The Art of Spinning

As the previous post indicated, we in the U.S. have a pretty low energy IQ. One of the reasons is that energy stories are often reported in a very biased or uninformed manner, which tends to distort public viewpoints. For instance, you may think those evil oil companies are wrecking the world. You are entitled to your opinion, and admittedly the oil industry has done plenty to help forge those sorts of views.

However, in the U.S. we take an especially negative view of the oil industry relative to the rest of the world. Why? Odds are that your opinion has been shaped by stories like the examples in this essay. Make no mistake: Your views are carefully nurtured and cultured by various groups with agendas, often by publishing stories full of misinformation. (Full disclosure: I am attempting to influence your viewpoint here, but I am going to do so by pointing out shenanigans).

Here is a perfect example of a story in which words and examples were carefully chosen to convey a very specific (negative) viewpoint:

Big oil companies, little investment in renewable energy

The Center for American Progress released a new report analyzing 2008 oil company profits and lack of investment in renewable energy, even while the companies spend millions of dollars on ad campaigns touting their emphasis on renewable energy.

Note the wording. There was a “lack of investment” in renewable energy, while they spent “millions of dollars” on ad campaigns. The problem with that line – as you will see – is that the “lack of investment” is in the billions, which dwarfs the millions spent on the ad campaigns. But I suppose “billions spent on renewable energy and millions spent on ad campaigns” doesn’t convey the desired negative impression as does “4% spent on renewable energy and millions on ad campaigns.” The first phrase would likely elicit a response of “Uh, OK.” The second one on the other hand? “Why that’s outrageous! Those misers!”

These kinds of stories also inevitably fail to note that the ‘miserly’ oil companies paid several hundred billion dollars in taxes as a result of those profits (if the stories mention taxes at all, it’s that the oil companies aren’t paying their ‘fair share’). According to the Tax Foundation, oil companies have paid out some $2.2 trillion in taxes over the past 25 years – far more than they earned over that time period. But such a misleading picture tends to get painted, that many may think this petition is rational:

Stop subsidies for Big Oil

Think oil companies should pay their fair share of taxes? So does President Obama. In his budget, the President has proposed cutting billions of dollars in special subsidies and tax loopholes for oil and gas companies.

Just what is a fair share? Will it only be a fair share when oil companies are funding the entire U.S. government? But back to the initial article:

It should come as no surprise that last year’s record high oil prices also led to near record profits for big oil companies.

No, we were bombarded with headlines about it all the time. It should come as no surprise at all. So someone should tell this guy, who thinks it is a secret:

Obama braces for big oil backlash

Little known fact: While most every other industry was falling to pieces last year, the oil industry posted record profits. ExxonMobil alone made $45 billion. So Obama, in his attempt to bolster the sinking U.S. economy, is likely not feeling too much sympathy for the industry as he goes after the clearly unnecessary tax credits the industry currently enjoys.

Another example of a highly misleading article (which actually led me to the petition). Important to note once again that while other industries were falling to pieces and requiring multi-billion dollar bailouts, the oil industry was making big profits and paying big taxes; taxes in part which enabled those bailouts. But let’s continue to dissect the initial article:

Despite their soaring earnings, the big five companies were very stingy with investments in renewable and low-carbon energy technologies and fuels that would reduce oil dependence.

Media tracking group TNS Media Intelligence reported that $52.5 million was spent in the first quarter of 2008 along by the oil industry on greenwashing advertisements that boast about investments in wind and solar power or efficiency.

In fact, a CAP analysis of their investments reveals that the big five oil companies invested just an average of 4 percent of their total 2008 profits in renewable and alternative energy ventures.

So, let’s have fun with math. According to the story, 4 percent of total 2008 profits was spent on renewable and alternative energy. That amounts to $4 billion, which the writer considers “very stingy.” $52.5 million spent on advertising – which is only 0.0525% of 2008 profits – amounts to a “smokescreen PR campaign.” Just once I would like to see one of these articles stick in a line like “In fairness, spending on their tax bills amounted to 250% of total 2008 profits.”

What planet do these people live on? Oh, right. The planet where oil companies are run by psychotic madmen and profits go to a select few executives and insiders who conspire in smoke-filled rooms. The planet where novices ‘know’ that the industry should invest their profits into ventures that aren’t their core business, and which would likely cause their profits to vanish (potentially leading to a bailout scenario!) These people live in a cartoon world, but the problem is that most of the population lives there.

Voters have been conditioned to hate Big Oil, as Robert Bryce points out in:

Exxon, Big Oil Profits Evil Only Until You Weigh Their Tax Bills

Bryce notes:

While it’s unlikely that the general public’s attitude toward Big Oil will ever be changed, the public should recognize that Exxon’s profits have come along with an enormous tax bill and that those tax payments are helping governments all over the world stay solvent. According to the company’s income statement, the amount of taxes it paid in 2008 was 2.5 times as much as its net profit.

In 2008, Exxon’s tax bill averaged about $318 million per day. And it paid those taxes at the very same time that the whiz kids on Wall Street, the geniuses at AIG, and the mavens at Freddie Mac and Fannie Mae, were begging Uncle Sam for multibillion-dollar life preservers in order to prevent financial chaos. Exxon made huge profits—and paid record taxes—at the very same time that the U.S. financial system was undergoing near-fatal convulsions brought about by excessive speculation, uncontained greed, and a basic failure to provide goods and services needed by the overall economy. How many Americans really need credit default swaps or collateralized debt obligations? Now compare that number with the tens of millions of Americans who absolutely must have gasoline every day.

