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Why Big Oil isn't slashing its ties to Republicans — yet

Some oil majors, such as ConocoPhillips and BP

Some oil majors, such as ConocoPhillips and BP Plc, have said they will suspend all contributions — to both parties — for several months after some Congressional Republicans voted to undo the presidential election last week. Credit: Bloomberg/Luke Sharrett

Big Oil faces that old political dilemma. You know the one. On the one hand, the industry's chosen party has its back on regulation and climate policy. On the other, the same party also tried to overturn the result of a democratic election in favor of a president who encouraged a mob to attack the Capitol, thereby endangering our whole way of life; which underpins, among many other things, the ability for any industry, oil included, to conduct business.

It's a head-scratcher, all right.

Let's just get out of the way up front that any of the 147 Congressional Republicans who voted to undo the presidential election result deserve to be defunded into political oblivion. But corporate donations aren't about doing the right thing. They're about doing the useful thing.

Hence, it isn't that surprising oil companies have been cautious in joining the growing crowd of companies announcing they will pull contributions to offending GOP House and Senate members or the party in general. Some oil majors, such as ConocoPhillips and BP Plc, have said they will suspend all contributions — to both parties — for several months, while ExxonMobil Corp. and Chevron Corp. will "review" their practices.

This is probably a simple cost-benefit judgment. First, no oil company will likely garner much PR benefit from moving quickly on this. Critics won't rethink their opinion of Big Oil — which is centered on the issue of climate change — because it leaped to democracy's defense.

Second, the downside is potentially big. The surprising Democratic victories in Georgia's runoffs, giving the party narrow control of the Senate, leave Big Oil with some delicate political math to ponder. Senate Republicans are a critical bulwark against the passage of sweeping climate legislation, especially with the legislative filibuster still intact. Red states account for the overwhelming majority of fossil-fuel production and processing in the U.S. And the decades-long transformation of energy and climate stances into tribal markers in America's culture wars binds Congressional Republicans to the industry in a way that transcends mere output. The industry's contributions to both parties haven't been even remotely close for years.

So a 50/50 Senate, in the context of an administration committed to decarbonizing the economy, doesn't leave Big Oil with much room for further Republican losses. Come 2022, 20 out of 34 Senate races will involve Republican incumbents defending their seats from Democratic candidates and, potentially, Trumpist primary challengers (with the latter's radicalism increasing the odds of a seat being lost if they become the candidate).

Of those 20, seven are in states with at least some oil and gas extraction, including five big ones: Alaska, Louisiana, North Dakota, Oklahoma and Pennsylvania. One of those, Sen. John Kennedy, R-La., features in the roster of eight senators who voted to overturn the election result — although his 21-point margin in a state that went for President Donald Trump by a similar margin likely insulates him from opprobrium. At the other end of the scale is Sen. Pat Toomey, R-Penn., who won by just 1.5 points in a swing state that went for President-elect Joe Biden, and has been forthright in calling for Trump to quit office.

There is also risk around a dozen Republican Senators defending seats in states with no appreciable oil and gas business, blunting the usual appeal to job preservation in campaigning against climate policy. Half of those are in states that don't have much coal mining either, a traditional ally in opposing climate measures. On this front, Big Oil may harbor concerns about the likes of Richard Burr in North Carolina, who won by single digits in a state that went only narrowly for Trump. Or Ron Johnson of Wisconsin, who, like Toomey, won a narrow victory in a state that went for Biden and has worked harder than many to sow doubt about the election result.

The risk of helping to unseat more Republicans by withholding cash, plus the prospect of few plaudits for doing so, dictates the logic of moving incrementally or on a both-sides basis. That isn't to say it's right or without risk. As I wrote here, the ideological pact between Big Oil and Republicans has been an effective shield for decades. But as climate has elbowed its way into the American consciousness and a swath of the GOP has embraced protectionism, populism and now electoral nihilism, the shield risks becoming an anchor.

One intriguing upshot of this is that more fossil-fuel money may flow toward Democrats, specifically those at the other end of the party's spectrum from Green New Dealers. When two Democrats won Georgia's senate races, Joe Manchin, D-W.Va., was the third winner, with leverage to largely dictate the scope and pace of climate policy. In a world where overt support for the Republican Party carries a stigma, Big Oil may regard Manchin as a more acceptable face for its defensive strategy.

Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.