There’s a brilliant story today in the New York Times, At ExxonMobil, Making the Case for Oil. Many aspects of what is reported struck me as remarkable, but the one that got my attention was Exxon’s predictions of the future:
According to Exxon’s own outlook, global oil demand is set to reach 116 million barrels a day by 2030, up sharply from 86 million barrels a day today.
Meanwhile, renewable fuels, like solar, wind and biofuels, will grow at a brisk pace but they will account for just 2 percent of the world’s energy supplies by then, according to Exxon, while oil, gas and coal will represent 80 percent of global energy needs by 2030.
“For the foreseeable future — and in my horizon that is to the middle of the century — the world will continue to rely dominantly on hydrocarbons to fuel its economy,” Mr. Tillerson says.
Of course as the world’s largest corporation (this year, at least when oil prices were high), Exxon certainly has a degree of power to control the future. But aren’t they thumbing their nose at … pretty much the entire world? Is this stance one that really serves their stockholders well? Perhaps in the short term it does — all those other companies are losing profits by investing in alternatives, even if still only to burnish their images rather than to make serious investments compared to their sizes.
Can it possibly be the case that Exxon discounts all of the various factors that suggest we are beginning a dramatic global shift away from hydrocarbon fuels? The reality of climate change is no longer something they can pay to suppress. Global governments are becoming more aligned against fossil fuels. Oil and gas are both getting more expensive and risky to get. Markets are very volatile. And perhaps most important, a new US administration will soon take over; Obama singled out Exxon repeatedly in his presidential campaign.
Having said this, of course Exxon has a small share in the coal business which is most easily replaced with alternatives to produce electricity. Do they plan to buy all the other non-state-owned companies and duke it out with Russia, Venezuela and the various Middle East companies?
We have repeatedly seen that arrogance, bravado, and corporate cultures can blind a company to reality. Our financial institutions and our car companies are only just the most recent and dramatic examples of this. I worked in the Internet industry during that bubble, and hope and then denial was evident in every corner. In each case, the companies that survived were the ones that are diversified and have a solid, long-term business model and the ones that invested in new ideas and different directions before it was fashionable to do so. Toyota and Honda were derided for their folly in hybrid technology. Google was derided for their foolish insistence on web search in 2000 when (“web search is a commodity” was the mantra … no, really, that’s what most people thought).
Can Exxon really, truly think that renewable sources will account for only 2% of the world’s energy supply in 20+ years? And that 80% will be oil, gas and coal? The implications of this outcome would be truly horrible (unless global warming isn’t real, there’s actually plenty of oil, we keep building gas powered cars, few innovations in energy occur, and Obama and the rest of the world changes course).
It is my sincerest hope that Exxon wakes up and realizes they they will be another General Motors unless they change their course. Exxon could be a leader in the new energy of the new century. Or, they could keep their head in the sand, fail massively, and potentially take the country down with them.