When fighting forest fires that are raging out of control, a controlled burn at the edge of the area can eliminate the fuel needed to support the wildfire and bring control to an otherwise untenable situation. It is not without risk, but when you’ve tried everything else, “fighting fire with fire” is your only option.
Yesterday at AAPL’s annual meeting in Chicago, Alex Epstein asked the question to the audience
“On a scale between -5 and 5, how effective has the oil and gas industry been at impacting the narrative?”
His point with the negative and positive scale? Not all communication creates a positive message and in some cases, rule number one of not digging a hole for yourself is to stop digging. For oil and gas companies in the last 5-7 years, we have allowed scope creep, ESG funds and fear of what people might say drive silence, acquiescence and even support for goals that truly have question basis. As a result, my answer to his question was -5. For sure, there are exceptions. I think that Chris Wright for Liberty Oilfield Services does a very good job. I think Harold Hamm taking Continental private is a wonderful step in the right direction as well (you don’t like what I’m doing, fine, I’ll take my returns private). But broadly speaking, oil and gas has done nothing with it’s platform to correct what are clearly errors in policy thinking.
Let’s start with net zero. As Alex said yesterday, the oil and gas industry agreeing with a “net zero” framework would be like a computer company agreeing that they wanted to be net zero computers in 2050. I like the analogy.
When politicians talk of “windfall profits tax,” Exxon, Chevron and the like should take to the airwaves and walk the public through Google and Pfizer or Apple and Amazon, as I did in this post. It’s not hard and though it might trigger some people, it is the moderates and the clear thinkers that need to be educated and persuaded. Fighting fire with fire.
Finally, I see rays of light. After Biden sent this letter to the major refiners, Exxon at least took a moderate step towards a defense. In Exxon’s response, they explicitly and directly corrected the narrative. We need MUCH more of this. You can not appease a burglar in your house by giving them half your jewelry and asking nicely for them to leave. Sometimes, they need a golf club upside the head. Good on you Exxon. It’s about time. Keep it up.
We have been in regular contact with the administration to update the President and his staff on how ExxonMobil has been investing more than any other company to develop U.S. oil and gas supplies. This includes investments in the U.S. of more than $50 billion over the past five years, resulting in an almost 50% increase in our U.S. production of oil during this period.
Globally, we’ve invested double what we’ve earned over the past five years -- $118 billion on new oil and gas supplies compared to net income of $55 billion. This is a reflection of the company’s long-term growth strategy, and our commitment to continuously invest to meet society’s demand for our products.
Specific to refining capacity in the U.S., we’ve been investing through the downturn to increase refining capacity to process U.S. light crude by about 250,000 barrels per day – the equivalent of adding a new medium-sized refinery. We kept investing even during the pandemic, when we lost more than $20 billion and had to borrow more than $30 billion to maintain investment to increase capacity to be ready for post-pandemic demand.
In the short term, the U.S. government could enact measures often used in emergencies following hurricanes or other supply disruptions -- such as waivers of Jones Act provisions and some fuel specifications to increase supplies. Longer term, government can promote investment through clear and consistent policy that supports U.S. resource development, such as regular and predictable lease sales, as well as streamlined regulatory approval and support for infrastructure such as pipelines.
Here is Biden’s letter.
Reporter to Trump, "How come you got a forty year tax abatement"?
Trump, "Because I didn't ask for fifty".
Big oil should be equally bold.
Yes. Exactly. That is what I have been trying to say…FIRE THE BASTARDS DESTROYING THIS COUNTRY. (Was that gentle and polite enough?)