Exxon's Executive view on Renewable Energy

Most people that work in renewable energy view their ascension as imminent and inevitable. On the other hand, the leadership of the old-world order disagrees.

“Exxon is a strong and diverse organization”

 

The view of Exxon Mobile

In a conference call with analysts Jeff Woodbury, a top executive at Exxon, claimed that the threat of electrification was is overblown. The comments were direct specifically at Telsa Motors. Woodbury pointed to Elon Musk’s projections that electric cars would represent 6% of the car fleet by 2040. That would only decrease the global demand for crude by half a million barrels a day.

Furthermore, when if electric cars continue to grow in popularity Exxon is a strong and diverse organization. He pointed to production in fields like diesel and petrochemical that are far more profitable than gasoline. The reality is that the same crude oil that would be converted into gasoline can be converted to other material that is more profitable for Exxon

 

In a world of pure competition, Jeff Woodbury is 100% correct.

Most of the visionaries in renewables and EV claims that they will dominate the world in the next few years.  It is refreshing to hear a sober opinion that shows another viewpoint. The reality is that renewable and EV are decades away from being in a position where they can dominate that market. For example, Ontario represents the largest solar market in Canada, but the market is very small. Only about 1% of the energy in Ontario is generated from solar. Furthermore, one of the critical downsides of renewable is that they have variable output. They usually need support from energy sources that are invariable like nuclear or natural gas, which is another area that Exxon dominates.

 Photo by mucella/iStock / Getty Images

Photo by mucella/iStock / Getty Images

“Path dependence will give crude oil a leg up for decades ”

    Even in a case with the cost of renewables and EV were entirely at par with the cost of crude oil, due to path dependence. Path dependence refers to the facts that the decisions that you make today, are limited by the decisions were made in the past. The majority of the world’s infrastructure is reliant on the extraction of crude, and thousands of jobs are reliant on its refinement and sale.

 

But we don’t live in a world of pure competition

    Politics plays a huge role in a success of an Exxon, and it can work for them and against them. While it cannot completely tilt the scales, the large-scale effects of politics are a pressing concern for oil producers. For example, a carbon tax can have a huge effect on demand for gasoline and diesel. The Federal Liberals do have announced a plan to introduce a carbon tax in 2018, and British Columbia already has one in effect. Naturally, such measures will not eliminate the demand for oil, but it can give renewables a leg up. Furthermore, incentives for renewable while they do have their critics has been met with support by most political parties. Incentives like that mircoFIT make it affordable for hundreds of homeowners in Ontario to go solar and Alberta is launching their mircoFIT program in 2018.  This is the reason that Exxon spends millions on lobbying and public relations. And while they will most likely dominate for the foreseeable future renewables and EV most be a concern for oil executives.

Matthew Griffin