No Succession Plan for ExxonMobil

These are the 12 biggest corporations on the planet according to Forbes. You'll notice that 6 of the 12 are oil companies. There is no clearer picture of the Dinosaur Economy than this list. In 40 years time, none of these oil companies will be in the top 12.  Even if they manage to make the transition to clean energy, I doubt if they'll be in the top 12. In 40 years time, with most coal, oil, and gas phased out, world energy markets will look very different.

The dominant form of energy will be electricity generated by a combination of rooftop solar PV, utility-scale solar thermal, wind generators and hydro. Ownership of the utility-scale solar and wind generators will be a combination of public and private. I wonder whether a handful of global corporations will come to dominate electricity generation as they have dominated oil and gas? Somehow I think not. In order to dominate they would have to control all the various forms - hydro, wind, solar PV and solar thermal - each of which has very different constraints.

Even if an oil company got big in wind generation by dominating engineering, manufacture, building and running wind farms in dozens of countries, could they be similarly big in PV, solar thermal and hydro? Not a chance.

The other major energy source in 2050 will be biofuel though it is unclear how big this sector will be. I suspect that markets in sunny climes will promote EVs over internal combustion engines running on biofuel, because solar power will be more cost-effective than any of the biofuels. Biofuel will be attractive for specialty uses (aviation, oils, plastics) and will, in effect, be too valuable to be used for transport that can be electrified. There is a chance that oil companies could dominate the biofuel market, but it will be a tiny market compared with the current oil/gas market. Biofuel suppliers are not likely to be among the biggest corporations in the world.

I used to think the oil companies were securing their future by beginning the transition towards post-carbon corporations. Reports like this from Bloomberg (May 2012) support the notion.

BP has invested $7 billion in alternative energy since 2005. ExxonMobil is spending $600 million on a 10-year effort to turn algae into oil. And Royal Dutch Shell has invested billions of dollars in a Brazilian biofuels venture, buying up sugar cane mills, plantations, and refineries to make ethanol. In the U.S., Shell produces small lots of so-called drop-in biofuels—engine-ready products that can replace gasoline—from a pilot plant in Houston that uses sugar beets and crop waste.

BP is the company that has been most explicit about positioning itself for the post-carbon world. Their Beyond Petroleum slogan signalled a clear intent to be a long-term contender. However, they are finding it a rocky road. It's not easy to leap from drilling, pumping, refining and selling liquids and gases, to running factories that make photovoltaics. They had a go at it, but they withdrew in the face of strong competition from China. They still have investments in a couple of wind farms, and they're big in ethanol with a 10% share of the world market. So perhaps you could say they're still in the game and have a chance at being somebody in 2050.

The Royal Dutch Shell investment in Brazillian biofuel looks serious. Maybe that is the core of their succession plan, so perhaps they'll still be somebody too.

But ExxonMobil? I don't think so. Last week, I connected some dots that seemed to show that they have no succession plan.

I discovered that ExxonMobil spends  $100 million every day trying to find more oil and natural gas in increasingly inaccessible places like deep oceans, Siberia and now the Arctic. How does $100 million a day compare with $600 million over 10 years on algae development mentioned by Bloomberg? It looks like this - the $600 million for algae doesn't even register on the graph compared with $365 billion for oil and gas.

Does this look like ExxonMobil is serious about having a post-carbon future? Does this look like a succession plan? If they were serious about having a Plan B, they'd be partnering with the Pentagon to put $100 million a week into biofuel, instead they're spending $100million a day looking for more oil and gas that will end up as stranded assets. 

No wonder the oil companies are fighting tooth and nail to preserve and extend their current activities. They see that the post-carbon future does not have a big role for biofuel where they have relevant expertise, and they can't find a way to dominate the markets for PV, solar thermal and wind turbines. In those markets, they are bit players.

Without an effective  Succession Plan, ExxonMobil is wringing as much as it can out of current operations. When the carbon party is over, it will join the rest of us on the sidelines watching the new kids strut their stuff on Forbes Biggest Corporations list.

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The Transformation tab reports examples of progress towards a low-carbon future. Here is a recent snippet.

India's government has approved a $4.13 billion plan to spur electric and hybrid vehicle production over the next eight years, setting itself an ambitious target of 6 million vehicles by 2020. Source: PlanetArk.

The Economy is the Pied Piper

Those who claim that our economy can't afford to replace fossil fuels with renewables are mesmerising us with lies and leading us to a wasteland, just as the Pied Piper led the children of Hamelin off into the wilderness.