What about the original article at the Center for American Progress (CAP)? Funny story on CAP. I was invited to D.C. a few years ago for an energy conference, and I happened to be acquainted with the Director of Environmental Policy at CAP (which is a liberal think tank). I was invited to drop by and talk to CAP about the oil industry. Even though I expected a hostile audience, I was looking forward to it, because I thought I might be able to address some gross misconceptions. But at the last moment, my company decided that it wasn’t a good idea for me to make the trip as oil prices were at all time highs and they were worried that I might find myself in an awkward situation with the media. But, back to the original CAP article:

Big Oil Misers

That certainly looks like a balanced title from an organization that describes itself as “non-partisan.” The strategy in the article is the same as the earlier article: Use a percentage to downplay the multi-billion dollar investments in renewable energy, and then quote the advertising money in “millions” to make it appear that more was spent on advertising than on renewable energy. But why must a truly non-partisan organization spin like this? Shouldn’t a balanced article mention the monumental tax bill that has been used in part to bail out other industries?

Worse, there are blatant falsehoods in the article itself. After noting that the American Petroleum Institute claimed that “most people support putting more of America’s oil and natural gas to work”, the CAP article claims:

And API’s assertion that “most people” support more oil and gas drilling is misleading at best. An NBC/Wall Street Journal poll asked “When it comes to addressing our energy problems, which one of the following do you think should receive the most emphasis?” (italics used for emphasis). Six of 10 respondents favored “developing alternative energy sources.”

Misleading at best? Hmm. Let’s have a look at the poll, shall we? On Page 26, we see Question 35:

I’m going to read you several steps that could be taken to ease America’s energy problems. For each one, tell me whether you think this is a step in the right direction, a step in the wrong direction, or if you do not have an opinion either way. And do you think this will accomplish a great deal or just a little in dealing with America’s energy needs?

How did people answer? While 92% felt that developing alternative energy sources would either accomplish a great deal or at least a little, 63% said the same about expanding areas for drilling for oil off the coast of the United States. Where I come from, 63% is “most people” and there is nothing misleading about the API making that claim. It is quite disingenuous, though, for CAP to suggest that API’s statement was misleading. CAP is either spinning or they didn’t read the survey very carefully. They have interpreted the question “Do you support this?” – which is the question API commented upon – as “Do you support this as your number 1 priority?” The ‘misleading at best’ charge aptly applies to CAP in this case.

I wish there wasn’t such an antagonistic relationship between the oil industry and Democrats. There is too much at stake. Historically, Republicans are more supportive of the oil industry, and in turn the oil industry overwhelmingly supports Republican candidates. (Or it may be the other way around; the oil industry supports Republicans who in turn support the industry). On the other hand Democrats (except for those in oil-producing areas) are generally hostile to the oil industry, which ensures that not much money from the oil industry will go to support the Democratic party (although Diane Feinstein has reportedly received $100,000 from the oil industry in the past decade).

My view that Big Oil and Democrats should find common ground has nothing to do with wanting to make nice with a new administration. My views are based on the belief that any intermediate success at achieving some level of energy independence must involve a large contribution from oil and gas. I think it goes without saying that oil and gas provide the overwhelming majority of our transportation fuel, and that they are forecast to provide the overwhelming majority for decades to come.

The problem is of course that some naively think they can marginalize the oil industry with punitive taxes, and alternatives will step up and fill the void. (To be clear, I also don’t subscribe to Newt Gingrich’s viewpoint that encouraging the development of shale oil will lead to energy independence). What will happen in reality is that punitive measures will discourage domestic production, which will quicken the pace of shifting our supply to imports. It is ironic that Steven Chu doesn’t seem to feel the need to work with our domestic oil industry, but warns OPEC not to cut production, and then is pleased when they don’t. I believe the blind spot in the present administration over the need to support our domestic producers will simply mean that future energy secretaries are even more beholden to OPEC.

This might change if we could have a more balanced discussion on our energy policy. However, I am keeping expectations pretty low. I have learned to do this when the topic is energy.

37 thoughts on “The Art of Spinning”

  1. First off, I’d have to see some documentation on that 4%.

    I would be Astonished if you could find proof that Exxon invest 1% in renewable energy last year.

    4% for the industry as a whole would be what, around $4 billion? I don’t believe it.

  2. Good stuff Robert. Haven’t I also read that oil companies’ profit margin is very low compared to other industries?

  3. 4% for the industry as a whole would be what, around $4 billion? I don’t believe it.

    While XOM spends very little on alternative energy, the industry as a whole has a number of projects that amount to quite a bit of money. It is most certainly in the billions. Think about it. BP and Shell both have big solar businesses. ConocoPhillips spent a lot of money to develop green diesel technology. Chevron is the largest producer of geothermal energy in the world.

    I suspect that with the collapse in oil prices, alternative energy investments will drop. After all, oil companies do not view them as core businesses. For that reason, they will tend to receive more funding when times are good. But don’t kid yourself. Billions have been invested by the oil companies. (In fact, I read somewhere that oil companies have invested more into alternative energy than the government has, but I don’t recall the source).


