Telling the Story

Last week I was invited to participate in a conference call interviewing John Felmy, the Chief Economist of the American Petroleum Institute (API), one of the energy trade associations I mentioned in my posting of February 27th. At the start of the call, Mr. Felmy framed it as part of the API's effort to tell the industry's story, something that has become more urgent after the hurricanes and high energy prices of the last couple of years. I agree that this is a worthy goal, and it's part of what I try to do on this weblog, as well, though from a somewhat different perspective. The call involved several other bloggers, and I encourage you to listen to it on podcast or read the transcript, both of which you'll find on the API's new EnergyTomorrow site. I'd like to expand on two of my questions, which relate to telling a compelling story about the industry's future, not just its present.

I asked Mr. Felmy whether he thought the industry were adequately positioned, in case it turned out that the DOE's forecast of a virtually unchanged energy mix in 2030 proved wrong, for whatever reason. In his affirmative response, Mr. Felmy cited the example of Shell's cellulosic ethanol investment in Iogen and referred to figures indicating that the industry invested $15 billion, or 11% of its aggregate R&D budget, in non-hydrocarbon energy technology between 2000-2005. Still, this represents a small slice of the industry's total capital expenditures, because investments in oil and gas production and oil refining still present much larger dollar and percentage returns than alternative energy investments, which entail higher risk, or at least a different kind of risk. Whether you consider this prudent or lacking in vision--and there are arguments for both--it creates a real chance that the next generation's energy giants will not only look very different from this generation's, but will include some altogether different companies.

Another question that I posed went to the heart of what a trade association can do on behalf of its members, and what it can't. I asked whether the industry might ever push for access to the substantial off-limits oil and gas resources in the US, on the basis that their total environmental impact would be lower than that of alternatives such as oil sands or coal-to-liquids (CTL). Perhaps I had been hoping for an answer close to the classic Ian Richardson line, "You might very well think that, but I couldn't possibly comment," but of course I didn't get it. I actually concur with Mr. Felmy's assessment that we will ultimately need all these fuels--or at least a contribution from all of them--along with efficiency and conservation.

At the same time, I think the basis of my question still has merit, even if it doesn't reflect the consensus of the industry, or the official view of any company within it. The industry might never ask Congress to make an exception for offshore gas drilling, while leaving offshore oil drilling constrained. It might also never publicly weigh the emissions and other environmental impacts of CTL against those of oil drilling in wilderness areas, but as citizens we ought to consider these things, and under any future greenhouse gas cap-and-trade system we must surely do so. The oil and gas industry may hope to avoid a "battle of fuels", but that is just what it faces, on several fronts; this ought to take place on as informed a basis as possible.

I don't envy the API its job of defending a large, profitable industry on which our entire way of life depends, at a time when so many people distrust big corporations and regard them as engines of income inequality and consumer exploitation. That's a shame, because that attitude won't help us find workable solutions to our energy problems. Quite the contrary, in light of the talent and resources within these companies. At the same time, I think it's helpful to have bloggers out there who understand the industry, but are able to say the things that it can't, or won't. This all contributes toward reducing the widespread misunderstanding and suspicion of the way the energy industry functions and the role it plays in modern life.