Oil companies & new political policies....

Today’s post: Weds, 5-28-2008

Just before sailing ships were replaced by powered ships, initially steam driven, the clipper ship was developed.

It was the best & most evolved design for sailing ships. But it soon disappeared from world commerce & became an antique.

Oil companies are becoming the clipper ships of today.

They are highly evolved to find, transport, refine, & sell oil for fuel & petrochemicals.

And, with shareholders to report to, record profits now, & rising demand, they are mostly deciding to try to respond to rising demand at time when supply is getting harder to obtain.

The executives would be fired by their shareholders if they didn’t.

However, the major oil companies are reported to be doing that ONLY. Some oil companies that have invested in alternative energy sources are even reported to be trying to sell them & leave the field of alternative energy sources.

The Rockefeller shareholders of Exxon Mobil are correct in my view that to decline to use a significant part of the very high profits & cash available to move into alternative sources of energy jeopardizes the future economic viability of the oil companies.

Meanwhile, driven by the rapidly escalating costs both in dollars & environmental impact, the rest of the world is switching to cost effective biofuels, renewable energy sources, & nuclear power plus plug-in hybrid & electric cars. And, more people will begin to telecommute.

It will take longer than is good for our economy both in the United States & worldwide to transition from fossil fuels to other sources. But, if we survive the problems that causes & make the transition successfully, which we still have a shot at doing, oil companies will still have petrochemicals for what oil remains. But they will become depleted relics of their current selves in size & profitability. The action is moving elsewhere. And, if oil companies don’t get into it with part of their money, they will become the clipper ships of our time. Unfortunately for them, that is the course they seem to be all following today.

One of the promising signs that we may make it is that the increasingly mandated use of renewable fuels & reductions in CO2 by governments is beginning to drive really large markets for virtually all the alternative energy sources.

Another is that if the major oil companies continue to decline to make this investment themselves, there are increasing signs they will be taxed in various ways by governments who will then invest in alternative sources separately from the oil companies.

As improved technology is adapted & the market responds, the governments will up the ante in all these areas & the process will accelerate.

Which oil companies will be large scale players on the world scene then?

Some who don’t want to be the clipper ships of today, will be; but based on today’s news, most of them will not.

The really unfortunate thing is that they have the money to do both.

They can maximize the oil they can deliver while it is still at a premium as best they can AND create a viable foothold in the alternative energy sources of tomorrow.

As someone who grew up in oil country & benefited from the prosperity the oil companies created there as a kid & as young man, I hope some of them smarten up in time.

But of most importance, I hope we make the transition in time to avoid really horrible economic problems without their help as it now looks likely we will need to do.