Bit-by-bit, bloggers are gaining similiar treatment to what traditional media reporters might receive. Bloggers get invited to trade shows, receive products and books to review, get invited to Iraq, have press conferences with business leaders and politicians, and get all-expense paid trips courtesy of oil companies (1, 2). This is a welcome trend, in my mind, opening up citizen journalism to the types of access for learning and asking questions that has been the monopoly of traditional media venues. Sometimes this can lead to better and more inciteful analysis. And, well, sometimes not.
First up, have to give Ed Morrissey credit for being totally upfront, with Fact-Finding Trip Disclosure providing upfront statements that the American Petroleum Institute paid for his trip. Haven’t seen anything come out of that yet, but hat tip to Morrissey for the blunt disclosure. Again, I welcome that organizations are reaching out to try to educate. Well, also to reach out to influence . And, that Morrissey is up front about that.
On the other hand, I fear that his takeaway might have the depth and sophistication that we see from McQ whose discussion could be summed up as ‘big things take big money to build and big profits are big money’. Or, as the title suggests, Size Matters. Certainly, revenues matter, but let us look at one paragraph:
Billion dollar projects aren’t undertaken unless you make a profit and can put that profit back into research and development and building the platforms necessary to produce the product. Since most of the oil which is easy to extract has already been extracted, that which is left is harder and harder to bring up out of the ground. New technology both for finding and extracting oil are necessary. And that costs money. Profits. No profit means no exploration or technological advances. No exploration means our supply eventually dries up. No technological advances means that even if new supplies of oil can be found they can’t be extracted because the means to do so won’t exist. Size matters in profits too.
Absolutely. And, well, absolutely not.
No sensible businessman will invest without some clear potential for making profit from that venture. Absolutely true.
On the other hand, research and development are, well, costs, aren’t they?
Now, Chevron booked $70+ billion in profits between 2001 and the end of the 2007 first quarter. (And, well, that 2001 profit was $3.9 and the 2006 profit was $17.1 billion. First quarter 2007, when oil wasn’t $100 barrel, profit was $4.7 billion. Will Chevron join Shell, BP and Exxon Mobil in breaking $20 billion in profits this year?) Of that, about 28 percent has been devoted to stock buybacks not the $billions of platforms and other research nor into renewable energy investments. First quarter 07, Chevron had over $55 billion in revenues with about $40 billion in direct costs for the revenue and another $8 billion in expenses, leaving about $7 billion in operating income before taxes, with Google Finance showing $3.7 billion income after tax. Again, that exploration cost — gone from the account sheet well before we start talking that after-tax money.
So, again, the potential for profit is simply a reality of business activity. A question to ask, therefore, is what is reasonable profit against risk. Are the oil companies making reasonable returns on reasonable investment? Well, many would argue that the equation is totally out of whack. And, that considering issues like Global Warming, tax favoritism to fossil fuels is exacerbating a bad situation.
New Energy and Fuel also had an interesting gleeful discussion, appropriately entitled WEEE! A Freebie on the Oil Business. He provides an interesting, if skewed, history of the oil industry over the past 40 years. Including how oil has played a role in helping create a vibrant global economy (including the green revolution). With all his love for the petroleum industry, he writes:
But the betrayal isn’t over, the mass media and nose ringed politicians aren’t the only guilty dopes in our country. A hard economic fact that if you want more of something don’t tax it and if you want less of something tax it, is just lost on many Americans and the press. That makes it the peak of stupidity to tax oil and gas production. At the same time it’s the peak of stupidity not to tax vehicle choices that are pigs like SUVs, large cars and pickups and other prodigiously wasteful uses of petroleum products.
First, we should wonder whether we want this new oil and how fast. But, we’ll put that aside. Second, with the evident support for ways to get rid of “prodigiously wasteful uses of petroleum products”, one has to wonder why there isn’t a word about how API and oil companies have consistently (openly and privately) fought against any path toward reducing oil consumption.
What is true, by the way, with each of the posts is that there are many compentent, dedicated, and decent people working on these projects. Yes, the petroleum industry is made up of people ‘just like us’ or maybe even harder working. But, this does not mean that we want to be fostering a growth in the industry, pump more CO2 into the sky, not move onto a more efficient future.
And, well, you might find the discussions of the new oil platform and their experiences of interest … even if you are discomfitted by their ideological embrace of the American Petroleum Institute’s continued fight for tax subsidies and favoritism in its feeding of America’s oil addiction.
Finally, for some perspectives on an API trip, you might want to spend a few moments at Sadly No.