• Feb 4th 2008 at 10:27AM
  • 17
While his former employer and their competitors have been rolling in record profits for yet another quarter, Sir Mark Moody-Stewart thinks things need to change. Moody-Stewart was the former chairman of Royal Dutch Shell until his retirement in 2005. In an editorial posted on the BBC web site, the former oil company exectutive makes it clear that he feels the way energy drives the world's economy needs to change. According to Moody-Stewart, the sources of energy need to change radically. At a minimum, at least half of of the carbon content in our energy supplies needs to be eliminated in the future, and the amount of energy needed to produce every unit of GDP also needs to be halved.
While Moody-Stewart believes in consumer choice and market forces, he also acknowledges that they both tend to lead to short-term thinking. People will tend to make the decisions that benefit themselves now, rather than years into the future. Some degree of government regulation is necessary in order to channel those forces so that people are encouraged to make decisions that will lead to better outcomes. It's definitely a refreshing change from a long-time oil company executive. With world energy requirements expected to increase 70 percent by 2030 from 2006 levels, it's clear that simply changing the sources of energy won't be enough. At the same time, because of the time and development that needs to happen, the transition needs to start happening now before the cost of fossil fuels becomes so high that economies are destroyed.

[Source: BBC]


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  • 17 Comments
      • 7 Years Ago
      Meme:

      I remember that in the 90's major corporations invested in acquisition of solar production. However, the investment and production of solar cells pretty much moved along at a snail pace until recent rush by the Chinese companies.

      I believe that profitability of oil and gas still overshadow the drive to expand renewable energy business. When these energy giants lobby the governments for subsidies, I mainly see oil and gas taking the large chunks of the pie. If only renewable had the same clout like oil and gas...

      Now, instead of the western nations taking the initiative for high-tech green technologies, it will probably be the Chinese who will take the lead, and probably will dominate the market in the coming years.
      • 7 Years Ago
      From the looks of that photo it appears the oil companies really are run by the devil.
      • 7 Years Ago
      Meme,

      Thanks for the added insight. I suspect many people will not believe you that companies are made up of a diverse collection of people, many of whom have strong personal commitments to the environment and human wellbeing... but it's still worth pointing out. Their jobs however require them to do what's in the best interest of the company when they act in their professional capacity.

      I actually have a long standing opinion on the issue of Nigeria and similar situations. The situation there is a representation of a phenomena known to social scientists as the "curse of natural resources." The curse being that countries that didn't have the benefit of stable governments, rule of law and an educated middle class before falling into an abundant supply of money coming from the ground often end up with corrupt governments and/or civil wars. Exploitation of natural resources makes it too easy for corrupt governments to have no accountability or concern for their own citizens. A government that has no such inflow of foreign riches and thus has to count on taxes from the productive efforts of a large segment of their population is going to be more concerned with educating their population and making them productive.

      One partial solution supported by me, though proposed I'm sure by many over the years, is to try to forge some sort of international agreement between developed countries that forces all of their corporations to have complete transparency in their dealings with developing countries over natural resources. Even simply exposing the magnitude of the money being "stolen" by these corrupt governments would likely result in internal and external pressure that could help drive reform. Possibly also having an international mechanism that requires a certain percentage of the royalties be set aside in audited accounts for verifiable projects that benefit the citizens. In the long run this would benefit the oil companies because it could lead to greater stability and thus less costs associated with the risk of violence.

      Of course the trick would be convincing the new major oil players of China, Russia and India to get on board. This would have been much easier to have implemented decades ago when the Western majors really made up a majority of the oil exploration potential.

      On the greenhouse gas issue, it does seem like the sensible solution is to bite the bullet and come out with a long term plan for either pollutant taxes or the one I favor more... caps (with possible escalating upper limit on credit prices as a relief valve). Companies would seem to operate best in an environment where the playing field is stable and predictable... where they can as you say, focus on optimizing the utilization of their financial and human capital.

      Throw in some subsidies and streamlined permitting processes for things that could be complementary to existing strengths such as offshore technology and enhanced geothermal... and we might just have a plan to get us out of the mess we're in.

      I personally, even as an environmentalist, would be willing to negotiate on increased development of offshore and/or Alaskan oil if it meant being able to end the insanity of tar sands. Too many environmentalists believe that the only way for them to win is to undermine the capitalist system that drives our economy rather than bargaining and crafting a regulatory environment where these great companies are incentivized to do what is in humanities best interest.

