already shifted irrevocably toward clean technologies. Consistent, active investment in renewable assets will be essential to retaining a leading position in the emergent energy market—and for achieving sustainable, long-term commercial growth within it.