Conclusion

Over the course of this blog, I explored some challenges with fossil fuel and some of the alternative opportunities that our economy is now exploring; Wind Power, Wave Power, Solar Energy, Biofuel/Biodiesel & Hybrid Technology. This alternative sources reduce the total amount of emissions that are part of the cause for global warming.

The way the oil giants are behaving, especially ExxonMobil (it being the one most against investing in alternative fuels), on what they are doing to help mitigate the high gas prices and global warming.

Price fixing was explored for both corporations as well as the influence of OPEC. While some may still argue that price fixing is occurring others say that it is the free market deciding.

Many people are involved in all of these controversies including but not limited to:

• Individuals like you and I;
• Corporations (Some like Toyota and Honda have a large stake with their Hybrid Technology);
• Power companies (they buy some energy from renewable sources);
• Oil companies (ie. ExxonMobil, ChevronTexaco, BP);
• Local, State & Federal Governments (ie. Investigations & tax breaks);
• Scientists (paid by various parties on both sides of the issues);
• OPEC; and
• Activist groups.

These are only some of the examples of those that act upon each other to further their beliefs. While many people can form their own opinions, many times it is flawed as they are using information provided by a group that expresses some bias. In order to create a completely unbiased opinion, one would have to perform their own tests and monitor the experiments themselves which are (1) too costly, (2) lack of education or technical training makes it difficult and (3) absence of proper equipment prevent some experiments.

Overall, the issues of our world concerning green house gasses and energy, be it fossil fuels or alternative energy, will never go away. As long as there are profits to be made by big oil companies and countries, and the thinking of many people on the earth about driving, our world's energy will be at the center of our focus for many years or decades to come.

OPEC! A major influence...

One group that I have not mentioned that is very instrumental in all of this is OPEC (Organization of the Petrolium Exporting Countries).

One of OPEC's goals is to stabilize oil prices, which they claim creates "an efficient, economic & regular supply of petroleum to consumers, a steady income to producers & a fair return on capital to those investing in the petroleum industry. " This has caused many companies, advocacy groups and individuals to question OPEC's actions of whether they are for the better or for the worse.

OPEC can cut supply of oil exports if they feel (1) that the prices are too low (2) or the inventory levels are at a level in which will force the price to retreat. "This measure was aimed at arresting the declining prices of crude oil in the international market." (Business Day Online, October 30, 2006)

With OPEC controlling the output and export of oil from it's governed countries, it could cause further development into countries not tied to OPEC or for increased investments into alternative energy. "High oil prices may mean opportunities for oil and gas investment in more difficult operational environments. It may also point to opportunities in non-OPEC countries or in the field of alternative energy or conservation technologies." (Smith Brandon International Online)

While OPEC helps its' governed countries, it can hurt the general economy of many others as people are forced to pay more for gasoline and other sources of fossil fuels. This will reduce how much money is pumped into the general economy thus stemming growth until prices retreat.

Even as of late, with oil prices in the mid $60 range, OPEC stated that there is an adequate supply of oil in the market and will not increase output ahead of its' next meeting in September. World Business News In fact, The Standard reported on June 11, 2007 that due to an increase demand for gasoline and tropical storm threats could push oil prices to $80 a barrel this summer. This would definitely cause even more backlash from consumers as the oil companies and countries would continue to fuel their financial coffers with profits while the consumers have to either invest in alternative energy or reduce their discretionary spending.

Coming up next: Conclusion on the parties who are in play and their role. To be posted tomorrow, June 13, 2007.

Price Fixing on Oil?

I wanted to talk a little bit about the continuous investigations about alleged price fixing in the energy sector. The alleged price fixing has been a hot topic for decades and the recent events are causing it to steam up again. It is also a reason for the huge push to alternative energies since the cost of crude oil and gasoline is getting so expensive. Now who really controls the price of barrels of light sweet crude and other fuels?

Most fuels are traded on the open market in futures. These futures are something that helped Southwest Airlines post massive profits while most other carriers were losing billions of dollars annually and even forced some into Bankruptcy Court (United, US Airways, Delta, Northwest & Aloha). Southwest was able to buy futures in heating oil (as it's the closest cost match to aviation fuel) and purchase it for a cheaper price. As prices began to increase after 9/11, they still had the contracts for the cheaper fuel thus reducing their overall expense.

Many people still believe that the oil companies set the price and that the open futures market does not. Evidence of Price Fixing by Oil Companies? By Guy Cramer
Now this report may not be scientifically conclusive as it only suggests that by the trends (of the price for futures) that there is price fixing going on.

