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Exxon vs. Obama

Peter Waldman, Portfolio
… if the energy landscape is transforming before our eyes, you wouldn’t know it from looking at Exxon Mobil or listening to Rex Tillerson. As the rest of the world stampedes to alternative energy and a popular new president rallies for it, the largest investor-owned oil company—the one with the biggest profit in history last year and $31 billion of cash in the bank—is standing stubbornly still. In 2008, Exxon Mobil spent about $26 billion on oil and gas development, plus another $32 billion buying back its own stock; spending on renewable-energy research amounted to a measly $4 million.

It probably shouldn’t be a surprise that the company’s prospects for the next decade or two are starting to look shaky. Exxon Mobil’s output and conventional reserves are declining, along with its share price, which is down about 17 percent since the beginning of 2008. In Silicon Valley, where venture capitalists and entrepreneurs are pouring their hearts, their souls, and billions of dollars into solar, wind, and electric-car investments, some in the clean-tech crowd have dubbed Tillerson the T. rex of the hydrocarbon age.

The nickname is fitting. Critics see Exxon Mobil itself as a hulking dinosaur that mastered the earth in one era but appears increasingly maladapted in the current one. “They’re dinosaurs, absolutely,” said Fadel Gheit, an influential oil analyst for the investment firm Oppenheimer & Co., when we sat down in his Manhattan office last summer, as oil prices were soaring. “They epitomize peak-oil theory: They can’t grow production. They can’t grow [conventional] reserves. They need to ask themselves, Where will they be in 50 years? What will they do when oil is gone? They need to reinvent the company.” With oil prices down, Gheit is more sanguine but adds in an email: “A national energy strategy is a must and three decades overdue, and the environmental issue must be a part of it. Exxon and all other energy producers and consumers must recognize that and cooperate in fixing the problem before it gets a lot worse.
(April 2009)

Shell dumps wind, solar and hydro power in favour of biofuels

Tim Webb, Guardian
Shell will no longer invest in renewable technologies such as wind, solar and hydro power because they are not economic, the Anglo-Dutch oil company said today. It plans to invest more in biofuels which environmental groups blame for driving up food prices and deforestation.

Executives at its annual strategy presentation said Shell, already the world’s largest buyer and blender of crop-based biofuels, would also invest an unspecified amount in developing a new generat­ion of biofuels which do not use food-based crops and are less harmful to the environment.
(17 March 2009)
George Monbiot comments: Shell’s subtle switch from renewables to the murky world of ‘alternative’ energy.

Crude truth behind numbers that govern our lives

Carl Mortished, Times (UK)
… It sounds absurd, that a tiny market, buffeted by local news, should become a proxy for values across a nation, not to mention the world, but that is roughly what has happened in the global oil market. Consider the benchmark US crude blend, West Texas Intermediate. It is the foundation of the US Light Sweet Crude Oil contract, traded on the New York Mercantile Exchange. Nymex WTI is the most widely traded oil futures contract. Every 24 hours, the volume in barrels traded exceeds by three times the 85 million barrels of crude consumed daily round the world. The all-time “peak” oil price of $147 per barrel recorded in July was a US Light Sweet Crude price.

Then consider this: the daily output of WTI is less than 300,000 barrels. The Nymex contract is based on dwindling deliveries of WTI crude at a pipeline hub in Cushing, Oklahoma. It is a landlocked market serving Midwestern American refineries without access to the ocean. The WTI price is buffeted by refinery shutdowns, hurricanes and local bumps and wrinkles.

… So concerned is Platts that this week it launched a rival – Americas Crude Marker – a price assessment of four high-sulphur (“sour”) Gulf of Mexico crudes, which it hopes will better reflect the US market. Light, low-sulphur (“sweet”) crudes, such as WTI or Brent, are becoming rare and the global oil market is shifting to the sour, heavier Russian and Middle Eastern grades.

Meanwhile, the world carries on using WTI futures to construct insurance against all sorts of energy risks, oblivious to its dubious provenance.
(18 March 2009)

Free download of tar sands book

Jonathan Hiskes, Gristmill
Of all the absurdities at play in extracting oil from Alberta’s vast northern tar sands deposits, the most staggering might be the nuclear renaissance it threatens to create in Canada.

Whether nuclear energy presents a legitimate alternative to greenhouse-gas-emitting energy sources is one question. Environmentalists have long debated that. But Canada is considering something else entirely — building nuclear reactors not to free itself from fossil fuels but to literally dig itself deeper into their shrinking underground reserves.

Because processing bitumen into oil is such an energy-intensive process, Alberta and neighboring Saskatchewan have considered building new reactors to power the process. “If realized, these latest atomic visions for the tar sands would make Canada the only developed country in the world to employ nuclear power to accelerate the exploitation of carbon-rich fossil fuels,” Calgary journalist Andrew Nikiforuk writes in Tar Sands: Dirty Oil and the Future of a Continent.

The book, released in the U.S. on Monday, contains a damning account of the energy development in Alberta, where even the proper name for the black muck that oozes from the ground is in dispute.

The publisher of Tar Sands, Greystone Books, believes in the book’s social importance enough to offer it as a free PDF download through Friday (also check out Nikiforuk’s shorter “Declaration of a Political Emergency“).

(16 March 2009)
Related at Huffington Post: Tar and Feather.