| On Tuesday, Exxon Mobil Corp said that it would slash its capital expenditures by $10 billion, to about two-thirds of what of what it had planned just a month ago. It's the second-largest capex cut in the company's modern history, according to Bloomberg News' Joe Carroll and Kevin Crowley. Exxon is hardly alone among integrated oil majors—those businesses that extract, transport, refine, and market oil, natural gas, and other such products—in cutting its planned spending on big, fixed assets like land and infrastructure. The same goes for smaller companies, and that's just one sign of pain ahead. This spending collapse is within the oil sector and driven by oil prices, but it could also have implications for the energy transition. Here's the collapse in capital spending by oil and gas companies put in context: their corporate guidance suggests that the grand total for the year will come in at around $122 billion for integrated oil company capex this year, plus another $40 billion from smaller, independent exploration and production (E&P) firms in North America. That's the lowest since 2006. The Federal Reserve Bank of St. Louis surveyed many of those smaller companies in its district recently and found that 40% face insolvency with current prices. The midstream (pipelines) and downstream (refining and marketing of fuels) sectors aren't as capex-heavy, and their expenditure has been in a fairly tight range since 2014. It seems likely, however, that the profound dropoff in demand for road transport and aviation fuels will impact expenditures in these sectors, as well. This drop in spending will matter beyond just the supply of liquid and gas hydrocarbons. Oil majors BP Plc and Royal Dutch Shell Plc have each acquired electric vehicle charging networks. Although the expense of building out those networks pales in comparison to what the oil majors spend on rigs and pipelines each year—so much so that it's not even broken out in their corporate disclosures—it does still require a capital outlay. Shell also has plans to enter the world's power markets in a major way. "We believe we can be the largest electricity power company in the world in the early 2030s," said Maarten Wetselaar, director of Shell's integrated gas and new-energies unit, in an interview with Bloomberg Television last year. That requires capex, too, and probably acquisitions, as well. These might be transformational strategies, but they run through corporate balance sheets and capital plans the same as any other corporate strategy. And then there's hydrogen. My BNEF colleagues have recently published their Hydrogen Economy Outlook showing how this "versatile, reactive, storable, transportable, clean-burning" molecule can play a critical role in decarbonizing the global economy. In particular, hydrogen could be crucial in areas that are "hard to abate"—i.e. where it's difficult, at least historically, to reduce emissions. Electricity can be generated by renewable means and road transport can be electrified, but processes like making steel, cement, ammonia, and glass are much harder to change. Transitioning to hydrogen, if it does happen, will take several decades and require hundreds of billions of dollars of subsidies and capital expenditure. If hydrogen is to replace natural gas, it'd require more than $630 billion by 2050 just to transport and store it. That money could come from lots of places, of course. But one of the most obvious sources is from the capital budgets of businesses that extract, transport, and transform molecules for a living. If oil companies are out of the capex game for a while, hydrogen will almost certainly be put on hold. Nathaniel Bullard is a BloombergNEF analyst who writes the Sparklines newsletter about the global transition to renewable energy. | 
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