  4. Haven’t I also read that oil companies’ profit margin is very low compared to other industries?

    As a percentage of sales, it is a low number. Historically, I think it has been something like 7% (below the industry average) but in the past few years it has been more like 10% (just above the industry average).


  5. Admittedly, when I think of oil companies I think of investments in Liquid fuel (or, at least transportation fuel.)

    However, I still don’t believe they spend 4% EVERY YEAR. I guess that if you applied some very liberal accounting they could have spent 4% of one year’s profit stretched out over ten, or twenty years.

    Anyway, I think I’m proving your point. Many Americans don’t believe much of what they see, hear, or read. We’re just too used to the spin.

  6. However, I still don’t believe they spend 4% EVERY YEAR.

    Ah, but then they didn’t make $100 billion every year either.

    Also note that the 4% comes from an organization critical of oil companies. Therefore, it likely represents a very conservative estimate. Given the way they spin this information, they would have used the number most favorable to their case.


  7. I went back to the “source” article, HERE.

    They made $656 Billion from 2001 – 2008. 4% of that would be in the range of $26 Billion.

    Then, I noticed that it said, “Renewable, and Alternative Energy.” Doesn’t this mean, “Tar Sands?” “Shale Gas?” etc.?

  8. You see, many of us grew up in “small-town” America. We learned, quickly, that if you wante to know if the local factory would be hiring, you didn’t ask the President of the company. You asked the guy down at the loading dock, or the drill press operator. “You Been Busy?” “Getting any Overtime?” He’d tell you the “Truth.”

    Nobody in their right mind would expect Exxon to like biofuels. They own “Oil” Fields, not “Corn” fields. Anything beyond that is just blather. “Spin,” if you will.

    As a “country” boy, the most instructive thing I’ve seen, lately, was Valero buying the Verasun refineries. That, I thought, gave you a glimpse into the “future.”

  9. Then, I noticed that it said, “Renewable, and Alternative Energy.” Doesn’t this mean, “Tar Sands?” “Shale Gas?” etc.?

    No, they have some other cute name for tar sands and such, but it isn’t alternative energy. I think it is “Next generation technologies” or something like that. So that won’t be included in the number you dug up.

    But you are getting into a different question. The topic of the article refers to the spin being applied. Your question is how much should they invest in alternative energy? Well, how much do you think? How much should they pay in taxes?

    Nobody in their right mind would expect Exxon to like biofuels.

    Exxon will invest in whatever they think can make them money in the long run. If they thought corn ethanol was going to be a viable, long-term option, they could own the entire industry. But they know as soon as they do, government would pull support.

    As a “country” boy, the most instructive thing I’ve seen, lately, was Valero buying the Verasun refineries. That, I thought, gave you a glimpse into the “future.”

    Valero did what they did (an alternative energy investment, I might add) because they are obligated by the government to meet a specific blending obligation. Since they are a very large U.S. refiner, this was a cost effective way for them to meet their mandates. In the context of the mandates, it made sense for them. But without the mandates, they wouldn’t have done it.

    Oil companies are businesses that answer to their shareholders. They will invest in what they think makes sense. Just because a liberal think tank thinks they should invest more in alternative energy, doesn’t mean they should. If they don’t and miss a big opportunity, they will answer to shareholders. Likewise, if they don’t invest in something that turns out to be a bust, they have made a wise decision.


  10. I agree that Valero would Not have bought the Verasun refineries if there were not mandates to use ethanol.

    This IS NOT, however, the same as saying “That is WHY they bought them.” I don’t believe Anyone, not on the Valero board, knows, exactly, WHY they bought the VSE refineries. Shell, BP, Exxon, Conoco, all have the same mandates but They are Not buying ethanol refineries.

    I think it’s as simple as, “They believe the ethanol business will become more profitable as time goes on, and it ties in with their core business.”

    Valero is, from what I can ascertain, an extremely well-run business, with very smart people at the helm.

    On the other hand, you, obviously, have to say the same about Exxon, Shell, et al, and they Aren’t buying (yet) ethanol refineries.

    We’ll see.

  11. “In his budget, the President has proposed cutting billions of dollars in special subsidies and tax loopholes for oil and gas companies.”

    “Obama, in his attempt to bolster the sinking U.S. economy, is likely not feeling too much sympathy for the industry as he goes after the clearly unnecessary tax credits the industry currently enjoys.”

    I frequently see references to subsidies and other special tax privileges for oil companies, but there’s never an adequate explanation. Obviously, the oil companies pay many times more in taxes than any benefit they’d likely gain from government subsidies. However, I could easily see some companies being favored in government contracts, and thus be gifted a slight edge over competitors. Sort of like how Goldman Sachs has received a great deal of special treatment in the bailouts because of deep political ties.

    Also, I think oil companies are unfairly criticized for their lackluster investments in renewables. The people making the investment decisions at oil companies are smart. They realize there is currently no cost effective renewable energy source. But that doesn’t mean they’re not invested in trying to find long-term solutions. Oil companies are putting their money (from what I’ve read) into research. The problem is that research very rarely leads to any kind of return, which limits the amount of money that can be invested. The other limiting factor is that most research on renewable energy is already well funded, just look at NREL and other national labs. All the oil companies are just waiting for something truly promising to come out of research, everything else is just a side project for now.

