In the past several weeks,
gas prices have risen dramatically once again. One reason for the spike
is the “fear premium” caused partially by the Bush Administration’s deeply
flawed foreign policy. Another reason is the empty words and unfunded
promises of the Administration’s short-sighted energy policy.
President Bush’s budget choices have deprived the Treasury of the funds we need
to invest in a better, more sustainable energy policy, and his friends in the
oil and energy industry have failed to fill the void by investing in
alternatives to oil.
As both energy prices and
industry profits have risen, the oil and gas industry has touted its investment
in new sources of energy. Given its record-breaking profits, the industry
certainly has capital to invest in renewable fuels and energy sources that can
reduce our dependence on oil. Unfortunately, the industry is investing
negligible amounts in renewable energy sources and is undermining service
stations’ efforts to provide renewable fuels for consumers.
Oil Industry Resources
Record profits. The five
largest oil companies reported almost $120 billion in profits in 2006 alone. From
2000 through 2005, they reported over $383 billion in profits. (Based on
ExxonMobil, Shell, BP, ChevronTexaco, and ConocoPhillips company annual
financial reports for 2000-2006)
Cash on hand and return on investment. The Congressional Research
Service (CRS) found in July 2006 that eight top oil and refining companies had
$57 billion in cash on hand, a sixfold increase over the $9.5 billion they held
in 2001. The rate of return on equity has also increased sixfold. Companies have both the
capital and financial incentives to invest in the next generation of energy
production. (CRS Memorandum to Senator Wyden, 7/5/06)
Investment in Alternatives
Rhetoric: Industry says it is investing heavily in renewable and
alternative technology. The
American Petroleum Institute (API) has claimed that, “In North America over the
last five years, the oil and gas industry has invested almost $100 billion on
renewable, alternative and advanced emerging energy technologies.” (API letter
to Members of Congress, 3/30/07)
Reality: Industry is hardly investing in renewable, non-petroleum
energy. When the industry breaks
down investment in what it terms “renewable, alternative and advanced emerging
energy technologies,” very little of the $98 billion spent on these
technologies was invested in renewable or alternative energy sources. Only
$1.2 billion of the $98 billion advertised by the industry as investment in
renewables and alternatives was actually spent on renewable sources of energy
between 2000 and 2005. This funding was not spent on renewable fuels but on
production of electricity from wind, solar, geothermal, and landfill gas. (American
Petroleum Institute, “Facts on Fuel”)
The
oil and gas industry has invested heavily ($86 billion over five years) in
refining heavier sources of petroleum, including tar and oil sands and oil
shale, and on turning waste and residue hydrocarbons into usable products. The
industry has also modestly invested ($11 billion) in combined heat and power
and vehicle fuel efficiency technologies. The amount invested in the next
generation of energy is a tiny fraction of investment and an even smaller
fraction of industry profits that could be invested in clean technologies.
When
asked to provide their companies’ investment in non-petroleum energy supply and
production during a November 2005 hearing, the CEOs of the five largest oil
companies reported little investment. Exxon reported investing a “negligible
amount” in non-petroleum energy, and ChevronTexaco included coal and natural
gas investments in its tally. (ExxonMobil and
ChevronTexaco responses to Questions from the Record of Joint Committee Hearing
regarding Energy Pricing and Profits, Senate Energy and Natural Resources and
Commerce, Science, and Transportation Committees, 11/9/05)
Both public and private investment in energy R&D have declined. Investment in energy research and development has
been steadily falling despite rising geopolitical, environmental, and economic
risks of dependence on oil. Investments in energy R&D by U.S. companies
fell by 50 percent between 1991 and 2003. Total private sector energy R&D
is less than the R&D budgets of individual biotech companies. Since the
mid-1990s, both public and private sector R&D spending has been stagnant
for renewable energy and energy efficiency. (Daniel M. Kammen and
Gregory F. Nemet, “Reversing the Incredible Shrinking Energy R&D Budget,” Issues
in Science and Technology, Fall 2005)
Big Oil is an “obstacle” to alternative fuel stations. Big oil companies are using their market power to
discourage service stations from stocking or offering E85 fuel and to create
rules that make it difficult for consumers to compare prices for, fill up with,
or purchase E85. Exxon Mobil and BP require their franchised stations to buy
fuel exclusively from them, and neither company offers E85. Station owners
must apply for exceptions to purchase E85. ChevronTexaco and ConocoPhillips
require an E85 pump to be set away from the other pumps and do not allow
stations to list E85 on their primary sign listing fuel prices. Chevron
recommends that stations install new storage tanks and pumps worth about
$200,000 at their own expense to offer E85, rather than using existing tanks
and pumps. BP will not allow its franchised stations to offer payment by
credit card at E85 pumps. (Wall Street Journal, 4/2/07)
