Oil and gas industry executives have all duly noted the change in Washington's thinking on global warming and greenhouse gases, but at least some are still in denial of what's to come. Those who think "all this renewable energy stuff is nonsense" are in for a rude awakening, an oil and gas industry researcher told NGI.
"My feeling is if I put the regulation in and I have a commitment to it, the technology will come because there will be a commercial play for it, especially if I have a cap-and-trade system or even a [carbon] tax," said Amy Myers Jaffe, the Baker Institute's Wallace S. Wilson fellow in energy studies at Houston's Rice University.
One need only look to California to see what's to come. "The California policies are leading what will eventually be national policies," Jaffe said. Maybe they won't be exactly the same. But the Clean Air Act is nationwide, as is unleaded gasoline, reformulated fuels, emissions controls on industrial polluters. "I don't know why the [oil and gas] industry would imagine that the California thing is an aberration, especially since it marries together what's happening all across Europe."
California-style environmentalism when it comes to energy also benefits from "a major fundamental, generational social change in this country," Jaffe said, which is something "the oil industry doesn't recognize because it speaks only to itself."
A parallel can be seen in the U.S. auto industry, Jaffe said. The Big Three fought to keep out imports and proceeded to rely on high-margin products (trucks and SUVs) that were out of step with the times. "How does the story end? The story ends with our car industry going out of business," Jaffe said. "Toyota and Honda are not going out of business."
Earlier this year Royal Dutch Shell said it would mostly abandon its solar and wind energy projects to focus on biofuels instead. "...[B]iofuels is the one that is really closest to what we already do in Shell," Linda Cook, head of the company's gas and power group, said at the time of Shell's clean energy portfolio.
Perhaps Shell and others like it should expand their skill sets, Jaffe said.
"I understand why the companies prefer biofuels: 'I'm collecting up some substance and I'm...refining it or boiling it or doing something chemical to it...' It's a program that they feel they can do well and I get that, but I don't think it has the potential like some of these other things [wind and solar] do. And companies like Shell that have a gas and power business need to understand that they call their business gas and 'power,' and they need to focus on the power part of their business.
"If it means they have to learn more about the business because it's a complicated business, they should be learning more about that business because as the transportation sector electrifies they need to be in that business."
BP CEO Tony Hayward recently said biofuels could eventually capture 20% of the U.S. fuel market. Solar power is "the most challenged" of the renewables, due to costs he said, but wind power -- in which BP has invested -- is more cost competitive (see related story).
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