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Birds, bees, and Big Oil

April 2nd, 2008
By POLIMOM

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Ah yes… the lovely sounds of spring. There are birds a-chirpin’, bees a-buzzin’, blossoms a-burstin’, and the biannual bonus display: Big Oil a-squirmin’.

Executives from San Ramon’s Chevron Corp. and four other major oil companies defended their record profits Tuesday before a hostile Congress, led by Democrats who criticized the oil giants for doing little to cut gas prices or invest in renewable energy.

It would be funny, if it were… well… funny. (Though it is slightly amusing that the Democrats weren’t chirping this song while campaigning in Texas).

We’ve been here, done this.

Too bad nobody kept the t-shirt, because it looks as if the stars may have again aligned this year. The combination of a presidential election and cumulative record oil company profits may very well take us down the treacherous but familiar road of windfall profits taxes and pulled incentives.

We never learn… and with the ever-tighter focus on renewable energy and a green economy, there’s an added layer of complexity.

While some folks evidently understand that getting oil out of the ground requires rather more than a spoon, an unfortunate percentage of the population still seems to think crude can just be scooped from puddles. The reasons behind our untenable choices — exploration and drilling in currently protected areas vs our lethally symbiotic relationship with external providers — just aren’t well-understood.

“But Polimom, what about green energy?”

Why… Yes!! There is a third possibility, and it’s definitely the direction we need to go… but there’s a problem (my emphasis):

“Why is Exxon Mobil resisting the renewable revolution?” he asked.

Simon responded that Exxon Mobil had pledged $100 million to Stanford University for a project to study renewable energy and climate change. But he said until renewable sources become more economically competitive, the company will focus on its core oil business.

Right there is the key to understanding the entire equation.

You think $3.287 is high? Sorry, but even factoring in the difficult-to-assess geopolitical and environmental costs, it’s not high enough. Current gas prices (and everything else related) are still lower than current technology can deliver for renewable sources.

The best thing that could happen, strangely enough, is for prices to go higher yet. Until we cross above the point where the cost of renewable energy is less than non-renewable, we’re stuck… and no amount of election year grandstanding will get us out of the spring mud.

(Cross-posted from Polimom Says…)



This entry was posted on Wednesday, April 2nd, 2008 at 8:03 am and is filed under Gas Prices, Alternative Energy Resources, Oil, Democrats, Economy, Energy, 2008 Elections. You can leave a response, or trackback from your own site.

Viewing 5 Comments

    • ^
    • v
    "Current gas prices (and everything else related) are still lower than current technology can deliver for renewable sources."

    Sure, but current gas prices reflect massive government giveaways to petroleum. Shift that to renewables, ones that don't rely on lots of gas and diesel (as corn ethanol does) and the equation changes.
    • ^
    • v
    I agree that windfall profit taxes are a bad idea. However, Exxon Mobil does remain short-sighted if they aren't using these billions and billions of extra money to develop renewable energies. Exxon states that renewables are not competitive right now, but one of the reasons they are not competitive is that no one has invested in the infrastructure and development of these resourses, as has been done for decades now with petroleum. As you state, polimom, the price of oil is only going to climb over the next 2-3 decades as demand swells. Instead of waiting until then, when the business model is already clear, Exxon needs to meet that day with the best renewable energy sources on the planet so that they knock over their competition. It would be a different matter if Exxon's business was tight right now, so that there was little money to invest in an uncertain energy future, but Exxon is rolling in cash they can use for this. Investing today's profits for that long-term future is the best business model they could have.
    • ^
    • v
    I hate to disagree with Polimom, but alas I must.

    Why exactly are we still subsidizing oil exploration at prices over $100.00 a barrel?

    I had a meeting today with one of the worlds largest drilling contractors. Day rates are through the roof, rig utilization is at all time highs. And yet the Federal Government acts as if oil is still at $11.00 a barrel.

    We've given them special tax breaks to encourage increased refining capacity. Didn't work.

    We've offered them both tax breaks and royalty forgiveness in every single piece of legislation to open ANWR to production. Why? Because they have said they aren't interested in drilling in ANWR without them.

    And these examples don't even address the subsidies provided by the Dept. of Defense, which are astronomical.

    In 2006 the feds forked over 9 billion of our tax dollars to oil companies in tax breaks and subsidies.
    • ^
    • v
    Wait a minute. Big Oil can't engage in developing new technologies and new sources of energy because it doesn't want to undertake any risk?
    Where does it say that assuming risk isn't part of business? Where does it say that profits have to be guaranteed by government subsidies?

    That seems to imply that no matter how inefective a business is, taxpayers have to pay them (subsidies) to do more of the same. Then, we can never change course. Where is the common sense in that?

    Windfall taxes is a separate matter, but the corporate welfare system has to stop when it begins to smother instead of help.

    Do I hear lobbyists at work?
    • ^
    • v
    I don't have a problem with gas being expensive. Well, I do, but not because I think the oil companies shouldn't make money. I don't even have a problem with the oil companies making what seems to be an obscene profit. I *do* have a problem with giving them tax breaks while they are making record profits.

    If they're making all those billions per year and having fairly large distributions to shareholders, then THEY should be financing their own exploration activities, not our tax dollars.
 
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