Filed under: Fossil fuel
Rex Tillerson, chairman and CEO of Exxon-Mobil, yesterday beat back a mild revolt by an alliance of Rockefeller family members and some institutional investors.
Exxon earned $40.6 billion last year, making it the most profitable corporation in the known universe.
The dissenters want Exxon to take a long-term view, and develop products and services that may keep it profitable as the company’s oil reserves become depleted. They asked that the chairmanship and CEO positions be split up so that the board of directors could take a broader view of the energy business.
Tillerson said, in effect, that there’s nothing wrong with the company’s current narrow focus on the extraction and sale of oil and gas. The majority of stockholders supported him.
What’s interesting about this story is the light it sheds on the tensions within any corporation. In most public companies, managers are rewarded for generating short-term profits, and full-time stock speculators can take advantage of that reality. Long-term investors are better-served through management by long-term objective, and by managers who can see where a company should be 10 or 20 years out.
U.S. courts have held that the fiduciary duty of a corporation is to maximize profits for stockholders. This is why smaller, more agile companies, owned by families or entrepreneurs or based in other lands, are responsible for more meaningful technological change.
During the mid-20th century, the railroads insisted that they were in the railroad business, and didn’t have to worry about competing with other modes of transportation. The result? Airlines and the Interstate highway system destroyed their passenger base. The environmental costs have been severe: Railroads are about twice as efficient, in energy terms, as airlines, and produce about one-third the atmospheric pollution per passenger mile.
Exxon — the double-cross company — is now faced with the same issue: Is it an extractive company or an energy company? This decision isn’t final. It’s pretty clear, though, that an oil company’s policy choices have social and environmental effects far beyond the narrow interests of its stockholders. –Seth Masia
Freeman Dyson is emeritus professor of physics at the Center for Advanced Studies at Princeton — the chair once held by Einstein and Oppenheimer and currently by nobellist Frank Wilczek. In the current issue of The New York Review of Books Dyson tackles The Question of Global Warming.
Specifically, Dyson excoriates Yale professor of economics William Nordhaus for the kind of financial forecasting that ignores the state and progress of technology. In his new book A Question of Balance: Weighing the Options on Global Warming Policies, Nordhaus identifies putting a price on carbon as a necessary first step for climate action, and Dyson likes this. But then Nordhaus dismisses as horribly expensive and counterproductive most aggressive investment in new technology. Nordaus identifies “low-cost solar power, geothermal energy, some nonintrusive climatic engineering, or genetically engineered carbon-eating trees” as “low-cost backstop” technologies that might save the world.
Concerning the possible candidates for a low-cost backstop technology . . . Nordhaus has little to say. He writes that “no such technology presently exists, and we can only speculate on it.” The “low-cost backstop” policy is displayed in his tables as an abstract possibility without any details. It is nowhere emphasized as a practical solution to the problem of climate change.
Dyson points out very sensibly that low-cost backstop technologies do exist now, and others will exist within five to ten years. A number of these technologies (solar power, tidal power, wind power and even carbon-eating trees) are economically scalable to eliminate the need for coal and other fossil fuels within a very few decades. Economists don’t like to place bets on new industries, but the very existence of these technologies moots the whole book.
For a more optimistic take on what the future holds in efficient technology — in direct opposition of the dire economists’ view — see Ray Kurzweil’s Law of Accelerating Returns. –Seth Masia
Interesting article in Scientific American on the ethics of climate change, by John Broome, professor of moral philosophy at Oxford.
Formerly an economics professor, Broome notes that economists inevitably value current decisions by applying a discount rate. They do so, he says, without recognizing that a discount rate is a moral judgement: How can we value a future life, or a future quality of life, differently than a life today?
It’s a good read. It largely ignores more proximate issues: What are the costs of massive migration and resource wars, and what are the potential benefits of immediate investment in emerging technologies and industries. Historically, the cascading effects of wars and new technologies have far exceeded “realistic” forecasting. Choosing between resource wars and profitable new investment should be a no-brainer for any ethical person. The question for the financier might be this: which investment has a richer, more immediate payout, General Dynamics (a defense contractor) or Nanosolar (a new photovoltaic technology)? If you choose the defense contractor, you’ve made a morally indefensible discount-rate decision.
The comment train following the article is also instructive. It’s amazing how many flat-earth climate-change deniers are still out there, and reading Scientific American. –Seth Masia
Filed under: Policy
The House of Representatives on Wednesday passed HR 6049, extending federal production tax credits for wind by a year and an assortment of other renewable tax credits by three years.
The vote was 263-160 — about 20 votes short of the supermajority required to override a presidential veto. The Bush Administration has promised to veto the bill.
The tax credit extension now faces more hurdles in the Senate, where no agreement is evident on how to offset the bill’s $54 billion price tag.
Filed under: Fossil fuel
As oil prices spiked to $135 a barrel, the International Energy Agency will report in November that accessible oil reserves, worldwide, fall short of previous estimates. So says The Wall Street Journal.
Oil fields today produce about 87 million barrels a day. The IEA, a consortium of 26 developed industrial nations, previously estimated that production will rise to 116 million barrels a day by 2030. Now, the Journal reports, IEA experts think, oilfields may produce only 100 million barrels a day in 2030.
The shortfall will be felt long before that. Recent IEA data suggest that as early as 2015, demand for oil may exceed production by 12.5 million barrels a day.
12.5 million barrels contains the power equivalent of about 21 terawatt hours. Realistically, one terawatt of new clean-energy capacity would fill that need and keep the world economy growing. The challenge and opportunity for renewable energy — particularly carbon-neutral transportation technologies — will be to make up the petroleum shortfall. –Seth Masia
Filed under: Transport
Honda, scrambling to catch up with Toyota in the race toward cleaner, greener cars, announced on Wednesday that it will introduce at least three new hybrid models for the 2009 model year, including a light, cheap version priced at about $20,000.
In a mid-year strategy speech, CEO Takeo Fukui said the company expects to sell 200,000 of the new entry-level hybrids each year, with total hybrid sales reaching 500,000 cars annually after 2010 — about 10% of the company’s production. Toyota last week shipped its millionth Prius, which has been in production since 1997.
Honda entered the hybrid category with the two-seat Insight in 1999, and currently builds a single hybrid model, a version of the Civic. The new cheap hybrid will be a five-door, five-seat sedan with a small gasoline engine assisted in acceleration by an electric motor. Batteries and control circuitry will live under the trunk.
Existing hybrids cost about $5,000 more to build and sell than their gasoline-driven equivalents, Fukui said. The new design is meant to carry a $2,000 premium.
On Monday, Nissan announced a joint venture with NEC to manufacture compact laminated lithium ion batteries for use in a new line of electric cars. The new factory is scheduled to begin operations before the end of the year, with an initial production capacity of 13,000 units, expanding to 65,000. Nissan-Renault plans to introduce electric cars in the U.S., Denmark and Israel for the 2011 model year. Volkswagen has signed a battery development deal with Sanyo, and General Motors has contracts with high-tech battery-makers A123 and LG Chem.
Filed under: Policy
Today is the National Day of Action, a last-minute drive to push HR 6049 through Congress. The bill mandates a one-year extension of the renewable energy production tax credit, with a variety of investment tax credit extensions. The bill reported out of committee yesterday.
In order to keep investments rolling into new renewable projects beyond Dec. 31, it’s important to get it passed — and signed — by mid-June.
It’s time to phone your senators and representative and tell them clearly that this bill needs to pass.