  12. Rufus is correct that you can tell what companies are doing by the jobs they are posting.

    Sometimes you need a scorecard to keep track of who is who in the energy business. I work for a multi-national energy company. However, I was hired by a traditional US utility who were expanding to provide engineering services to DOE. At the time I had never done any work for DOE but my job was creating non DOE jobs. Two weeks after I started, we merged with a NG company to become multi-national energy company. ENRON in reverse.

    The good news for me was that I got to develop renewable energy projects. The bad new is that the NG folks took charge because making electricity with the NG was the future. So the engineering services get sold to another multi-national energy company based in the EU. The bad news is that they do not do renewable energy and I can no longer walk to work. Every few weeks they buy more US engineers. Then they change their name.

    To continue in renewable energy, I will have to change companies. BP and shell were hiring engineers for renewable energy projects. I decided to relocate with my company to what I considered by dream job in 1993 BC (before Clinton). As luck would have it, my present company is now big in renewable energy buying up several companies and opening operation in the US partnering with 2/3 of the same utilities. Last week there were several postings but you can only work one dream job at a time. To give you an example of the magnitude of the business a billion dollar contract was announced last week.

  13. ROBERT–

    you demonstrate the patience and demeanor attributable to a saintly person in dealing with your reading audience. many signs that working with you might be a pleasure.

    a curious,objective, deductive mindset is akin to liberty; both take diligence, dedication, attention to detail and hard work.

    keep the faith.


  14. I frequently see references to subsidies and other special tax privileges for oil companies, but there’s never an adequate explanation.

    The way I view tax credits, etc. is that they are designed to get a company to do something the government wants them to do. For instance, oil companies may view green diesel as a poor business. However, if the government was convinced that this is what is needed, and they wanted the oil industry involved, they should provide tax credits. (In reality, what happened in this case is the government offered subsidies to everyone but oil companies, which says they favor renewable diesel as long as the oil industry isn’t pursuing it).


  15. Off topic, but you have previously discussed Pacific Ethanol’s poor business model. Did you see that they are about out of cash, and considering bankruptcy by the end of April? I guess you can call victory on that one, especially over the poster who said that you were stupid because Bill Gates invested in it, and that was good enough for him.

  16. Firstly – a me too – where do you get 4% from? Please post on this.

    This Reuters article for example quotes quite different numbers.


    “Royal Dutch Shell Plc says it invested over $850 million in renewables, largely wind power, in the past five years. This excludes spending on hydrogen projects, which rely on natural gas, and biofuels.”

    It then lists lesser numbers for other companies – the numbers it quotes definitely don’t add up to $4bn.

    Secondly… I think rufus has a point the these companies are also guilty of spin:

    “Between 2002 and 2006, Chevron spent approximately $2 billion on alternative and renewable energy technologies in such diverse areas as geothermal, hydrogen, biofuels, advanced batteries, wind and solar”. However, this figure includes hydrocarbon projects.”

    “Company spokespeople declined to provide any figures for investments in renewables alone, citing “business reasons”.”

    Third point is – isn’t this all moot now that BP and Shell are selling all their renewables – or is this just another media propagated myth?

  17. I don’t believe Anyone, not on the Valero board, knows, exactly, WHY they bought the VSE refineries. Shell, BP, Exxon, Conoco, all have the same mandates but They are Not buying ethanol refineries.

    I know exactly why they did it. As the largest U.S. refiner, they are the most at risk if they don’t meet the mandate. Therefore, they have the most compelling case of any of the refiners for buying the producers of the blendstock to ensure that they are first in line.


  18. I guess you can call victory on that one, especially over the poster who said that you were stupid because Bill Gates invested in it, and that was good enough for him.

    Ah, you mean our friend James:

    Well, this is why Mr. Gates has money and you don’t. He has something else that you don’t have either – the ability to see into the future…if you think PEIX or any other ethanol producing company is dying or dead, then you are very very stupid. For those who are selling off your stock of PEIX, thank you very much. Please keep selling it off because I’ll get a better deal when I buy it.

    I wonder how far down the poor sap rode the stock? As of that writing, it was at $9.97. It closed last Friday at $0.32.


  19. Firstly – a me too – where do you get 4% from? Please post on this.

    That was a direct quote from the article:

    In fact, a CAP analysis of their investments reveals that the big five oil companies invested just an average of 4 percent of their total 2008 profits in renewable and alternative energy ventures.

    Regarding this:

    This Reuters article for example quotes quite different numbers.

    You are looking at 2006. The cited article looked at 2008 spending contrasted with 2008 profits.

    Secondly… I think rufus has a point the these companies are also guilty of spin:

    Nobody said they don’t try to pad their stats by lumping GTL and such into ‘next generation technologies.’ But in the specific category of renewables and alternative energy, things like shale oil and GTL are not counted in the spending numbers that CAP looked at.

    Third point is – isn’t this all moot now that BP and Shell are selling all their renewables – or is this just another media propagated myth?

