How Will Big Oil Manage To Continue Its Profit Stream?
It won’t.
Many people hypothesize that Big Oil will go down the same road that Big Tobacco has been travelling over the last 50 years, i.e., hunker down, ignore the contempt of civilization, and use its vast wealth and power to focus the most aggressive legal tactics imaginable on ensuring it can continue its profit-streams indefinitely.
I don’t believe this will happen, though my reasoning has nothing to do with decency or morality, rather, that, unlike the case with cigarettes, all these profits are in the process of drying up quickly and completely. This is the case I present in “Bullish on Renewable Energy,” in which I present 14 different reasons, each one a chapter:
1. Energy Efficiency: The Much Ballyhooed “Low-Hanging Fruit”
2. The Development of Advanced Nuclear Reactors Will Be a Big Help
3. Cheap Wind
4. Cheap Solar
5. Cheap Energy Storage
6. Storage Isn’t the Only Solution to the Variability of Solar and Wind
7. All Other “Flavors” of Renewable Energy Are Making Progress Too
8. Other Important Macro-Economic Issues
9. The Upheaval of the Power Utilities
10. Extremely Wealthy Forces of Super-Innovation Will Not Let 20th Century Energy Policy Slowly Destroy the Planet
11. Electric Transportation Will Become Ubiquitous
12. Certain Concepts Are Clear Losers, Further Facilitating the Investment Decision-Making Process
13. Incentives to Lower Carbon Emissions Will Accelerate All This Even Faster
14. More on Heightened Consumer Sensibilities
Btw, speaking of Big Tobacco, if you want to laugh your butt off at the same time you learn something extremely valuable, I hope you’ll check out John Oliver’s piece on the subject.
I have been to many of the countries in SouthAsia. Everywhere I traveled smoking was very common. It is at first shocking to see and then a bit sad to understand that we have fostered economically powerful multi-national corporations that are destroying the quality of life worldwide. The story of the export of tobacco is just one of several.
Not only is india polluting its lungs with cigarette smoke, they are polluting the air they breath with horrible pollution, mostly from coal power plants in ever-growing numbers (see recent NY Times coverage). I don’t understand it at all! Isn’t India a democracy?
Yes, it’s the world’s biggest democracy. But it’s monstrously corrupt, and it’s power sources are completely indifferent to the welfare of its people. In other words, it is now where we in the U.S. are heading.
I see no reason why “big oil” cannot maintain its profit stream into the future by embracing rather than fighting change, and participating in the transition to cleaner more sustainable technologies.
Money is money, and whether it is earned by selling oil, by developing solar projects, or by investing in wind farms, a dollar profit looks the same on the bottom line.
As an example, Total (Based in France) is the fifth largest oil company in the world. It is also 66% owner of SunPower, one of the largest solar companies in the world. The two are not mutually exclusive!
I could well see Total’s revenue from solar power (and biomass in which it is also active) growing to rival the oil business for which it is currently best known!
No need for the oil companies to die, just to transition their revenues to more sustainable business activities.
Hi, Gary. Here’s what I believe on the subject:
I wouldn’t say that they are mutually exclusive, but they are orthogonal, to use a big word. I.e., one has nothing to do with the other. Oil companies can own solar companies, just like they can own pizza restaurants, but they have no special expertise that would add value to either one. In fact, as fossil fuels and renewable energy are “substitute goods,” as they say in economics, they are natural competitors.
Craig, they will remain in business because of the economics are on their side. For all mature fields (20 years or more) and there North Sea, Maracaibo, Saudi, Pardoe Bay, Texas Panhandle, Brea, etc. The price for extraction and transport is less than $2/barrel, the refining cost add probably $1 more so their operating costs add up to about $5 max.
If you sell Brent at $60 then you are making a bundle of money.
No need to be a genius to see why Big Oil will remain in business. When they have to pay $50 for extraction and refining and the price of renewable fuels drop to less than $.06KW/h with Energy Storage.
Then they will have very difficult time and people with switch stop using fossil fuel in behalf of Hydrogen and other things that are good for the environment and reduce your energy bills big time.
All carbon issues aside, USA is foolish to continue to send billions of dollars off to a region that hates US, pun intended. As well oil companies personify greed and generate distrust as well as having a bad track record to prove they are in fact unethical and they value money over people or ethics. Forget the anthropogenic carbon, look at filthy fuel, spills and pollution . All this in the name of jobs? Yea right… I say let the sun shine, and tell big oil to stick it where the sun don’t shine.
Clever ending…
Thanks, Craig. For a change, let’s accelerate the ubiquity of electric transportation, as you have pointed out. Here’s another small thorn in big oil’s side:
https://www.fundable.com/electric-avenue-scooters
Maybe, this will cause a few smokers to quit, also. (It’s difficult to smoke while riding an electric scooter.)