The Economist recently published a column titled Climate politics: Flush with cash. So what? that described the results of a recent study by Matthew Nisbet, an researcher at American University in Washington, DC. According to Nisbet, groups classified in the environmental category spent almost $400 million on climate change and energy issues in 2009.
The study and the article go on to try to figure out what the groups got from that expenditure other than a big backlash and a large measure of distrust from people who believe that there is not enough evidence of damage from human activity to cause them to change their behavior.
There is a lively discussion associated with the column. One of the topics that has only been lightly mentioned, however, is identifying the sources of all of that cash. Here is one of my contributions to the discussion. I wrote it in response to another comment that accurately recognized just how much equity the natural gas producers have in the climate discussion.
@Dr. Music who wrote:
“The article misses the fact that the smarter fossil companies work hand in glove with the “greens” on expanding the markets for natural gas — ostensibly to fight coal but really to fight nuclear.”
You are correct. I have to sadly agree that the strategy is “smart” from the money grubbing point of view, but it is a strategy that is killing the geese who have laid trillions of golden eggs for the petroleum companies for many decades. Though the sub-prime loan originators bear a lot of the blame, the rapid rise in oil and natural gas prices through the period from 2000-2008 played a major role in the economic collapse. As the cost of commuting and heating/cooling large suburban homes in new communities in Florida, Nevada, and California increased, more and more people began having difficulty making payments. The value of those newly developed homes began to fall because there were fewer and fewer people who were capable of buying them. The honest, hard working people that are similar to those that have been my neighbors in American suburbs for my entire life refused the “liar loan” path and simply stayed closer to jobs in cities.
Hundreds of billions taken out of the economy and concentrated in the national treasuries of Russia, Saudi Arabia, Kuwait, Qatar, Nigeria, and Iran cannot be good for our general welfare, but it is terrific for the bottom lines at ExxonMobil, Shell, Chevron, and BP – all of which are multinational petroleum companies that produce about as much energy each year in the form of natural gas as they do in the form of crude oil.
I believe they are using their massive oil profits right now to keep the price of natural gas artificially low so that they can kill the Nuclear Renaissance. The “smart” ones who can run the numbers and recognize how to manipulate the law of supply and demand in their own favor know that allowing nuclear energy to thrive once caused them about 15 years of painfully low prices as the production from nuclear plants grew from zero in 1956 to more than 12 million barrels of oil per day equivalent in 2000. That is like having to absorb the energy output of another Saudi Arabia plus another Kuwait. I believe that is a major reason why oil and gas prices were low around the world from 1985-2000.
Here is my evidence for the crude oil supported price war against nuclear energy. ExxonMobil spent more than $41 billion to purchase a shale oil gas producer called XTO in 2010. In the last quarter of 2010, ExxonMobil reported that XTO had contributed $36 million to its quarterly profits. That is an annualized Return on Investment (ROI) of about 0.35%, but the man briefing the results to analysts during Exxon’s quarterly conference call stated that the company was “pleased” with the purchase.
I can read between the lines – the company knows that the current low prices will not last very long. Once the nuclear renaissance is sufficiently hamstrung and the companies have laid off all of the engineers and technicians hired to build the new plants, the price of natural gas will take off like it did in the period from 2000-2008. It will be exceedingly difficult to reassemble the teams needed to build those nuclear plants that could have been built, however, so the economy will suffer with the vast transfers of wealth from all of us to just a few.
That giant company – ExxonMobil – only employs 80,000 people. Its annual, after tax profits are about $500,000 per employee and its revenue is closer to $4,000,000 per employee. Just think about how the numbers work for Russia, Saudi Arabia, and Iran.
One more thing that I thought about as I was posting this was the benefit that established energy firms get from any amount of policy paralysis. If discussion and debate continues, no action gets taken to change our current course and speed. Since our current economy runs primarily on coal, oil, natural gas, and existing nuclear power plants it will continue to run primarily on coal, oil, natural gas, and existing nuclear power plants until a strong force can begin to change the momentum. It is an inertia problem not unlike trying to change the speed or course of a supertanker.
Wind, solar, geothermal, waves, biomass and energy efficiency are weak and unreliable tools – even when combined. The petroleum producers know it. That is why they encourage others to focus on those tools while bashing nuclear energy – the only powerful tool in the available toolbox.
I mention that as food for thought for anyone who wants to dispute my theory by asking why oil and gas interests (a term that includes traders, bankers, transporters, pipeline construction companies, railroads, petroleum companies and even some entire countries) would provide cash to organizations that also seem to fight against their interest in continuing to burn massive quantities of fossil fuel.