    They are selling specific segments. Shell, for instance, is dumping wind and solar to focus on liquid biofuels. But again the point is not how much was spent. They have no obligation to spend a dime on biofuels. If they don’t and they miss an opportunity, their shareholders will suffer. The point of this article is how spin is very consistently applied. Billions become a small number if the purpose is to minimize the amount they spent. In the same article, millions becomes a big number if you want to make it sound like they spent a lot (on advertizing in that case).


  20. I have never understood the idea that oil companies are obligated to spend money on “alternative energy” projects. My understanding of their obligations (any corporation’s obligations really) is to spend their money in their businesses, don’t waste it on somebody else’s bright idea, pay their taxes, and distribute the rest to their shareholders as dividends.

    It is not as if the oil companies have any way of blocking access to the sun, the wind, and the tides. Nor do they have any reservoir of technical expertise in other people’s businesses.

  21. 'Please contact us to discuss writing with us. Note these are part-time and volunteer positions.'

    The above paragraph is from the site. I have not followed the climateark site but many other green sites have the same offer and the quality of the articles (often modified and opinionated extracts for other sites) it really bad!

    Then these sites quote each other or u tube as informative.

    In the end you have the uninformed & opinionated copying and quoting each other – really good stuff.

  22. Good luck in DC this week.

    Speaking of your old friends at Center for American Progress, their chief climate accolyte, Joe Romm, recently debated Marc Morano, a former staffer for Senator Inhoffe. Links here: No Wonder Climate Alarmists Refuse to Debate

    Romm accuses Morano of just “making stuff up” and counters Morano’s arguments by making stuff up.

    Romm claims that temperatures will rise 10-15 degrees and that one third of the planet will be desert. (Did he mean the 1/3 of the planet that is land, or the 1/3 of the 1/3 of the planet that is already desert? I’m confused.)

    Joe digs his hole deeper by claiming that so called “green jobs” outnumber fossil fuel jobs already by claiming more people are employed in wind energy than there are coal miners. That is an apples to frisbees comparison. They got there by counting EVERY job involved in wind power, and ONLY coal mining jobs. Forgetting transportation jobs, and all the jobs in power generation.

    Joe must not be too proud of his performance. He makes no mention of it on his own blog.

  23. “That is an apples to frisbees comparison.”

    King you understand that splitting firewood is woman’s work? That is because using mules to plow the field in man’s work. A woman was well off if she had cast iron a cook stove instead of a open fireplace.

    The productivity, safety, and environmental improvements of the coal industry in the last 30 years are just awesome. Americans can drive big SUV because we are very productive and efficient. Particularly when comes to making electricity.

    The irony of having energy supplied by a few workers at a low cost is that others have time to debate how terrible it is.

  24. I enjoy reading you articles & comments. Thanks & please keep it up.

    In my mind, I separate greens into two groups:
    1. Greens with desire and intent to learn and do something – useful bunch
    2. Green idiots who already know everything there is to know – just ask them and they do nothing but parrot what they have seen on some site – never questioning the accuracy of the statement or site

    There needs to be some reason to mix in with all the BS spread by green idiots.

  25. Kit P. – “Green Jobs” is one of the biggest spin jobs in recent memory. The Greens have done the polling and know that environemental issues barely show up on the public’s radar screen these days. In a recent poll global warming ranked just below “trade issues”. So they have to spin enviorommental issues into jobs/economic issues to get any traction.

    This is all part of a broader strategy to demonize succesful industries like energy and oil and gas.

  26. King, I agree about spin of green jobs. I happened to like heating with wood. If I was working too much overtime I would reluctantly pay someone to provide wood. Fire wood is renewable energy. Can I spin it into a green job? You betcha!

    Here are some snippets from a Kansas rag:

    “With just enough training in mechanics, electronics and computer know-how, instructors say just about anyone with the perseverance – and arms beefy enough to climb 27 stories one rung after the next – can fashion themselves into a wind technician in one year.”

    “On average, one technician can keep 10 windmills pumping electricity into the grid.”

    “Under stronger winds, technicians have been known to vomit.”

    Therefore, being the navy is a green job if you ever suffered from motion sickness.

  27. There is mass delusion working in the oil companies’ favor as well. They work hard to cultivate the drill-baby-drill delusion and the Gingrichesque shale delusion which thinks Colorado oil shale is the ‘new Saudi Arabia,’lots of these delusions proliferating. I don’t think we’ll see Shell stepping up to correct Gingrich’s article.

    Maybe this is just a case of the mass ignorance the oil companies’ actively cultivate coming around to bite them on the ass.


  28. 57,

    The EIA tracks about 13,800 oil companies in the US, and while I’m sure there are some companies with unconventional views, I doubt you’ll find any credible oil industry executive claiming that drill, baby, drill is the answer to all our energy prayers. Exxon, for example, is on record with this:

    “Meeting the world’s growing energy needs while also protecting the environment will require an integrated set of solutions. This integrated approach includes three key elements:

    * accelerating gains in energy efficiency to conserve supplies, reduce the growth rate of greenhouse-gas emissions and minimize energy costs,
    * expanding all commercially viable energy sources to enhance the availability of reliable and affordable energy, and
    * developing and deploying technology to help mitigate the growth of emissions associated with energy use.”

    Whether we should believe them or not is not especially relevant. The point is that they are saying that future energy requirements are sufficiently great that we will need contributions from a host of sources. We need to cast the energy net. I think this is the prevalent view in the industry.