For he led us, he said, to a joyous land,
Joining the town and just at hand,
Where waters gushed and fruit-trees grew,
And flowers put forth a fairer hue,
And everything was strange and new;
The sparrows were brighter than peacocks here,
And their dogs outran our fallow deer,
And honey-bees had lost their stings,
And horses were born with eagles' wings.

Robert Browning

The glittering promises of a joyous future based on coal, oil and natural gas are as real as the Piper's promise of sparrows as bright as peacocks.

Every credible economic advisor says that tip-toeing around carbon emission reduction will cost more in the long run. Here's what the very excellent Australian Treasury (the guys whose advice has made Australia the stand-out OECD economy) says. 

Early global action is cheaper than delayed action. For economies like Australia, deferring action on climate change will only lead to higher long-term costs as emission-intensive technology, processes and outputs are locked in.

Australian Treasury

Nevertheless, we have governments that seem to be mesmerised by a magical Piper as they continue to subsidise fossil fuel industries and give permits to new coal mines, oil wells, and gas wells as though fossil fuels are not destroying our future with their carbon emissions.

In Australia, we have a government that brought in a carbon price of $23/tonne based on a world where CO2-e emissions can rise to 550ppm. Yes, 550ppm, not the 450ppm that gives a 75% chance to keep average global warming within the 2°C guardrail, and not the 350ppm that many credible scientists recommend as the maximum for a safe climate.

When will they wake from sleep and understand that countries can't be run to the misbegotten tunes of economists? As we come ever closer to the absolute resource limits of a finite planet, some economists are beginning to realise that growth economics is a fantasy.

Tim Jackson, economics commissioner on the UK government's Sustainable Development Commission says,

The idea of a non-growing economy may be an anathema to an economist. But the idea of a continually growing economy is an anathema to an ecologist.

So, don't be taken in by those who say that the 'joyous land' of the future will be based on coal, oil and natural gas. Recognise them for what they are - persuasive folk who spin yarns about horses born with eagles' wings.

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In the Pied Piper of Hamelin, Browning describes how government officials responded when the Piper claimed his fee for ridding the town of rats.

A thousand guilders! The Mayor looked blue;
So did the Corporation too.
For council dinners made rare havoc
With Claret, Moselle, Vin-de-Grave, Hock;
And half the money would replenish
Their cellar's biggest butt with Rhenish.
To pay this sum to a wandering fellow
With a gipsy coat of red and yellow!

They refused to pay the thousand guilders and ended up paying a much higher price when the Piper led all their children away. Right now, we're acting like that Mayor and Corporation. We're not willing to pay the price of an immediate transition to a low-carbon economy. Our children and grandchildren will pay a very heavy price. As extreme weather events become daily fare, oceans acidify, and sea levels rise, many will pay with their lives.

We have to pay the piper, dance with the one who brought us.

We can't argue with Mother Nature, but we can, and must, side with ecologists against economists.

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H/T David Oertel for noting that the economy is the Pied Piper.

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Snippet from the Transformation tab.

China estimated it may spend $373 billion on projects for conserving energy and reducing emissions in the five years through 2015. The State Council announced a plan to reduce by 2015 the amount of energy it uses to produce every unit of gross domestic product by 16 percent from 2010 levels. In the five years through 2015, China is aiming for energy savings equal to 670 million tons of standard coal equivalent energy. Source: Bloomberg.

Wuthering Heights – love is not a rational activity

Our enduring love affair with oil means that pain and punishment don't diminish our affection for the beloved. Even catastrophes like the Gulf oil spill haven't dented our passionate dependency on oil.

It's hard to comprehend this kind of irrational behaviour. Science has its logical explanations, but no one has shone a better light on irrational love than Emily Bronte in Wuthering Heights where destructive forces are unleashed when Cathy and Heathcliffe can't be together. This kind of love is a force of nature not to be argued with. It makes absolute sense on an emotional level, and, after all, love is not a rational activity. 

It seems that we'll put up with a lot of abuse from oil and still keep loving it, but that is not the case with nuclear. When nuclear treats us badly, we're outa there! Japan closed 50 nuclear power stations after the Fukushima disaster. And half way around the world, Germany pulled the plug on its nuclear plants, closing eight immediately and phasing the remainder out by 2022.

Given the destructive force of carbon emissions, we better hope that our love affair with oil tapers off into a cooler and more pragmatic business relationship, similar to our feelings for nuclear.

