EDITORIAL: Big Oil Is Us
Among the inhabitants of this goofy world are a few people who hang on to outlandish beliefs like the earth is flat, the moon landings were staged and complete strangers from Africa are anxious to share millions of ill-gotten dollars with them. Because there aren’t very many flat-earthers and kindred spirits whose ideas stray so far beyond logic, they are more likely to be pitied than scorned by sensible people.
More annoying are so many other people whose half-baked views are just as illogical but nonetheless end up in the mainstream of our economic and political conversations. I got to thinking about them in late October while attending the semi-annual meeting of the PVF Roundtable in Houston.
The Roundtable’s guest speaker was Richard Spears, a veteran oil and gas industry consultant, who gave a mesmerizing presentation about the state of those energy supplies. You can access his PowerPoint presentation at the PVF Roundtable’s Web site, www.pvf.org. If you do so, pay special attention to the slide labeled “Global Oil Marketing … Consumption + Extra Capacity.” It vividly depicts how the gap has narrowed between available supply and demand. A couple of other particularly instructive slides show huge increases in the sub-sea and directional drilling markets. This means oil supplies are becoming increasingly harder and more expensive to obtain.
Our planet’s two most populous countries, China and India, are expanding their economies at double-digit growth rates, with energy consumption rising alongside. Put that scorching global demand together with increasingly hard-to-extract supplies - then add in environmental pressures from the global warming scare - and it’s hard to see oil and gas prices going anywhere but way up. We’ll see market-driven fluctuations in between, but any graph with an X axis scaled out to decades is likely to see the $ arrow veering distinctly to the northeast.
Future historians may well define this era’s energy crunch as the pivotal issue of our times. How developed countries respond will shape the future for better or worse. Will our grandchildren continue to enjoy the upsurge in global prosperity that began with the onset of the industrial revolution? Or will they look back on these times as the beginning of the end of the “good old days?”
I prefer to remain optimistic, but if I’m wrong, I suspect the most astute historians of the future will blame any regression on the lack of seriousness with which our political leadership is addressing the coming crisis. Public policy about energy is being driven mainly by yammering about government-induced conservation and wishful thinking about unattainable alternative forms of energy. Any discussion of stepping up fossil fuel exploration and extraction gets shouted down for often-whimsical environmental reasons. Nuclear power - the cleanest, most abundant and obtainable non-fossil fuel alternative - has been relegated to the unthinkable file for the last two decades.
If only we could bottle all the hot air spewing from the energy naysayers and their political pets. Supposedly serious debates boil down to charges of greedy oil companies selling us down the river for short-term profits. That wins votes from people who can’t spell economics, and we will hear plenty of it in the coming year.
As if such demagogy were not insufferable enough, it gets coupled with hypocrisy. This came out in another PVF Roundtable program put on at the Network ’07 event in Anaheim a week prior to the Houston meeting. (See Industrial PVF News this month.) A panelist, Dan Westbrook, cited a study finding that only 1.5% of shares in the big oil and natural gas companies were owned by the board members and executives of those companies - people portrayed by the demagogs as the epitome of evil.
The remainder of public energy stock is owned by mutual funds, individual investors, asset management companies, pension funds, insurance companies, endowments, foundations, banks and other public institutions. (This information comes from the American Petroleum Institute and can be accessed at http://www.api.org/Newsroom/owner-study.cfm.)
In other words, average citizens invested in various ways own about 98.5% of the huge public oil and gas companies. No doubt this includes many of the same people who habitually bash the “greed merchants” from Big Oil, but who nonetheless fully expect those same executives to pad the bashers’ retirement nest eggs.
In writing this article the week before Thanksgiving, I for one intend to give thanks for oil company profits. Those big bucks, far more than today’s political rhetoric, offer a glimmer of hope for the future.