Friday, April 28, 2006

Windfalls For Windmills: Big Oil Won't Miss The Coming Alt Energy Boom

Eschewing the bogus demands for a windfall tax on oil companies, President Bush is calling for industry leaders to reinvest their record profits into new technology and alternative fuel development initiatives. With the rising demand for hybrid, flex fuel and other gas-free vehicles and a growing antipathy for our criminal dependence on foreign oil, look for more companies to follow BP's recent lead into alternative fuel technologies. Look also for the oil barons to mount public relations campaigns like GM's "Live Green By Going Yellow" blitz with their recent spoils.

Alternative energy isn't, of course, the only option for lowering gas prices and killing the terrorist cash cow greasing the war machines of rouge nations. American companies could increase domestic production by opening more refineries, a cost that will passed to consumers no matter how much the oil supply increases and no matter how high the record profits go. Drilling in ANWR, another oft-vaunted measure to increase supply, is politically unviable at the moment and will remain so unless its proponents can raise some serious political capital soon. With the President focused on alternative fuels, this doesn't seem likely. The extraction of usable petroleum from tar sand (the US and Canada have the world's largest tar sand deposits) is becoming a cleaner process but does nothing to change the kind of fuel we'd actually be burning, an issue of increasing importance to many Americans who recognize that no oil-based solutions are environmentally efficient or fundamentally sustainable in the long run.

The nation is, in effect, catching on.

Fossil fuel reserves will long outlast their usefulness and profitability if consumers continue to demand the expanded commercial use of more efficient energy technologies and can feel good about the environment in the process. The global war on terror, the lunacy in Iran and the mainstream inroads made by environmentalists in recent years have produced an American zeitgeist green in more ways than one. Our emerging demand is cheap, clean, American energy, and, like all good capitalists, we're trusting the market to bring it. Big Oil knows if it doesn't leverage this niche someone else will. Famously characterized as an octopus with its tentacles in everything during the antitrust craze of the late 19th and early 20th centuries, the industry won't sit this growth phase out, and, like all smart capitalists, its leaders have made sure that the initial capital for this expansion comes from somewhere else. So, buy 4 dollar gas with a smile, America. You're investing in the future.


Anonymous Bill White said...

Should we smile when they pay their CEOs $400 million a year? That's why I don't trust the market anymore.

5:15 PM  
Anonymous Joe C. said...

I must admit I do smile at seeing gas at $4 a gallon, in fact I'd like to see it go even higher... As a result of the gouging that has been occuring at the gas pumps Americans have opted for more environmentally friendly alternatives to driving alone to work. Anyone who rides buses regularly noticed that during the month after Hurricane Katrina ridership rose signficantly. The buses were packed, and now that gas and crude oil are on the rise again as were approach the summer driving season and as a result of the tenuous relations between Iran and the world and shortages in Nigeria the buses are full once again. The other noticeable effect of sky high oil and gas is the rush to buy fuel efficient cars. Whether the "Big Three" realize it or not, gone are the days of gas guzzling SUV being the default family choice. Americans have are catching on, and as the people catch on big business is left with no choice but to follow. Americans have been opting for more fuel efficient cars, even without them being produced domestically and GM and Ford have finally drawn a connection between the fact that American vehicles are consistently missing from the list of highest fuel efficiency, with the list is packed with VW, Honda and Toyota and the fact they have been treading water, while Toyota has been rising. Yes, GM has caught on with his media blitz "Live Green Go Yellow" and Bill Ford has been boasting about his green revolution; however, I'm prone to think that Autos are only thinking green, because they are... well... thinking $green$. Americans are thinking buying green, because they too are thinking $green$. Americans want to save money at the pump; so they'll buy the cars where gas lasts longer; and big auto doesn't want to miss a market sector so they're following the money trail. As to the oil companies... Well it is true that BP is fairly environmentally friends, but are the exception to the rule? The oil companies are doing quite well after all, ExxonMobil posted record profits last year. I don't know... If i had more time and more space I could articulate some intelligent thoughts... I suppose to summarize I'm skeptical. I'm skeptical of the President truly caring or whether he is simply trying to boost sagging poll numbers ahead of midterm elections. I'm skeptical that automakers and big oil just go where the money is located. I do think the alternative energy is the only way to move forward. I do think our dependence on foreign oil is criminal. And I do think that American will catch on, even if only because their wallet tells them they must. And finally I also think that the businesses will follow the money to a greener future.

10:00 PM  
Anonymous David Foster said...

History suggests that, whoever profits from alternative energy, it is unlikely to be today's large integrated oil companies. Those who are successful at one stage of a technology are rarely successful at a later, disruptive stage.

None of the companies that built steam locomotives are now building diesels. They are built by GE and Electromotive (until recently part of GM), neither of which was ever in the steam locomotive business. This pattern is seen in industry after industry.

8:57 AM  
Anonymous Chris said...

At the same time, Western Union and WellsFargo have been able to outlast their original industries, for example. Big Oil is too smart and too diversified to miss this boat.

2:09 PM  

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