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Just Can't Spend It All | Oil Watchdog

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Just Can't Spend It All


Tue, Jul 31, 2007 at 5:55 pm

    Just Can't Spend It All

    07-31-07 by dugan


    "With the world thirsty for more oil and cleaner fuels, Exxon Mobil and
    other oil firms have been spending billions to buy back their shares."

    A great sentence, but not my words. It’s a quote from the first popular-media piece I’ve seen on oil company stock buybacks, by Elizabeth Douglass of the LA Times. It’s on the web now, and apparently destined for tomorrow’s paper. Here’s the chart illustrating the story, as well.

    The article cites a report from the Center for American Progress on oil companies’ lack of significant investment (compared to their profits, and compared to their stock buybacks) in renewable fuels. It’s no surprise that Exxon, which is currently spending more buying back stock than on capital investment of all kinds, also has the lowest investment in renewables: 0.0% of profit, i.e. too low to measure without more digits.

    A troubling statement ends the LA Times piece. It’s from Farad Gheit, a longtime oil analyst at Oppenheimer and Co.:

    "As for green-energy investments, [Gheit] said the companies had no expertise in those fields. What oil companies are spending these days on alternative energy ventures, [he] said, ‘is like a charitable contribution: They want to just deflect some of the blame.’ "

    What oil companies care to spend on renewables wouldn’t really matter if the capital and determination existed elsewhere.

    What looks like big spending on biofuels to you and me–a hundred million here, $10 million there, is peanuts compared to what it will take to build the alternative infrastructure to deliver non-point, non-petroleum energy in real quantity. It’s an issue that Dan Adler of the California Clean Energy Fund, a venture capital group, thinks and writes about. In a piece published recently in the Californi Progress Report, Adler says"

    "This is the nature of the energy transition – enormous potential paired with massive social, economic and technological challenges. The extent to which potential is overmatched by challenge is the question for the emerging post-honeymoon period in clean energy."

    So if oil companies won’t fund the big investments needed to update their own refineries, much less give themselves, us and the Earth a sustainable energy future, who will? We’re at the point where markets fail, and government has to set much more ambitous energy policies. President Bush’s desire to enrich Iowa farmers doesn’t qualify as a policy, even if corn ethanol is part of the mix for short-term change.

    Big Oil, if it can’t help build the future itself, will have to hand over, through taxes, many of those billions it can’t spend.

    Government should be setting hard goals for conservation, solar, wind and biofuels not made from corn, while using regulation to inject some fairness into gasoline prices for the short term. Instead, we have Congress dickering about whether to pass a modest increase or just a tiny increase in auto efficiency standards. We have the California Legislature considering a fat tax break that would benefit Chevron.

    The LA Times story clarifies the choice: a higher stock price for Exxon, or a real shot at a new way of producing and using energy.

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