    Obviously they would like more drilling, since that’s their business (and it’s their business only because you and I are buying their oil), but that doesn’t mean they think it’s the only answer. This is your spin on it. Do you see the difference? You’re claiming that the industry as a monolith is trying to delude the public with the “drill, baby, drill” chant. So perhaps you could post sources? Quotes from credible industry leaders that think drilling is the only answer for the future? And I mean lots of quotes, since you’re ascribing this ruse to the industry in general.

    As for the Colorado shale delusion, I’ll ask you to demonstrate the same… that the industry is attempting to fool the public. Please provide quotes indicating a monolithic industry position designed to fool the public.

    The EIA says: “Colorado’s oil shale deposits hold an estimated 1 trillion barrels of oil – nearly as much oil as the entire world’s proven oil reserves. However, oil production from those deposits remains speculative.”

    On April 2, the US Geological Survey said: “The Piceance Basin of northwest Colorado probably holds about 53 percent more oil-shale resources than previously estimated, the U.S. Geological Survey said Thursday.

    It was the federal geology and mapping agency’s first reassessment of in-place oil-shale resources in the basin in 20 years.

    In 1989, USGS said the Piceance Basin held the equivalent of about 1 trillion barrels of oil in its oil-shale resources.

    Now, it says the basin has an estimated 1.525 trillion barrels of in-place oil-shale resources.”

    The resource is known (or better, estimated). The issue is technology and profitability. Given assumed oil prices and extraction costs, can the industry produce these shales at a profit? No one is going to hype a resource if they don’t think they can make money on it. Maybe they can at $150 oil, probably they can’t at $40. Where’s the delusion?

    Fifty years ago, you might have claimed that Prudhoe Bay was hype. After all, prices were low, it was too expensive to explore in North Alaska, the environment was too pure, and the industry was deluding the public to get their hands on it. By the late 1980’s it was producing 25% of our domestic oil supply. 25 years ago, you might have said the same about the deepwater Gulf of Mexico. But that province now produces (estimating here) 15-20% od our oil. What happened in these two cases was technology improvement combined with changing cost and price regimes. What is your information, exactly, on future oil shale technologies, economics, oil prices and production volumes, that leads you to claim delusion?

    I think this post illustrates pretty well the problem RR describes when it comes to general understanding of the oil industry in the US. People don’t know much about it, but hear negative sound bites by an equally uninformed media, with the result that it’s widely accepted by folks like 57 that the industry is somehow conspiring to the detriment of the rest of the country, despite the mountains of evidence to the contrary.

    I don’t think anyone who knows the industry will claim that it’s staffed by choir boys. But neither is it staffed by Klingons and mafiosi. In fact, I think it’s pretty safe to assume that, at a personal and industry wide level, it’s no more or less ethical than just about any other industry. So why is it assumed to be the enemy?

    I had to chuckle when reading a recent reference to Judy Dugan in the LA Times. Here’s a major US newspaper quoting Dugan as saying “almost any gas station will tell you that the refiners are fixing the price to keep it high.” Well, where’s the evidence for widespread conspiracy? There is none. The Times is giving the readers some “balance.” So the average reader comes away with another reinforcement of the evil oil company notion. I don’t think you’d see a science editor quoting the Flat Earth Society for balance when writing a piece on an astronomy convention. But we have the LA Times quoting the energy equivalent to the Flat Earthers to, we must assume, provide “balance.” This shows how little that even the editor of a major newspaper knows about energy, and it gives a pretty good sample of the scope of the problem RR will be addressing at the convention.

  29. 57 – hurumph!

    You also won’t hear energy companies touting “energy independence” for the US or the mantra “we haven’t built a new refinery in X years”. Rather you hear the words “energy security”, which stresses flexibility and imports from secure and stable partners.

    Energy companies seem to be about the only ones supporting increasing ALL forms of energy supply, from drilling to alternatives. The greens are anti-coal, anti-nuclear, anti-oil. Energy companies don’t go around spinning this fantasy that we can switch from petroleum supplying more than 90% of our transportation and coal at 50% of our electricity to alternatives without massively reducing our demand for energy and increasing the cost, and destroying our economy.

    Given a choice, I’d trust ExxonMobil a lot more than any politician.

  30. More kinds of spin! First there is the good intention spin.

    “We’re going to…..”

    In this case the renewable energy is land fill gas. My big company DOES LFG and the EPA gave an award for innovation. The little public utility I used to work for DOES LFG. I have toured both facilities. Ten years ago I called my project developer friend at the little public utility and tell him I put together a great presentation if we partner. He says do not bother because they issue the same RFP every year.

    The “We’re going to..” folks are going to be the biggest too. In fact they are going to be ten times bigger. Ever notice the “We’re going to..” biogas projects in California are always 49.9 MWe? When I calculated the size of a biogas project it was based on the amount of biogas, the BTU content of the biogas, and the heat rate of the ICE. The not so little PUD I used to work for in California tried this. The environmentalists noticed the natural gas pipeline and figured out that 94% of the renewable energy project was not renewable energy.

