February 20, 2006

Big Oil Throws Down the Gauntlet

"America will always rely on foreign oil." - Exxon Mobil Senior Vice President Stuart McGill. Maybe so, to some extent, but can America rely on Big Oil?

Myopia appears to be alive and well at Exxon Mobil. "No combination of conservation measures, alternative energy sources and technological advances could realistically and economically provide a way to completely replace those imports in the short or medium term." And the long term?

This is disturbing because it means that the windfall profits made this past year from the escalation of oil prices will not be invested in ways that will help sustain a nation whose Texas-oil President is forced to admit is "addicted to oil."

Other industry indicators are equally disturbing. Yes British Petroleum is promoting "Beyond Petroleum" but none of the alternative energy technologies in their initiative have anything to do with renewable liquid fuel. And why not? Can anyone seriously argue that the oil companies aren't in a prime position to exploit the implementation of ethanol as a gasoline extender?

Brazil exports both oil and ethanol at considerable profit because they made a concerted effort to develop the production capacity of ethanol. Our oil companies could elect to do the same - protecting both their longterm resources and the economic health of the markets that buy them.

From the Daily KOS Blog. File under "Methinks thou dost protest too much."


"America will always rely on foreign oil"
by Chris Kulczycki

"America will always rely on foreign oil." So says Exxon Mobil Senior Vice President Stuart McGill at a recent Houston energy conference. This is one of several belated responses to Bush's weak call for American energy independence, or at least less reliance on Middle Eastern oil. More below:

"Realistically, it is simply not feasible in any time period relevant to our discussion today," Exxon Mobil Senior Vice President Stuart McGill said, referring to what he called the "misperception" that the United States can achieve energy independence. -snip-

"Americans depend upon imports to fill the gap," McGill said. "No combination of conservation measures, alternative energy sources and technological advances could realistically and economically provide a way to completely replace those imports in the short or medium term."

Instead of trying to achieve energy independence, importing nations like the U.S. should be promoting energy interdependence, McGill said.

"Because we are all contributing to and drawing from the same pool of oil, all nations -- exporting and importing -- are inextricably bound to one another in the energy marketplace," he said.


David said...

Expecting the established players to disrupt the status quo is an oxymoron. It has never happened in any industry in the past and it's not about to start today. Big Oil is never going to promote developing energy sources that disrupt their dominate position in energy. One *might* think that they'd be willing to develop alternatives as long as they end up controlling the alternative; however, considering that as long as they are in control one energy source is as good as the next (from their perspective) so there's no incentive to change from one energy source to the next, especially when the next energy source costs money to develop. From their perspective, that money that would be more welcome in the stockholder's pockets. It's not a matter of doing the right thing, it's the way people are. I predict Big Oil will go the way all technology is destined to go: They will slowly whither away until they wake up one day and find out the world's economies no longer depend on pumping crude oil from the ground to run. The only question is how long that will take. Big Oil is (predictably) predicting never. Governments that cater to Big Oil are predicting 50 years or more. Alternative energy developers are predicting 20 years (also obviously biased). And the answer is?

My guess is that China and India will be smart enough to quickly pass through the oil based technologies and move on to alternatives. The US will still import oil for a long time to come but the cost of oil will turn and slowly drift downward. The real race here is future oil demand vs. production. I predict worldwide demand will peak before production does. This is bad news for the established economies because with the price falling we will lose incentive to cut oil consumption. However, disruptive technology breakthroughs will continue to manifest around the world and there will be a point (difficult to predict when because of the disruptive nature) where the right breakthrough will radically shift energy production methods. That will spell the end of Big Oil and it will be replaced with Big Whatever. But (importantly) it will be a rapid change on the order of a decade. Until then, worldwide oil demand will likely just balance production.

If the US has forward looking politicians, we will see some movement to employ our citizens in new energy producing industries instead of buying it through imports. However, since we live under a capitalistic system it is in fact difficult to move to a more expensive energy source for the short term, even if such a source would be cheaper in the long run. It is especially difficult as long as we subsize Big Oil. Our best bet here are grass-root education movements coupled with natural public outrage over things like record profits coupled with billion dollar tax relief for Big Oil.

There's always hope. In the meantime, each of us should do our part to vote with our dollars as best we can. I know I plan to.

Bostwick said...

Thought you might be interested in this article at BBC about Chevron's recent investment of $300 million in biodiesel and ethanol research , a move called "very important" to the long term success of the company by the company's vice chairman.

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