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| By Christopher Flavin and Seth Dunn
The $76 billion merger between oil giants Exxon and Mobil last week provides one
more indication that the oil industry is entering a geriatric phase in which
slow growth and low prices are forcing companies to cut costs ruthlessly to
survive.
Oil companies are going to have to do more than merge if they want to keep up with the changes in the world's energy economy. World oil use is only growing at 1.4 percent per year, oil prices are down, and global warming is putting the squeeze on the industry. As more countries diversify their energy supplies, oil prices have fallen to less than $12 per barrel-down 80 percent since the early 1980s. Despite prodigious exploration efforts, known oil resources have expanded only marginally in the last quarter-century. Eighty percent of the oil produced today comes from fields discovered before 1973. Recent studies find that remaining oil resources are so limited that world production will peak within the next 10-20 years. The energy industries with the highest growth rates are wind and solar power. A new generation of advanced electronics and synthetic materials could quickly usher in a decentralized solar-hydrogen energy system in the early decades of the new century, according to recent assessments by Worldwatch. Since 1990, the global solar energy industry has grown at 16 percent per year and the wind power industry at 25 percent annually, growth rates the oil industry hasn't known for decades.
Although these newer energy sources fill relatively small niche markets today--as
oil did at the turn of the century, when it was used primarily for
lighting, double-digit growth rates will soon turn them into major investment
opportunities. The wind power industry has created 20,000 new jobs in the past
five years alone-a dramatic contrast to the 9,000 jobs that will be lost as a
result of the merger of Exxon and Mobil.
In the last year, leading automakers, including Daimler Benz, General Motors, and Toyota, have announced plans for a new generation of fuel cell cars that could be run on ethanol, natural gas, or hydrogen, rather than oil. As such technologies begin to take hold a decade or so from now, oil demand could begin to shrink dramatically. The prospect that climate disruption could force the world away from oil has led some oil companies to diversify their energy portfolios. In a dramatic statement last year, John Browne, Chairman of British Petroleum (which this year announced plans to merge with the U.S. company Amoco), said that his company had accepted the scientific reality of climate change and would add to its existing investment in solar energy. Royal Dutch Shell later announced plans to invest $500 million in renewable energy. Such moves have opened a transatlantic environmental divide in the oil industry, one that may be deepened by the merger of Exxon and Mobil. Both companies have actively questioned the science of climate change, and have lobbied the U.S. Senate not to ratify the Kyoto Protocol. This policy of denial may blind the merged company to changes in the energy marketplace. In fact, Exxon and Mobil both walked away from major solar investments in the 1980s, a contrast to the recent moves of BP and Shell. The risk facing oil giants is that they will be so focused on cost-effectively exploiting remaining oil reserves in remote corners of the world that they will miss the far larger and more lucrative energy investment opportunities that will soon open. Shareholders in the new firm would do well to listen carefully to the plans being announced by their new management team. Releated Stories from the GayToday Archive: Global Temperature Jumps Off Chart Related Sites: Worldwatch Institute GayToday does not endorse related sites. |
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