“As soon as you stop attacking the oil and gas industry and as soon as you stop pushing a political agenda with our pension funds we are happy to do business with you.” Those are the words of Oklahoma Governor Kevin Stitt. Stitt signed into law a ban on the Sooner state contracting with banks seen as hostile to the oil & gas industry. What an odd stance for a Republican governor to take.
For one, imagine the reaction of Republicans if California Governor Gavin Newsom or New York Governor Kathy Hochul went into attack mode against financial institutions perceived as hostile to the financing of “green energy” activity. The Republican reaction would properly be disdainful simply because it’s long been accepted wisdom among Republicans that government shouldn’t dictate how businesses operate. Central planning is the path to economic stagnation.
Beyond the slow-growth effects of central planning, let’s not forget that a failure to finance certain economic activity, or to do business with certain sectors, is not on the face of it evidence of a “boycott,” or a political agenda. Italian restaurants don’t generally feature fried chicken on their menus, while Vegan restaurants almost certainly don’t feature meat dishes. Is this a “boycott” of fried chicken or red meat? Hopefully the question answers itself.
Instead, with restaurants along with businesses in all commercial sectors, there’s frequently an attempt to specialize in certain areas. Applied to the oil & gas industry, not every bank or financial institution is going to have the in-house expertise to meet the needs of those in energy. This isn’t a signal of discrimination or boycotting as much as the oil & gas industry is incredibly competitive, and by extension so is the financing of that industry. More than a few financial institutions and banks will pass on business in the sector not for ideological reasons as much as they lack the resources and local knowledge to be an effective player.
Does any of this harm the oil & gas industry? See above to see why not, but if there’s any uncertainty here, it’s worth saying again that there’s a great deal of competition among banks and financiers more broadly to match the leading lights of the energy industry with capital. Which means if one or several financial institutions pass on the financing of fossil fuel extraction whether because they lack the expertise or – yes – for ideological reasons, the industry itself is hardly harmed for some passing. Precisely because there’s so much money to be made in the energy sector (see the myriad Oklahoma-based billionaires who made their fortunes in oil & gas), neither Governor Stitt, nor state legislators, nor actual businesses in the space need ever worry about “discrimination” as the catalyst for insufficient energy capital.
Of course, that more than a few Oklahomans can claim billionaire status based on their brilliant work in energy is very telling about the nature of the business. Legendary oilmen like Harold Hamm and T. Boone Pickens didn’t achieve their immense fortunes easily, rather the massive net worth of Hamm and the late Pickens (if you seek evidence of Pickens’s wealth, just visit Stillwater!) is a sign that they took major risks to achieve what they did.
Please keep the above in mind with banks in particular. They’re not in the business of equity. They don’t own their loans as much as they own the income streams of their loans made with funds entrusted to them by their customers. Stop and think about this. And in thinking about it, don’t forget that banks can’t take major risks with the funds of their customers. It’s bad for their customers, and by extension it’s bad for them. Just one or two non-performing loans can erase the gains of a hundred good ones. Translated, oil & gas lending is not infrequently way too risky for banks, but also for all manner of financial institutions pursuing narrow forms of finance.
So while there are countless reasons that financial institutions of varying stripes can and should pass on oil & gas finance for reasons that have nothing to do with ideology, Republicans must not forget that they’re Republicans. Stated simply, Republicans are rightly in favor of businesses choosing whom they do business with free of government meddling. In which case it can be said with lament that in attacking financial institutions for not doing as he wishes, Governor Stitt is acting like a Democrat.
