Banks to Fossil Fuels: Drop Dead
These days, a fossil fuel executive could be forgiven for feeling anxious.
Despite all their wildly successful efforts to shape U.S. energy policy to their favour, they face an increasingly unfriendly economy where market dynamics, not policy pronouncements, are beginning to write the final chapter of the fossil fuel era, writes Climate & Capital Media Founder and CEO Peter McKillop.
For all their influence and wealth, they may feel more like someone staring down the barrel of a mobster’s gun and hearing these last words: “Sorry. It’s just business.”
Show Me the Money
The numbers don’t lie. Data compiled by Bloomberg indicates that financing for oil, gas, and coal projects by Wall Street’s top six banks fell by 25% compared to the same period last year (although that loss didn’t offset a bigger increase from 2023 to 2024). Leading the retreat, Morgan Stanley reduced its fossil fuel financing by 54%. JPMorgan Chase, historically a major supporter of the oil and gas sector, trimmed its lending by approximately 7%.
Analysts are noting that the first decline in global upstream oil and gas development spending since 2020 coincides with this reduction in lending. As BloombergNEF analyst Miquel Kishimoto Guardiola puts it, “the composition of banks’ lending books is a better measure of whether they’re having a ‘meaningful energy transition impact’ than their public net-zero commitments.”
Booming Energy Demand
The irony is that demand for energy and power has never been stronger, supercharged by the growth of artificial intelligence and the growing economies of Asia and the Global South. All this is straining electricity systems and forcing a global rethink of financing energy markets—pushing money toward the future, and away from increasingly economically uncompetitive fossil fuel assets.
Here are a few facts the oil and gas industry would prefer you not know.
• Globally, four-fifths of new renewables installed in 2024 produced power at a lower cost than fossil fuels.
• Solar-powered electricity is currently 41% cheaper than fossil fuels, according to International Renewable Energy Agency (IRENA) data.
• The levelized cost of energy (LCOE) for utility-scale solar ranges from $25 to $35 per megawatt-hour, compared to $45 to $70 per MWh for natural gas and $70 to $120 per MWh for coal in 2025, making solar and wind the lowest-cost sources of new electricity in most regions.
In Europe, and even the US, new solar and wind projects are undercutting even the cheapest fossil fuel plants, and the cost gap continues to widen as fossil prices remain volatile. In contrast, the costs of solar and wind fall due to scale, efficiency, and innovation.
For oil executives, this horrifying new economic reality, not the pursuit of “energy security,” or saving whales and birds from wind turbines, is what is driving the Trump administration’s war on renewable energy. Their biggest nightmare is being realized: The renewable buildout is happening faster than even the optimists forecast.
The Whale Oil of the 21st Century
For fossil fuel companies, this new era is death by a thousand cuts. Every year of declining bank lending means less available capital for new projects and tighter margins on existing assets. Oil and gas bosses increasingly find themselves in the same position as the 19th-century Nantucket whaling captains—a dominant force, until suddenly they weren’t.
And the future is not pretty. At present, fossil fuels still generate about 83% of the world’s energy supply. But by the end of the century, it will account for less than 25%, if the execs are lucky. For the industry, it’s becoming a game of musical chairs. Every dollar invested in renewables is a dollar their industry will never see again, permanently shrinking the demand for oil, gas, and coal.
A few oilies are starting to get it. In the Middle East, petro-potentates who once scoffed at clean energy are now launching some of the world’s most ambitious renewable energy projects. You see, the oil industry understands it cannot possibly compete at scale with limitless, free solar energy. But please, don’t tell anybody.
They also know something that most people think is preposterous. We are entering an era where power, like data and communications, will be all but free. Crazy? History is full of technological surprises. Today, we make limitless free “long distance” calls and have unlimited “free data.” A hundred years ago, a similar call cost $500 for three minutes, and until relatively recently, every phone text cost 50 cents or more.
Pandora’s Box
Ironically, Wall Street is now the climate movement’s best hope for blunting the pace of rising carbon levels. Markets, unlike the environmental movement, have one huge advantage: they are amoral. But when the economics tip, the change is swift.
With the hope of limitless, cheap, and clean energy comes an unexpected new threat: the consequences of “too much” energy. Just as we solve the 20th century crisis of burning carbon, we will encounter a new 21st-century challenge: How do we harness boundless solar power—and keep our stewardship of the planet in view? Unlimited electric power without equally progressive advances in circular economies, regenerative agriculture, and managed oceans will only make the global environmental crisis worse. Let’s hope the market has an answer for this, as well.
Cover photo: Unsplash/Pixabay
