6-01-08 by dugan
I admire and follow
the work of business columnist Joe Nocera of the New York Times. He’s a broad-ranging,
infinitely curious writer, on topics from the financial
crisis to China’s
new role to what’s
wrong with smartphones-especially his own miserable Treo. But his Saturday column,
arguing that Exxon is right about its all-oil strategy and its campaign of "debate"
on global warming, sags on some important points. It’s worth some second
thoughts by such a good thinker.
Nocera wrote from Exxon’s annual meeting in Dallas, where the company again beat back
efforts by big retirement funds and the Rockefeller family to fundamentally
change the company. Specifically to split CEO/chairman Rex Tillerson’s job and
appoint an independent chairman of the board. More broadly, to develop a future
that is not entirely dependent on oil and more focused on energy that doesn’t
exacerbate global warming.
He fairly and thoroughly describes both sides’ arguments,
but ultimately sides with Tillerson, who delivered an unusual 45-minute speech
in defense of focusing on oil.
Here’s the nut of Nocera’s argument:
"What [the Rockefeller] other family members seem to really want is for Exxon
Mobil to begin taking steps to transition away from the thing it does better
than any entity in the world: find and produce oil. But where is it written
that oil companies should be the ones to lead us into the promised land of
alternative energy? The world doesn’t work that way. Transforming technologies
will most likely come from innovators who have never set foot in an oil
company, and don’t have an oil company’s baggage. Expecting Exxon Mobil to move
the world to an oil-free future is a little like expecting buggy-whip
manufacturers to invent the automobile."
First, the oft-noted buggy whips. Their makers were small shops that focused
on the horse, not the carriage. The smarter makers of carriages were swift to
see opportunity and either joined the nascent auto companies or built custom
businesses in limousines and custom bodies for the rich, especially
in Hollywood. In Detroit, auto body works were colloquially
known as "coach works." If the whip makers had any vision, they could have
turned to making fan belts. It was the horse-the energy source-holding them
back.
Exxon may, as Nocera says, be best in the world at finding
and producing oil. Yet it’s not either/or: money spent to find oil or on less
polluting energy. Exxon spends fewer of its billions on finding and developing
new oil than it does on buying back its own stock-filling a giant piggy bank.
Exxon also spends only $10 million a year, a tiny fraction
of 1% of its $40 billion yearly profit, on renewable energy research. That’s less
than it spends in a year on its highly effective federal lobbying. Its
"green" spending is mostly on new ways to use fossil fuels, with a pittance on
new battery technology that it may ultimately sell at a handsome profit to
hybrid car makers. If the world’s biggest, most expert energy company, awash in
cash, wants to wait to see how global warming turns out, there’s not a single
reason why its few billion a year in taxpayer subsidies shouldn’t be turned to
more visionary use.
Which brings us to the global warming argument. As Nocera
says, China and India
"desperately need more energy to fulfill their ambitions." Yet if, in 2030,
they’re getting nearly all of it from fossil fuels, the climate change "debate"
in which Tillerson is still engaging will be over. If Exxon is focused on making
sure they use oil, its billions will be the enemy of the innovators who Nocera
hails, but need Exxon-sized money to make a market.
Nocera also agrees with Tillerson in dismissing the
Rockefellers’ view of the future: "As for
[the] prediction of weather catastrophe, it could certainly happen. But it
might not. We just don’t know enough yet." Yet…economists and scientists who
study global warming are at consensus that the possible upsides: more land open
to crops, and to settlement, will be vastly outweighed by weather effects, the
certain spread of now-tropical diseases like malaria, the catastrophic loss of
coastal lowlands and desertification in temperate areas. There are indeed
economic costs to slowing climate change, but also the benefits of new
industries and jobs.
"It would be lovely if we had new technologies that made the
world much less reliant on oil but that’s not likely," concludes Nocera. That’s
the Exxon argument that kills innovation. I agree that corn ethanol is not the
ultimate answer to oil, but it’s also the simple pioneer that makes ethanol
from waste possible. Germany
is the world leader in solar power, with about half the sunshine of the United States. Google
is spending big in the bleeding edge of solar and wind innovation, but even it
can’t match what Exxon could do.
If Exxon sees solar and wind as unpromising technologies,
why shouldn’t some of its fallow billions be forked over to the innovators?
Government ought to do more and better, but it needs the
cooperation of its industrial giants and Exxon is No.1. I just wish that the comparison of Exxon to
buggy whip makers was the right one: Exxon could head into the industrial
sunset and the world would be none the worse for it.
Exxon has to lead or pay.