Another reason that has fueled more speculation and that has got the involvement of many government agencies is the overall profit that the oil companies are posting. ExxonMobil even posted that largest profit ever to be reported by a US publicly traded company ever:


With profits for the four largest energy companies reaching nearly $100B annually as of 2006, it makes people wonder if price fixing is happening.

In 2005, the Bush Administration was asked by eight (8) state leaders to investigate oil pricing in the aftermath of Hurricane Katrina as oil spiked to over $90 a barrel which had been hovering around $65 a barrel prior to the catastrophic event. CBS News


In February of 2006, the Supreme Court ruled against the gas distributors who filed a class-action lawsuit against ChevronTexaco & Shell Oil Co saying that their partnership, while appearing to be anti-competitive in setting prices, was not illegal. Ruling

So as we can see, this has been a huge topic that has many people, from individual citizens to government agencies, acting on the potential threat of price fixing for our world's necessary fossil fuels. All in part driving the development and use of alternative fuels to help reduce the out of pocket expense and reduce emissions.

More to come...

ExxonMobil and Green Energy...

Are major oil companies investing in green? Some of them are. Should they? That is hotly debated!

Some of the world's largest oil companies are ExxonMobil, ChevronTexaco, ConocoPhillips and BP. These oil companies control some of the most lucrative drilling rights in the world and have the profits to invest in virtually anything that they see fit. With all the oil companies recording record profits, the government has called the executives to testify on Capital Hill about why prices are so high. Transcript from CNN.com

The government is urging the oil companies to produce more fuel, lower costs (even thought the investment markets set prices by purchasing energy futures) and invest in alternative fuels. While most of the oil companies are investing in alternative energy sources and striving to clean up the way that they extract and refine fossil fuels, there is one company that says that investing in such alternatives in not for them. ExxonMobil!

(Disclaimer: I am a shareholder of ExxonMobil and do not have a bias against them.)

In a recent article in Fortune magazine, Rex Tillerson, Chairman and CEO of ExxonMobil, sat down with Geoff Colvin, Fortune senior editor-at-large, to discuss alternative fuels and ExxonMobil.

Tillerson explains that ExxonMobil is in the business to earn a return on its' shareholders investments first and foremost. (Isn't that why businesses exist?) If they do not believe that an investment can make the proper return that the company believes is adequate, it just won't invest in it. "What are we going to bring to this area to create value for our shareholders that's differentiating?" asks Tillerson. "Because to just go in and invest like everybody else - well, why would a shareholder want to own Exxon Mobil?" (Fortune, source is linked) They have been around so long and have rights to some of the oldest and richest oil reserves, they can pump oil for less than $1 a barrel. To harness alternative fuels, it would cost significantly more and they would not be able to invest new technology to the harnessing and refining of such energy that would create value.

They are a leader in technology and innovation for fossil fuels and can arguably produce oil for cheaper than another company pumping from the same well. Gheit, who worked for Mobil long before the companies merged, recalls being mystified by Exxon's X factor. "We [Mobil] could be pumping oil from the same platform, and they'd make more money on it than us," he says. "It was like taking the same train to work, but they got to the office first." (Fortune, source is linked)

While activist and environmental groups oppose ExxonMobil and the government is trying to keep their nose in things, ExxonMobil pays outside scientists and groups to justify their reasoning on alternative energy sources. ExxonMobil contends that alternative energy sources will never be large enough for the world's most valuable company (based on market value) to be investing in. Their payments to outsiders helps support their rationale to all of those who oppose them.

That's another reason Exxon isn't investing in alternative energy sources: They don't look big enough. For a company Exxon's size - No. 2 on the Fortune 500 - businesses of less than mammoth scale don't merit troubling with because they can't nudge the bottom line. (Fortune, source is linked)

Exxon's most stinging critics, such as Greenpeace and the Union of Concerned Scientists, have charged for years that the company has funded a range of global-warming doubters and deniers, and it's true. Public documents show that Exxon has long given money to organizations that publish papers, run websites, and write letters contending that global warming isn't happening, or isn't proven, or isn't connected to human activity. The company recently stopped funding some of those outfits - "about a half-dozen," says Cohen - though it may still be financing others. (Fortune, source is linked)

While ExxonMobil believes this way and does not agree with the opposition, other companies are making strides to appease both the activist groups and their shareholders. Stay tuned to find out who and how...