    Second is the potential spin. From a BO cabinet member,

    “windmills off the East Coast could generate the same amount of electricity as 3,000 coal-fired power plants”

    This is actually a great idea. My company could build the wind turbines. Economics are a matter of perspective. My assumption is that the coal plants that get closed are not my utilities coal plants. It is certainly a good deal if my green job makes city folks electricity more expensive while my rates stay cheap.

    Potentially means nothing, it is the doing part that counts.

  31. Nobody in their right mind would expect Exxon to like biofuels. They own “Oil” Fields, not “Corn” fields. Anything beyond that is just blather. “Spin,” if you will.
    Nope. That does not compute.

    The focus of Exxon and other US Big Oil would be to keep selling liquid fuels to its customers. In reality, I believe, US Big Oil don’t care where the liquid fuels come from, it’s just that (so far) crude oil has been the most cost effective way to do it. That may eventually change.

    At the moment US Big Oil (or most of it) still owns enough reserves so that $150/bbl means great profits. But that is changing. Already US Big Oil’s share of the remaining reserves is shrinking, so that we are getting closer to the day that $150/bbl will hurt more than it helps, as happens already for Valero and other refiners.

    When it comes down to it US Big Oil will gladly buy corn from Farmer Bob, probably more gladly than buying crude from Hugo Chavez and our allies in the Middle East.

    Not to worry. Before US Big Oil buys corn from Farmer Bob, it will just buy Waste Management and get paid for taking all the carbon it that is available…

  32. As of today. investment in alternative energy is a venture capital crap shoot. Going forward, many such ventures will be pursued, and most will fail. There are no sure things out there. Eventually, after many ventures fail, a few will survive – and provide captivating success stories. But if you think you know which one(s) will win – buy their stock now.

    On a related note: Exxon-Mobil bought back about 6% of their stock in 2008. This means investors sold XOM and received money which they were then free to invest in alternative energy, if they wished. Of course, savvy investors aren’t likely to throw money at something with questionable profitability. Only taxpayers do that.

  33. armchair261,

    Judy Dugan is an idiot. Stop trying to paint any negative commentary on the oil industry, no matter how self-evident, with the same broad brush.

    Last time I checked, oil companies were in it to make money, not save the world. Of course when oil companies benefit from certain types of public ignorance they will foster the delusion(s) that make money for them. Currently access is what they want so they promote the delusion that leads to greater access, the delusion that such access to off-limits areas will make a significant difference to the country’s energy security. They foster this delusion in many ways, not least of which by shoveling money to dutiful, pandering politicians like Hatch and Gingrich who feed the delusion to their constituents. Oil companies put their money where their mouths are. They also do this by taking out full-page ads in, say, the New York Times, or by buying advertising on prime time television which feed the delusion as well.

    Of course they acknowledge the common sense notion that efficiency, alternatives and new supply are all important. But they really want you to believe that new domestic oil and gas supply will be the most important facet of energy policy going forward.

    “But of utmost importance, America needs policies that promote greater supplies of oil and natural gas, not policies that hinder the industry’s ability to provide consumers the energy they demand and need. The U.S. could significantly improve its energy security by allowing access to domestic oil and gas resources.”

    Yeah, and 50-dollar notes might fly out of my nether regions.

    When it comes to the Colorado shale potential, it’s what they don’t say. It’s true that there may be as much as 5 times as much oil in western shale than there is in Saudi Arabia. Lobbyists and politicians tell us every damn chance they get. What they don’t say is that Shell will never be able to extract it at a rate that will make any significant difference to society at large, and even the small amounts they might be able to produce will come at a tremendous cost in energy, carbon and water.

    The public’s ignorance is something oil companies try to harness and ride like a horse.

  34. The NY Times must be reading this blog. They had a story today on how miserly Big Oil is with renewables:

    Oil Giants Loathe to Follow Obama’s Green Lead

    Round up the usual suspects. Call hit the speed dial button for NRDC for background (what was Tyson LowScum at Public Citizen out of the office?) Blame big oil. It is all their fault that we don’t live in Obama’s Green Fantasyland.

  35. 57,

    No one is saying that the oil industry is altruistic. That’s the point. They’re businesses mostly just like any other business. So why are they demonized?

    You supplied no evidence for your inference that domestic oil and gas supply is not going to be very important in the future (you might want to check what the EIA and the IEA say on this). You failed to supply any evidence that the industry is adopting a premeditated illegitimate stance in knowingly leading an uninformed public astray. What if the industry really does believe what they’re saying? We’re supposed to just believe your claim that oil and gas will soon be a secondary source of energy, because you just… you just know it I guess. Wishful thinking is not very convincing and has no place in setting policy.

    From your comments it’s pretty clear you’re unfamiliar with key technical details of oil shales, specifically geology, geophysics, and well completion technologies. Yet you say, at least in the case of Colorado, that significant commercial development will never happen, that it’s all a ruse. If it’s never going to work, then why do you suppose the industry wants to drill wells there? No evidence is provided for your claims here, so I guess we are supposed to all believe that your personal bias is again good enough for US policy. Once again, not very convincing.

  36. armchair,

    You have again ascribed all sorts of things to my post that weren’t in there. I’ll try to be more clear.

    Oil and gas is going to remain important for the foreseeable future. Domestic oil and gas is going to remain important for the foreseeabe future. But to say that access to *new* areas of domestic development in oil and gas is going to be the *most* important aspect of energy policy going forward — that’s simply ridiculous, and dangerous. And that is what the oil industry, collectively, through their many lobbying outlets, would have the ignorant public believe.

