On July 8, oilman T. Boone Pickens launched a personal initiative to promote wind power as a primary renewable energy source for the United States. Pickens wants the next U.S. president to lead the nation to 20% wind power by 2018 by tapping a “wind corridor” that runs from the Northern Midwest all the way through Texas. Pickens himself has invested in wind energy in Texas.
Why would an oilman take on this kind of public environmental project?
A better question is, why wouldn’t Big Oil take on this kind of project? It’s clear that alternative and renewable energy is a big part of America’s future, and oil is already fast becoming a much smaller part. Pickens points out at his website PickensPlan that in 1970 the U.S. imported 24% of its oil; now we import nearly 70%. This dependence on foreign oil, while lucrative in the short term for the oil companies, has resulted in the greatest outflow of money from the U.S. to the rest of the world in history.
Though most of our oil is imported from Canada, much of this lost U.S. wealth is flowing to nations with which we have very troubled relations: Iran, Iraq, Saudi Arabia, and Venezuela. The painful result is that the U.S. economy is currently experiencing a contraction the like of which has not been seen since the Great Depression. When a country has to import its most basic energy resource at great cost, that country is in trouble economically. We cannot compete effectively in a global economy when we have to spend that much money just to get a business running. We are rapidly losing ground on the world stage.
While Big Oil may have made some big short term profits in recent years, those profits have greatly lowered the average American’s standard of living. They have destroyed any kind of positive feeling consumers might have ever had toward Big Oil. How many people do you know (outside of actual oil company employees) who do not hate the oil companies? No ad campaign showing waving fields of corn and pristine oceans can counteract the rancor that currently exists in the hearts of most Americans for Big Oil.
Poverty is radical; wealth is conservative. No one changes course while being deluged with money. So it’s not surprising that innovation is not exactly the middle name of the CEOs who lead successful corporations, unless they happen to be working in the field of information technology, where innovation basically is the product. Most other corporations just hire big publicity departments to spin what is already working to make it palatable to the public at large. In fact, if the corporations are doing well enough, they don’t even care that much about the consumer; they care about the stockholders.
But one thing big corporations do understand is profit. CEOs understand it keeps them in their overpaid jobs. Stockholders understand that it makes them money.
As the graphic above shows, the U.S. is, Pickens puts it, “The Saudi Arabia of Wind Power.”
All we have to do is invest in infrastructure to tap that power.
Big Oil can stay on its current course, winning the enmity of the world and destroying the environment and the political peace, or it can lead the way to energy independence and thereby nearly monopolize the profits that will come from renewable technologies. Wind and solar are often pooh-poohed because they take significant initial investment before they pay off. But so does oil. Without refineries, crude oil is nearly worthless, and we have not built any new oil refineries for over 30 years because of the huge cost.
Instead of investing even more money in oil, why not invest it in renewable energy? When corporations start to see the potential for profit in these technologies, no amount of Congressional oversight and bumbling will be able to stop corporate investment in them. We won’t be looking for ways to promote renewable energy, we’ll be looking at anti-trust laws to make sure the profits are being properly shared amongst the prospective players.
Pickens will no doubt be the butt of much cynical critique from pundits who note the potential for big profits down the line for Pickens. So what? The market works or it doesn’t. Right now it is working by showing us corporate failure after failure; profits without product, policies so self-serving and harsh they’d be despicable even if they worked. But they don’t work!
Big Oil should back renewable energy because it works, because the potential for profit is enormous, because it is what the future has in store for us if we do not fail entirely. They will want to be on the cutting edge, not left behind. Forward thinking is not their strong suit. But we’re only talking ten years forward here.
Even I know how to make a ten year plan. My job at a regional bank is pretty shaky right now. Anybody out there need a renewable energy CEO?
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This doesn’t make a lot of sense. First, oil companies are not in the business of selling electrons like power companies, so why should they invest in the power infrastructure? That business is nothing like the hydrocarbon business in which they specialize. If the answer is simply “they have excess cash,” well, so do lots of venture capitalists, hedge funds, sovereign wealth funds, and companies already in the power business– last year $9 billion was invested in U.S. wind infrastructure. Lack of capital is certainly not holding back the development of wind power.
Second, why do people always assume that oil companies don’t know what they’re doing with their cash? Exxon Mobil invested over $15 billion in its business last year. If it is opportunity-constrained, as it is, it should return money to shareholders so that they can invest in wind power or whatever they’d like. As a matter of fact, this is exactly what EM is doing through its stock repurchase plan.
Third, under what basis do you assume oil companies are not innovative? They are pure engineering and technology companies; there’s nothing simple about extracting oil from the middle of the Gulf of Mexico or the North Sea. They have big R&D departments working on a variety of things: ever heard of bio-butanol? Google it; it was invented by BP. Chevron owns a large biodiesel plant in Texas. Shell first entered the solar business over a decade ago. Many oil companies have made investments in a variety of alternative energy technologies. When those technologies are mature enough to have the risk profile demanded by oil company investors, and can support the type of investment that oil companies need to make (billions of dollars), the companies will invest more. But as I said earlier, lack of capital is not the issue holding back the development of alternative energy in this country. As soon as the regulatory environment is clear and the economics make sense, the money for investment is there. Click on the link in my name for more on common misconceptions about the oil industry in the MSM.
Thanks for the links and the opinions from the other side.
You say, “When those [alternative] technologies are mature enough to have the risk profile demanded by oil company investors, and can support the type of investment that oil companies need to make (billions of dollars), the companies will invest more.” Then you go on to say that lack of capital is not the issue.
Your view doesn’t make any more sense to me than mine makes to you.