      Sorry... I'll climb down from my soap box now.
      • 7 Years Ago
      meme:

      In regards to your comment about government not helping the oil industry when it was down... I do not subscribe to that perspective. Just recently, the hoop-blahs about Gulf States trying to renegotiate oil contracts come to mind. It's sad that the government failed to write in a clause that would terminate the subsidies once oil companies have returned to profitability. And yet, I don't remember reading oil companies willingly giving up the subsidies when the Gulf States wanted to renegotiate the contract...

      I know that business is business, and I really tried not to be judgmental. I just don't think the "green" side of the oil industry is as sincere as you portray.
      • 7 Years Ago
      "It's definitely a refreshing change from a long-time oil company executive."

      This guy can have it both ways and be a star. Retire from the oil industry that made him rich and then come back and say the same industry he ran and created should not be that way. This is called having your cake and eating it too.
      • 7 Years Ago
      And let's not forget Lord Oxburgh's comments, too, before him:

      http://news.bbc.co.uk/1/hi/uk/3815151.stm
      http://www.guardian.co.uk/science/2004/jun/17/sciencenews.research

      Or Mark Moody-Stewart's call to ban gas guzzlers:

      http://www.forbes.com/markets/feeds/afx/2008/02/04/afx4608943.html

      Lots of Shell execs have been speaking out on the need for government regulation to deal with things that the market on its own can't, like greenhouse gasses and unsustainable consumption growth. Oh, and let's not forget Philip Carroll's stopping of the sell-off of Iraq's oil industry (Carroll is the former CEO of Shell USA). My favorite line is when a neocon talked about how it was a "no-brainer" that we should have sold off Iraq's oil, Carroll's response was: ""I would agree with that statement. To privatize would be a no-brainer. It would only be thought about by someone with no brain."

      I may be more than a bit biased, as my father is a president of Shell USA, and a VP of Shell Intl., but of all of the supermajors, I think Shell is taking the most forward-thinking approach. And they never get credit for it, either. BP advertizes the heck out of their renewables, so everyone talks about them like they're the "green" oil company, but Shell's renewables divisions are even bigger. Not to mention, Shell was the first oil company to leave the Global Climate Coalition (an anti-global warming industry group) and, as formerly noted, their execs regularly speak out about it.

      It's easy to throw all oil companies into the same basket, but compare Shell today with Exxon-Mobil, a company who still even pays scientists a reward to publish anti-global warming papers. Shell's strategy is simple: they can't go off and make changes on their own, because other companies that don't (like Exxon-Mobil) will simply take over their market share. So, instead, they encourage governments to take action and thus give them a level playing field which, when combined with strong investments into alternative technologies (solar (especially CIGS), wind (especially offshore wind, since they have a lot of experience with offshore platforms), hydrogen (blah, but it is a natural diversification for them), carbon sequestration, etc) gives them a leg up. For example, if governments start mandating carbon sequestration, companies who've invested in the tech, such as Shell, will profit off of that. If they impose broad carbon limits, wind and solar benefit, and so Shell benefits at the same time it loses money in its oil business (say, from restrictions on its bitumen production). Basically, they're betting on an unpredictable future, while Exxon-Mobil is betting on more of the same. I really believe that if everyone started switching over to EVs powered by grid solar or wind today, which would take a few decades, that Shell could manage to get deep enough into electricity generation to compensate for the reduction in hydrocarbon demand over that time period. I doubt Exxon-Mobil could.
      • 7 Years Ago
      The only reason he says that is because he knows that the oil companies have led us down a path with no future. I'm sure he is very green and very rich. I wonder how much of his own product he uses? Save fuel so the rich can ride around in private jets and power yachts. ::rolls eyes::
      • 7 Years Ago
      I see very little incentives for the typical oil company to support renewable energy.

      While it's not absolute, oil production is a process that corporations can exert a lot of control over and competition is somewhat limited. Renewable energy such as wind and solar is more localize. When renewable energy costs plummet, control will not be in the hands of a few corporations anymore, Shell or otherwise.

