What the Oil Companies Can Do To Morph Into “New Energy” and Become Good Corporate Citizens

Sev Clarke, a fellow from Australia I’ve known and admired for many years wrote this about my recent post on Shell Oil:

Craig, sorry to contradict, but a few of your statements do not hold water, probably because you have accepted what is regarded as common wisdom, but which is incorrect. There are ways that the oil companies can get out of their dilemma, retain profitability, and become good global citizens.

The trouble is that they have been looking in the wrong places, have made predictably bad calls on which technologies and markets to pursue, and have not developed the systems by which to triage effectively new ideas. They have simply not been sufficiently imaginative or enterprising. Like most business leviathans, they have become set in their ways. They need to develop competing ‘skunkworks’ and ‘searchworks’.

We do need to move progressively away from burning fossil fuels, particularly from those that are most polluting and global warming. But there are enough extractable and relatively non-polluting methane clathrates to cover a transition period of several decades. Moreover, these ought to be extracted before global warming vents them into the atmosphere with catastrophic results.

We will always require organic raw materials to produce our fuels and products. However, the refineries of tomorrow will be biorefineries that typically will make use of technologies that are now on offer, are under development, or are under patent application. All Shell needs to do is to widen its concepts of what constitutes its drilling, pumping, refining, chemical conversion, product marketing and distribution competencies, then build on them and the new methods to develop the upcoming bioeconomy.

Hi, Sev.  Good to hear from you again.  I agree with the first part of what you wrote here, i.e., that the oil companies have not done a proper review of ways to get into the next generation of energy and become good corporate citizens in the process.  At the risk of sounding cynical, I’d say that the reason is obvious: they have no incentive to do so, and all the reasons in the world to go nowhere near the idea.  They’re understandably far happier sitting on the most profitable monopoly in human history than they are in figuring out ways to make it go away.

If we want “new energy” to come from the oil companies, we need to make some fundamental adjustments in the way we deal with them that make it harder for them to get rich at the expense of the health and safety of the other seven billion of us.  A good start, obviously, would be to remove the huge subsidies that do nothing more than transfer additional wealth from the taxpayer to the oil company shareholder.

On the second point, I disagree.  I’m not an expert in biofuels, but my belief is that this will never prove to represent an effective energy solution, for reasons that I explain in this piece on Chevron’s experience with the subject.