If we think back, perhaps we can see some signs that this is happening. Cars have lost their place as fetish objects in popular culture. Increasingly, young people are choosing not to drive at all. In the US, the percentage of people younger than 35 without a driver’s license has risen to 26% in the past decade.

Our new fetish objects are mobile phones, ipods, ipads and e-books. They are all powered by electricity.

Perhaps we see emerging signs of love for renewables in growing affection for solar power, the teddy bear of renewables, and appreciation of wind generators for their majestic beauty.

Let's hope this early affection flowers into full blown obsessive passion—a Cathy and Heathcliffe kind of love that let's nothing get in the way.

Kate Bush captured the wild irrationality of Cathy-and-Heathcliffe love in her song, Wuthering Heights. Check out this fabulous version by Hayley Westenra who can really sing!



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News of the day on the Transformations menu tab.

India takes up solar power. Karnataka Renewable Energy Development Ltd. (KREDL) has embarked upon a Public-Private-Partnersip project for a 1000 hectare solar park at Mannur village in Bijapur. KREDL has already commenced projects to generate 80 MW of solar power in Bijapur and Gulbarga districts, and is working on increasing solar power generation by 40 MW every year. 

Boom and bust the natural way

History is littered with examples of animal populations that expanded when new resources were found. Farmers know about the good seasons that result in mouse plagues.

It is typical for populations to boom during good years and then collapse suddenly in bad years, or when they overrun the resource base. It's the natural boom and bust cycle.

Human populations have boomed and busted throughout history, and resource depletion has been an important factor. Jared Diamond's book Collapse examines the boom and bust effect in eight historic and four contemporary societies.

It is clear that human population has been booming over the past 200 years, as illustrated in this graph based on UN 2010 projections.

The resource that has underpinned this population boom is the energy from coal, oil and gas which has allowed billions of people to be fed, and to live lives of unimaginable wealth.  This wealth has brought immense riches to the top 1% and also health, education, comfort and civil society for general populations.

Right now, we are at the point of overrunning the resource base. The biggest whammy is that fossil fuel supplies cannot keep up with demand as shown by rising prices. Can't argue with that. There's a limited supply of the stuff.

This graph shows that oil prices have risen when spare capacity has fallen.

The next chart shows that natural gas prices are rising in Europe and Japan, though US prices are held down by a current production boom and a warm winter.

Natural gas prices in the United States, Europe, and Japan, based on World Bank Commodity Price Data

Even coal, the most abundant fossil fuel, is rising in price.

Not only are coal, oil and gas supplies unable to keep up with increasing demand, but we know that we can't keep using even the reserves that we have, due to the damage they cause through the greenhouse gases they emit. As the damage from climate change becomes ever more apparent, countries will act to cut carbon emissions. Fossil fuel reserves are looking more and more like stranded assets.

The Dinosaur Economy, based on fossil fuels, will end. It will be followed by a new Clean Energy economy. If we manage to build a bridge between the old and the new, we have a chance to avoid the ghastly impacts of the Bust part of the cycle. 

If we don't build that bridge, we'll fall into a chasm where we have very limited energy resources for a period of time. In that chasm, all the horrors of the Bust cycle will be unleashed – starvation, displacement and war as people fight for limited food, water and shelter. Walls will go up between the haves and the have-nots. Populations will collapse and those that are left will adjust to the new, lower resource base.

That's the natural Boom and Bust cycle.

If we do manage to build a bridge, or ramp or something, across to the other side, we can minimise the inevitable disruption. We can adjust to the new resource base as we go along. It's already happening as countries move to replace fossil fuel with renewables.

If we avoid the Boom and Bust cycle, we won't be a plague upon the earth, instead we'll be more like responsible custodians. They're much more lovable than a plague.

Stranded whales

A dead whale on the beach is big and smelly. It is no use to itself and it spoils the beach.  So when whales get stranded on beaches, hundreds of people turn up to help get them back to sea before they die and the beach is a stinking mess.

In a similar way, fossil fuel interests are fighting to prevent their coal, oil and gas assets from becoming stranded assets. Their main tactic is to dig up as much as they can as fast as they can, before the world cottons on and puts strict limits on greenhouse gas emissions.

A report by the Carbon Tracker Initiative reveals the scale of climate risk. To limit the chances of exceeding the UN's agreed warming limit of 2C to 20%, the amount of CO2 that can be emitted between now and 2050 is 565 gigatonnes. But the known fossil fuel reserves declared by energy and mining companies is equivalent to 2,795 gigatonnes of CO2. That means, if the world acts on its climate change pledges, 80% of those reserves can never be burned and are stranded assets.