    I also never said that shale oil wouldn’t or couldn’t be developed on a significant commercial scale in Colorado. I think Shell could make plenty of money there, that is, should the population remain ignorant of the basic issues concerning the project’s incredible thirst for coal-fired energy and water, and ignorant of the potential environmental disasters should the whole ‘freeze wall’ thing not work out quite as planned. What I said was that they would never be able to produce oil from this resource at a rate that will be a significant positive for society at large, considering the huge trade-offs involved. Seems like Shell is advertising a potential 100k barrels per day, and to get there will have to convince the public to let them build the biggest coal-fired power plant in a state that already has plenty of coal-fired plants, and consume water at 3 barrels-to-1 in a region that has very little water. That makes the chances of Shell’s fulfilling the stated potential of this resource, and thus producing on the order of 1/100 of what comes out of Saudi Arabia, seem pretty unlikely. That could be a pretty tough blow for Shell but probably not for the rest of us.

    Colorado is not Saudi Arabia, and to claim that it is, repeatedly, is a lie that harms the country’s energy security.

  37. 57,

    I think you’re being unfair to the oil industry out of personal bias against it.

    When you mock the statement: “But of utmost importance, America needs policies that promote greater supplies of oil and natural gas….” you’re implying one of two things. You’re either saying that increased domestic oil and gas supplies will not be very important, or you’re quibbling about rank and time frame. You’re suggesting that maybe new supply should not be “utmost”, but instead #2 or #4 or something, and that there is no question about this. To me this is an unhelpful discussion to have. The key point is that domestic oil and gas supply is and will continue to be critical. We can leave the rank and the time frame to others to work out, but to single out the industry for making a delusional claim here seems very pedantic and unfair to me. And you still haven’t provided any evidence that 1) this is not a legitimate industry belief, and/or 2) that they are intentionally duping the public. You haven’t demonstrated what the range of new domestic supplies might be, or what their impact might be on US energy security or the US economy.

    If by “importance” you’re talking about strategic direction, then maybe you have more of a point. But then time frame comes in to play. For the next several years, at least, oil and gas are going to be #1. In 200 years, probably not. But “several” could turn out to be 30, and it’s not smart planning to just wish away the importance of domestic oil and gas supply, hoping that something else will soon take its place. You might be wrong. It also seems misguided to start winding down one energy source before you have another ready to take its place. So I personally think it’s fair to say that development of domestic reserves is of utmost importance, at least in the near to intermediate term. For better or worse, fossil fuels are all we have for years to come to power our society on any reasonable scale. But in the longer term we do need to work towards a replacement (or more accurately a supplement) for fossil fuels.

    Whether those new supplies come from Colorado or somewhere else is another problem. Now you’re bringing in the issue of environmental trade off. Look, when oil companies drill, dollar bills don’t come flying out of the borehole. Oil does. Which means the oil companies will only drill for oil if there are buyers who demand it. There would be buyers for Colorado shale oil. It’s then up to local or state residents to decide on whether the trade off is worth it, i.e. whether they want to drill for the oil, or have someone do it somewhere else where presumably the environment and wildlife are less important. That’s a legitimate issue, and people have the right to preserve their environment at the expense of oil development. But if they’re still going to consume that lost oil anyway, then they have to recognize that there is no energy free lunch, that the oil is going to have to be found somewhere else or they’re going to be paying marginally more, or that they’ll have to pay more on a unit basis for replacement wind or solar energy. But most people in the US demand an a free energy lunch.

    I don’t believe any credible industry source has claimed that Colorado shales are the answer to our problems, or that their oil reserves will replace Saudi Arabia. Can you quote a reference on this? I think you are confusing the term “reserves” with “oil-in-place (OIP).” There is a huge difference between the two, and the press often prefers to use OIP because it sounds more impressive. In terms of OIP, maybe the Colorado shales could rival Saudi Arabian reserves, but clearly not in an apples to apples comparison. Suppose though that through technological advances over the years, the industry can recover 10% of OIP instead of 5%, for example? Incremental improvements can have huge impact in such a resource play.

    You discount Shell’s claim of 100K bopd. In January 2005, North Dakota was producing 90,000 bopd. As of November 2008 it was producing 216,000, an increase of 126,000 bopd in 4 years. By far most of that gain came from the Bakken oil shale. Which doesn’t necessarily mean that the same will happen in Colorado, as all shales aren’t the same, but it does show what is achievable in a short time frame.

    The US oil industry just can’t win. They are criticized, by those who buy their products, for exploring for those products in certain places, or in other words that excessive development is damaging the environment. And at the same time, others are criticizing them for not doing enough. A lot of people think the industry has secret reserves tucked away somewhere that they withhold from the market to drive prices higher. The industry is spending too much on stock buybacks and not enough on developing new supplies, they charge. Then one person will say that 100,000 bopd is insignificant, but another will criticize the government (in cahoots with Big Oil of course) for adding 50,000 to 70,000 per day into the Strategic Petroleum Reserve, saying that it’s putting even more pressure on prices. One spinner says 100K is nothing, the other says even half that is very important.

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