Local banks substantially increase lending to oil and gas companies

Regional U.S. banks are making significant moves in the oil and gas industry, with lending to fossil fuel companies surging over the past two years. While major European banks are tightening their belts on financing oil and gas projects, smaller regional banks in the U.S. are stepping up to fill the funding gap.

Data compiled by Bloomberg reveals that banks such as BOK Financial, Citizens Financial, Truist Securities, Fifth Third Securities, and US Bancorp have seen their loans to the fossil fuel industry soar by over 70% on average annually since the start of 2022. These five banks are now among the world’s top 35 in terms of deals signed with the fossil fuel sector.

The surge in lending comes as energy-rich U.S. states like Texas, West Virginia, and Louisiana blacklist major financial corporations and asset managers that they believe are discriminating against the oil and gas industry. In fact, Oklahoma has passed legislation to publish a Restricted Financial Companies List, which includes big players like BlackRock and JP Morgan.

Marisol Salazar, senior VP and manager for energy banking at BOK Financial, notes that the bank sees “much more opportunities” in the oil and gas industry. Additionally, commodity traders and alternative investment groups are also stepping in to provide financing previously offered by European banks.

Despite the push from ESG trends, major European banks like ING, HSBC, and BNP Paribas are announcing tougher rules on financing fossil fuels. This shift is putting pressure on U.S. banks, particularly the top lenders to the fossil fuel industry, to consider their own policies in light of changing environmental and social considerations.