The IEA has said that if concerted action is not taken as early as 2015, then 45 per cent of the world’s fossil fuel plants would have to close early over time to meet the 2°C scenario.

There is growing risk that money invested in coal mines, oil, tar and gas reserves, and their associated pipelines, train lines, ports and shipping facilities will be closed before their productive life is realised. They will become pipelines and train tracks to nowhere.

Banks and investment funds are beginning to take climate risk into account in judging whether or not to invest in big new fossil fuel infrastructure. Experts warn that the huge reserves of coal, oil and gas held by stock exchange-listed companies are ''sub-prime'' assets.  HSBC says that the declining ceiling of allowed emissions intensity should force more capital into lower carbon technologies.

As the urgency increases, we expect more banks and institutional investors to factor 2°C targets into their financing decisions.

Countries like Canada are strenuously resisting efforts to count the carbon cost of their fossil fuel reserves. Canada is resisting EU initiatives to account for the higher carbon footprint of their tar sands compared with regular oil. They fear that their tar sands will be stranded as uneconomic assets if the true cost was recognised.

In contrast, countries like Ecuador recognise that their oil reserves are valuable if they are NOT tapped. They are  seeking payment for not drilling in the Yasuní National Park which is regarded as one of the most biodiverse places on Earth. They have asked for $3.6 billion, about half the estimated value of the reserves, to leave the oil in the ground and protect the Yasuní.

In effect, Ecuador is trying to prevent healthy whales from beaching. In contrast, the vehement efforts of the Koch brothers and Australia's mining magnates, Gina Rinehart and Clive Palmer, to promote mining at any cost, will serve to drive more whales onto beaches and leave them stranded there.

Australian poet, John Blight (1913-1995), wrote this sonnet in the 1960s. It captures beautifully how hard it is for humans to care about very big subjects, even if they are potentially devastating.

Death of a Whale

When the mouse died, there was a sort of pity;
The tiny, delicate creature made for grief.
Yesterday, instead, the dead whale on the reef
Drew an excited multitude to the jetty.
How must a whale die to wring a tear?
Lugubrious death of a whale; the big
Feast for the gulls and sharks; the tug
Of the tide simulating life still there,
Until the air, polluted, swings this way
Like a door ajar from a slaughterhouse.
Pooh! pooh! spare us, give us the death of a mouse
By its tiny hole; not this in our lovely bay.
-- Sorry, we are, too, when a child dies:
But at the immolation of a race, who cries?

Addicted to oil

George W Bush famously declared in his 2006 State of the Union speech that "America is addicted to oil."

But either he didn't know much about addiction, or he didn't recognise his own addiction because he did nothing to help wean the U.S. off its oil addiction.  A few weeks after the speech, the budget he sent to Congress cut $100 million from federal energy conservation programs.

The addiction analogy is compelling and widely used. Andrew Sims uses it in this Guardian article that discusses our deep dependence on oil and our unpreparedness for necessary change. Carol Linnitt uses the addiction analogy in this Desmogblog article about the tactics used by Canadian governments to keep pumping oil regardless of the environmental damage.

In his article about Bikeshares, Adam Jones says says America is addicted to oil and that coming up with feasible alternatives to treat that addiction hasn’t been easy. Sticking to the analogy, Jones recommends Bikeshares as the "methadone of transportation".

Brigadier General Steve Anderson calls on Americans to wean themselves off their oil addiction. He says this should be a top priority for all politicians, regardless of party and says it starts with dealing in facts—not fiction—about the Keystone XL tar sands pipeline and its nonexistent role in lowering gas prices.

Australian academic Samuel Alexander describes the Gulf of Mexico oil spill as testament to the world’s addiction to oil, because it suggests that the world would sooner go out on a limb and risk great injury,  rather than rethink consumption.

Maria van der Hoeven, executive director of the International Energy Agency (IEA), lashes governments once more for their inaction.

Our addiction to fossil fuels grows stronger each year. Many clean energy technologies are available but they are not being deployed quickly enough to avert potentially disastrous consequences.

Maria van der Hoeven in the Guardian

To meet the carbon cuts that scientists calculate are needed, the IEA says the world needs to generate 28% of its electricity from renewable sources by 2020 and 47% by 2035. Yet renewables now make up just 16% of global electricity supply.

Van der Hoeven puts the blame squarely on policymakers, and she challenges ministers to step up to the task of weaning the world off its addiction to oil.