Biden Administration Grants $1.2 Billion For Big Oil To Controversially Extract CO2 From The Air To Produce More Oil

Oil companies face a potentially existential crisis. The world wants to move away from oil and other emission-producing energy sources. The Intergovernmental Panel on Climate Change, which falls under the United Nations, has set an aggressive "net zero" target for carbon emissions by the year 2050. 

Net zero refers to a situation where the amount of greenhouse gasses entering the atmosphere matches the amount of greenhouse gasses being removed.

This target is deemed necessary for the global temperature increase to be limited to just 1.5 degrees Celsius compared to preindustrial levels.

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While oil companies traditionally are massive pollutants of greenhouse gasses, increased innovations in the space have positioned them to also potentially be a part of the solution. 

To get closer to the reality of net zero, the Biden administration is granting up to $1.2 billion to advance one of the most promising, but also one of the most controversial, methods to tackle climate change: direct air capture.

Direct air capture is described as "essentially giant vacuums that can suck decades of old carbon pollution straight out of the sky," U.S. Secretary of Energy Jennifer Granholm told the Houston Chronicle.

Warren Buffet-backed Occidental Petroleum Corp. OXY is one of the two main recipients of the grant money with hopes to do just that.

Occidental CEO Vicki Hollub is optimistic about the technology. “If it’s produced in the way that I’m talking about, there’s no reason not to produce oil and gas forever," Hollub told NPR.

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That last part has climate change advocates on high alert. 

Jonathan Foley, executive director of Project Drawdown, a resource for climate solutions, seethes when discussing the grants given to big oil.

"Why are we subsidizing fossil fuel companies, which are the most profitable in history, to extend their lifespan by decades? We should be spending that money on real solutions: energy efficiency, renewables, retrofitting homes and fixing agriculture," Foley told Reuters.

The topic is controversial because the CO2 extracted from the air can also be used to pump even more oil. CO2 has been used by oil companies for decades to extract more oil out of aging, declining oil wells. 

This effectively means that big oil can not only make money from winning government grants or by charging businesses for the right to offset their carbon dioxide emissions but can also make money from taking the extracted CO2 to produce even more oil.

As much as the world is trying to move away from fossil fuels to renewable energy, the transition is not happening overnight. The price of oil has had a strong start to the year.

United States Oil ETF USO, which predominantly holds oil futures, has started the new year already up 9% partly because of rising geopolitical concerns in the Middle East.

Whether you like it or not, the world still needs oil, and direct air capture might be an effective tool to continue pumping the oil the economy still needs while constructively working toward a net zero future.

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