      A lot of things SHOULD have happened for the sake of progress, but most of the time, corporations are not bound by such ideals. I do not see Shell being any different. As long as profit is still in oil, renewable energy is always going to be a competing product.
      • 7 Years Ago
      Meme,

      Given that you have a direct line to someone within the upper ranks of Shell I'd be interested if you could gather any insight into their view of another renewable technology... geothermal. This, just like offshore wind would seem to be a natural match for oil companies as it involves drilling very deep wells. It would seem there is even the possibility for utilizing heat that is now being wasted at currently producing oil wells. Could some government money directed at these technologies help get more oil companies on board with a broader renewables package?
      • 7 Years Ago
      [quote]8. Meme,

      Given that you have a direct line to someone within the upper ranks of Shell I'd be interested if you could gather any insight into their view of another renewable technology... geothermal. This, just like offshore wind would seem to be a natural match for oil companies as it involves drilling very deep wells. [/quote]

      I've thought of this, too, and I'm not sure I've ever mentioned it to him. Deep geothermal seems right up their alley. Perhaps whenever the next deep geothermal pilot project comes up with results, I might use it as a way to segway into the subject :) I never tell my father what to do, but I do discuss emerging techs with him when I get the chance. Always good to keep him informed :)

      [quote]Could some government money directed at these technologies help get more oil companies on board with a broader renewables package?[/quote]

      Money is always a big seller with oil companies. Whether a company will support a bill is pretty simple: whether they think the gains will be greater than their losses. That's pretty much how all companies work -- if they don't live by that philosophy, they're nonprofits ;) I do think if congress could cut with the windfall tax talk (when was the last time your heard congress talking about helping oil companies when their profits were down and they were laying people off? It only ever makes news when they're doing well.) and open up some proposals that let them play a role in the renewables future instead of trying to leave them out altogether, companies like Shell would be glad to jump onboard.

      It's sort of like the old saying -- you catch more flies with honey than vinegar. In the case of deep geothermal, government technology development grants seem like a reasonable "honey". You'll find that at companies with Shell, a lot of the execs are people with environmental sympathies at heart who don't really feel that they can economically do anything about what's going on. The government really needs to take the initiative here to make it be in their best interests so that they can actually act on those sympathies.

      My father, for example, is really frustrated about what's going on in their Nigerian operations. The Nigerian government gets the lion's share of the money from the oil they extract, and gives almost nothing to its people in exchange. I don't recall the numbers, but I think they get on the order of 70-80% of the profit from oil extraction. So, the local people are ticked off about the oil extraction, because it takes up their land, there is the occasional spill, and they get nothing out of it. So, quite frequently, people get together and tap into the pipelines to steal oil and then sell it on the open market. And they make a huge mess in the process and disrupt oil production. These spills make the public further angry because they contaminate rivers and groundwater, but once again, they're not angry at their government, who gets the lion's share -- they're angry at Shell. Shell, from its proportionally small cut, has tried to fund projects to improve the area. Initially, these were really mismanaged. Instead of working through NGOs, they tried to go it alone, and ended up doing what basically amounted to a lot of payoffs to trial leaders that ended up making the leaders wealthy and didn't help the bulk of the people in the area. Then, when they stopped paying those individuals, the leaders used the money to buy weapons and in general further get in the way. Armed gangs, meanwhile, kept attacking their facilities and have killed some of their people. So, Shell, not having any mercenary force, got the Nigerian government to protect them. But then the Nigerian military went overboard and started killing protesters. It was a huge mess. It's been getting better in recent years, but it's still not pretty.

      When I asked him about all this, the conversation often came back to, basically, "so what are we supposed to do"? Get out? Leave the country so some other company can go through the exact same mess? Stop production and leave the country even poorer? And really, I didn't have an answer. Do you?

      It's a tough business. Everyone hates them even when they try to do what they think is right, and more often than not, their hands are tied. It's a dirty line of work, and while they really try to do everything they can not to make a mess, they can't spent more than their competitors on safety or environmental regs or their competitors will have a leg up. It all comes down to government regulation, but even that, while well intentioned, often ends coming down wrong. For example, my father hates it when governments (especially small governments, like states or even cities) mandate specific formulations instead of just assigning a cost to pollutants and letting the industry work out the most cost-effective way to deal with th
      • 7 Years Ago
      >"consumer choice and market forces... both tend to lead to short-term thinking. People will tend to make the decisions that benefit themselves now, rather than years into the future."

      Yup, hence:

      >"Some degree of government regulation is necessary."

      Exactly. It couldn't be stated any better... being leary of big gov't ("some degree"), but recognizing the check/balance it must provide and potential impetus to the market.
      • 7 Years Ago
      Consider today's news of Nigeria nullifying an MOU with Shell, in effect canceling a $2.50/bbl fee owed Shell.

      The majors will probably regret not putting in place some more regulated mechanism for dealing with developing countries when they could have. With China, Russia, India, etc. becoming world players in oil production, the power balance has shifted. In all likelihood the Nigerians are probably correct that they can now get away with basically giving the finger to Western majors... as has Putin, as has Chavez.
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