These technologies have been around for decades now. Individual people invest in them even though the price is still high. Why shouldn’t oil companies invest in them?
I don’t think people have misconceptions about oil companies, I think oil companies have a huge PR problem and there are lots of good reasons for that. That’s why they have expensive ads all over TV explaining how nice and innovative they are. Investing in alternative energy in a very public fashion would go a long way toward taking the edge off public resentment–It would be much more effective than websites, expensive ad campaigns, and stonewalling at Congressional hearings,
Thanks for sticking up for them though. It’s always admirable when someone steps forward and sticks up for the big guys.
Lightly dusting off the gentle sarcasm, this is what I mean about immaturity of the technologies: investing ten billion dollars in oil fields is not risk free, but it is a risk that oil companies like BP or Shell understand because they have been doing it for 100 years or so. They have legions of geologists and engineers and software and equipment to manage that risk. So they can make huge investments with reasonable return expectations, which is what they must do since they generate so much cash. Alternative energy presents two issues: there are no opportunities big enough to make huge investments with anything resembling the risk profile of their core business.
But just because its wrong for big oil to make multibillion dollar investments in wind doesn’t mean it’s not right for other types of investors. Goldman Sachs bought the third largest US wind company several years ago and sold it to a Portuguese utility last year. There are plenty of people willing to invest in wind. It just doesn’t make large scale sense for oil companies. And I get that they have a PR problem. So what? Their job is to maximize returns legally to the pension funds and small investors who own the majority of their shares. If they can’t, they should return the money to shareholders via dividends or share buybacks.
Btw, it’s not appropriate to characterize this as the “other side.” I can be pro-wind and pro-alternative energy without assigning any special responsibility to oil companies.
Point taken, thanks. I don’t see it as inappropriate even if its a losing proposition at first. My reasoning is that oil is a finite resource and we have been importing ever more of it since the 1970s so 1) it makes sense to get into alternative energy now and in a big way and 2) even if it loses money it is good PR.
I’m glad at least you saw the sarcasm as gentle, which is how it was intended. I don’t at all expect we will reach agreement on this topic. I appreciate you posting your views and the supporting links.
Neither of the political parties offer any thing but special interest group control. Special interest groups are set up to deprive someone of something… and provide something for the special interest.
The Technocracy Technate design offers a creative approach… something that is not offered by our very uncreative current society.
Energy Accounting – Wikipedia, the free encyclopedia
You might also want to read Cheryl Grey’s latest article on the automotive industry, posted on the homepage (or you can click here). It summarizes ways that Shell, Chevron, and ExxonMobil are investing in alternative energy.
I think that investing in the private renewable energy will destroy the oil companies since it will shift the focus of energy production from big companies to the private consumer who will produce its on power with solar panel, wind turbines etc.
So investing in green energy in general is not wise, from the point of view of an oil company.
However, it should consider the investments in “green” carbon based matrials such as biodiesel or ethanol, that will maintain a similar energy market to the one it is already familiar with. The motivation to do so is the same as described in this article. If the future of renewable energy will turn out to be based on biofuels, I don;t think that the mass production of it will be in the consumers hands.
I would really like to see the EPA-OBD II Annual Vehicle Emissions Inspection Law closely examined, and changed.As it stands right now, it is entirely possible for any Gasoline powered Vehicle, from 1996 to the present, to fail it’s Emissions Inspection, for not emitting enough Polluting Exhaust Emissions ! All such Vehicles have on board Oxygen [O2] Exhaust Sensors.These O2 Sensors are set up to detect a level of Polluting Exhaust Emissions that would indicate that Gasoline is being consumed by an Engine at 14.7 parts of Air to 1 part of Fuel.If there is a low level of Oxygen, and a high level of Pollution, a Vehicle will fail it’s Emissions Inspection, as well it should.But, Gasoline can be safely vaporized into a mixture that is 100 parts of Air to 1 part of Fuel.With this, even the largest SUV could easily get 50 + MPG, and emit a fraction of the Emissions of a conventional 14.7/1 Fuel System, with an increase in Power, and much longer Engine life.I’m not the first to figure this out.Far from it ! For proof, do a search on [the late] Tom Ogle, and Charles Nelson Pogue.Then, go to http://energy21.freeservers.com/bookrep.html .But, even if it is not to be believed that Fuel Vaporization is entirely possible, it’s illegal to even attempt to do so, with any Vehicle, 13 years old, or newer.O2 Sensors are set up to detect that Fuel is being consumed at 14.7/1. A mixture of 100 / 1 will not emit enough Polluting Exhaust Emissions to register on O2 Sensors.When such a Vehicle is connected to an OBD II Emissions Inspection Analyzer, an O2 Sensor Failure Code will be generated, which will result in a failed Emissions Inspection.O2 Sensor Exemptions are permitted for Vehicles that have been legally converted to operate on Natural Gas, Propane, or Hydrogen, and are Registered as such.But not for Vaporized Gasoline.Thus, it is entirely possible, under this EPA-OBD II Vehicle Emissions Inspection Law, for any Gasoline Powered Vehicle, 13 years old, or newer, to fail it’s Emissions Test, for not emitting enough Polluting Exhaust Emissions ! As long as this insane 14.7/1 Law, that only benefits Big Oil, remains in effect, the only way to make Vehicles more “Efficient” will be to make them lighter, and smaller.This has got to change ! I have asked the Question many times ; “Why is it illegal for any Gasoline powered Vehicle, 13 Years old, or newer, to emit too little Polluting Exhaust Emissions”? So far, not one Big Oil Executive, Politician, or Concerned Environmentalist can, or will answer the Question.Those that have replied can’t seem to come up with an Answer either.Can you ?