11-17-08 by dugan
Sitting inside the wreckage of the rest of the U.S. economy, Exxon
Corp. beams with fiscal health. It is protected by its insular,
petroleum-only culture, as described in a long NY Times Magazine piece Sunday by
Jad Mouawad headlined "Green Is For Sissies". In Exxon’s view, the world’s largest corporation exists
only to increase and preserve its profit in a captive and uncompetitive
market, without serious regard for consumers or the environment.
Only
breaking free of Exxon’s oil will change the result. Exxon and its
brethren will have to pony up, one way or another, for the transition.
And if U.S. energy policies change as much as promised during the
presidential campaign, Exxon could be crafting its own eventual demise.
From the NYT piece:
"[W]ith the election of Barack Obama,
a new chapter is about to open for the nation’s energy policy. Mr.
Obama says he wants to move away from oil dependence, and his policies
are likely to emphasize conservation, alternative energy sources and
new limits on the emissions of greenhouse gases responsible for climate
change. The question for Exxon, which Mr. Obama repeatedly
singled out as an exemplar of corporate greed during the presidential
campaign, is whether the model that has served the company so well for
so long will keep it competitive — or whether it will still be
producing hydrocarbons long after the world has moved away from dirty
fuels."
But right now, Exxon is sitting pretty:
"FROM
a purely financial standpoint, there’s no doubt that Exxon’s business
strategy has paid off. Despite the broader economic turmoil, Exxon is
worth around $375 billion — more than General Electric, Bank of America and Google combined — making it the world’s largest corporation.
"Its
balance sheet is pristine and its credit rating is better than that of
most governments. If Exxon’s revenue were stacked against the world’s
G.D.P.’s, it would rank between Austria and Greece as the 26th-largest
economy. As oil prices peaked this summer, the company once again set a
record as the most profitable American corporation, earning $14.8
billion in the third quarter. Since 2004 alone, the company has rung up
profits of about $180 billion."
These profits came at the expense of rising consumer debt, even as energy costs posed an inflation threat
that inhibited the U.S. government from acting faster to prop up a
sinking economy. Consumer anger was no counter to the oil lobby, which
successfully preserved all of its tax breaks and lobbied to get
billions more, in the form of larger manufacturing tax credit.
Exxon
won’t have any trouble surviving and profiting even with oil
temporarily down in the $50-$60 a barrel range. For one thing,
investment in renewable energy, which Exxon sees as a threat, not a
promise, starts drying up at that price–even though it’s a certainty
that energy prices will rise as soon as the economy and stock markets
show new life. To Exxon, these roller-coaster prices are just insurance
against the competition. But even some of its top shareholders see
Exxon as owing more to the general good:
Again, from the NYT:
Exxon has battled powerful forces in recent years, locking horns
with governments and multinational rivals from Africa to Central Asia,
from Eastern Europe to South America. But last spring, the challenge
struck closer to home — at the company’s annual shareholder meeting in
Dallas.As oil prices zoomed above $100 a barrel, a group of
investors tried to force Exxon to lay out a new strategy for developing
alternative fuels and addressing global warming. While the challenge
was not unprecedented — raucous shareholder meetings have been a staple
for years — the dissent was led by a symbolic, if slightly quixotic,
constituency: descendants of Mr. Rockefeller, who founded Standard Oil
in 1882.“Exxon Mobil needs to reconnect with the forward-looking
and entrepreneurial vision of my great-grandfather,” said Neva
Rockefeller Goodwin, a Tufts University
economist, speaking for the family. The company, she added at the time,
was focused “on a narrow path that ignores the rapidly shifting energy
landscape around the world.”Exxon’s top managers easily brushed
off the Rockefeller revolt, as they have so many obstacles over the
years.
Exxon has about $37 billion in cash reserves. Since 2003 it has
spent $110 billion buying back its own stock–another cash reserve.
That’s more than the company spends, on an annual basis, on finding and
developing new oil and gas resources and 5,000 times more than the tiny
$10 million a year it gives to research on renewable energy. The
company has spent far more than that–$100 million over the last three
years–on an ad campaign to make itself look concerned about global
warming while doing nearly nothing.
While Exxon is slowly unshackling itself from [former CEO Lee] Raymond’s [hostile] stance
on global warming, it remains faithful to his legacy by dismissing most
green alternatives and sticking with hydrocarbons. Although the
company’s tone has changed, its strategy has not. Despite growing
pressures on oil companies to invest in alternative energy, Exxon’s
long-term view remains unapologetically tied to fossil fuels. “[Current CEO] Rex
[Tillerson] looks more approachable than his predecessor,” says a rival executive
who requested anonymity because he did not want to jeopardize his
relationship with Mr. Tillerson, “but he is more inflexible.”
The NY Times report does not pass judgment on Exxon’s strategy, but
I and others do. If Exxon won’t spend some of its billions helping
develop a future less reliant on petroleum, it has to pay into the
kitty for cleaner and cheaper energy–starting with giving up its tax
loopholes, tax credits and undeserved royalty relief.
Renewable energy–wind, sun, geothermal, better biofuels, electric
engines–needs to be developed no matter what the price of oil is
today, and Exxon can’t be allowed to play an opposing game.