The Blue State

Exxon profits set U.S. record

Even though Exxon Mobil's profits declined by four percent during the last quarter of '06, they still set a yearly profit of $39.5 billion, which is an all-time record for any U.S. company.  The Boston Globe has the raw numbers:

The 2006 profit topped the previous record, also by Exxon Mobil, of$36.13 billion set in 2005. The record earnings amounted to roughly$4.5 million an hour for the world's largest publicly traded oilcompany, which produces about 3 percent of the world's oil.

It also equals the approximate gross domestic product -- a measure ofall goods and services produced within a country in a given year -- ofcountries like Ecuador, Luxembourg and Croatia.

Also eyepoppingwas   Exxon Mobil's revenue, which rose to $377.64 billion for the year,surpassing the record $370.68 billion it posted in 2005.

Part of Exxon's success came as a result of crude prices reaching $78 a barrel over the summer.  The sharp decline of natural gas prices in the fall and winter might explain some of the reason why Exxon's profits fell four percent in the fourth quarter of 2006.

Presidential rhetoric on energy reform in the oil era

During this year's State of the Union Address, President Bush pledged to back a program that invests in alternative fuels.  If you are somewhat skeptical that Bush will actually follow through on this, you are definitely not crazy.  In fact, throughout history past presidents have made the same pledges during State of the Union speeches.  Check out these examples:

Calvin Coolidge, Dec. 4, 1928: "The practical application of economy tothe resources of the country calls for conservation … We have aconservation board working on our oil problem. This is of the utmostimportance to the future well-being of our people in this age ofoil-burning engines and the general application of gasoline totransportation."

Herbert Hoover, Dec. 3, 1929: "Conservation of national resources is afixed policy of the Government … Conservation of our oil and gasresources against future need is a national necessity."

Richard Nixon, Jan. 30, 1974: "These measures will require the oilcompanies and other energy producers to provide the public with thenecessary information on their supplies. They will prevent theinjustice of windfall profits for a few as a result of the sacrificesof the millions of Americans."

Gerald R. Ford, Jan. 15, 1975: "But in all honesty, we cannot put allof the blame on the oil-exporting nations. We, the United States, arenot blameless. Our growing dependence upon foreign sources has beenadding to our vulnerability for years and years, and we did nothing toprepare ourselves for such an event as the embargo of 1973."

Jimmy Carter, Jan. 19, 1978: "Every day we spend more than $120 millionfor foreign oil ... Now we know what we must do, increase production.We must cut down on waste. And we must use more of those fuels whichare plentiful and more permanent."

Ronald Reagan, Jan. 26, 1982: "By deregulating oil we've come closer toachieving energy independence and helped bring down the cost ofgasoline and heating fuel."

George H.W. Bush, Feb. 9, 1989: "And in some cases, the gulfs andoceans off our shores hold the promise of oil and gas reserves whichcan make our nation more secure and less dependent on foreign oil."

Bill Clinton, Feb. 17, 1993: "Our plan includes a tax on energy as thebest way to provide us with new revenue to lower the deficit and investin our people. Moreover, unlike other taxes, this one reducespollution, increases energy efficiency, and eases our dependence on oilfrom unstable regions of the world."

Talking about our dependence on foreign oil makes for great bipartisan rhetoric.  However, short-term rhetoric without a bold plan has been the common formula that leads to inaction in Washington.

So you say six months of oil leads to energy security

During Tuesday's State of the Union Address, President Bush is expected to spend the majority of his speech addressing domestic issues.  One of those agenda items is energy reform -- more specifically, drilling in the Arctic National Wildlife Refuge.  While it technically is considered a domestic investment, some argue that it will significantly reduce our dependence on foreign oil, and therefore help the country from a security standpoint.

But just how much oil is really there?  Proponents of ANWR drilling strategically leave that part out of their argument.

According to the U.S. Geological Survey, ANWR would only contribute six months worth of oil to the U.S. reserve.  Last year, Senator Joe Lieberman (D-CT), of all people, spoke out against drilling there, saying it did not make any practical sense:

"Is it worth forever losing a national treasure, one of our last greatwild places, for a six month supply of oil 10 years from now?" askedSenator Joe Lieberman, one of the refuge's staunchest defenders.

Opponents of ANWR might soon ask the President to explain how six months worth of oil would make us more energy dependent?  Even more comical is the notion that drilling in the Arctic will lower gas prices, even though prices are mostly controlled by OPEC.  But at least drilling there would give oil companies a temporary source of extra revenue.  We don't want the CEO's to be homeless or anything.

What ExxonMobile and the tobacco industry have in common

Their ongoing war against science depends on creating public uncertainty.

"Since there is a certain degree of uncertainty about global warming, we should not automatically assume it is true.  The burden of proof therefore lies on left-wing environmentalists, not the oil industry."

That is the key talking point behind the oil industry's political war against the advocates of energy reform.  If there is some uncertainty, then why regulate it?  But analytically speaking, this type of logic is all too familiar.  Think back to when the tobacco industry used to create uncertainty about the dangers of smoking.

The Union of Concerned Scientists released a report, titled "Smoke, Mirrors and Hot Air: How ExxonMobile Uses Big Tobacco's Tactics to Manufacture Uncertainty on Climate Science."  Here is an excerpt from their press release.

"ExxonMobil has manufactured uncertainty about thehuman causes of global warming just as tobacco companies denied theirproduct caused lung cancer," said Alden Meyer, the Union of ConcernedScientists' Director of Strategy & Policy. "A modest but effectiveinvestment has allowed the oil giant to fuel doubt about global warmingto delay government action just as Big Tobacco did for over 40 years."

So why even engage in those cheap tactics?  There is more too it than ExxonMobile just being worried about government regulation, as Newsweek's Jerry Adler explains.  It's about compensation for stockholders:

Of course, cigarette companies weren’t concerned just about futuresales, but the billions of dollars in compensation they eventually hadto … umm … cough up. ExxonMobil’s motivation, presumably, is to protecta fantastically lucrative market: its 2005 profits of $36 billion madeit the most profitable corporation in history. But that very wealthputs them in a position both to shape and eventually dominate thepostcarbon energy world, if they choose to do so. Ironically, as thereport points out, the company and its shareholders will suffer if itgets left behind in the transition to less polluting forms of energy.

Next week, House Democrats plan to introduce legislation that repeals the tax breaks for oil companies such as ExxonMobile.

Democrats plan investment in renewable energy

As we count down the days until January 4th, when the Democrats will assume power in the new Congress, the majority party's agenda is becoming a lot more clear.  One of the first items of business will be repealing the tax cuts that the Republican Congress gave to oil companies last year.  Although the fine print has yet to be written, the Democrats plan to use the money from the oil tax cut repeal to invest in renewable energy:

House Democrats in the first weeks of the new Congress plan toestablish a dedicated fund to promote renewable energy andconservation, using money from oil companies. That's only onelegislative hit the oil industry is expected to take next year as aCongress run by Democrats is likely to show little sympathy to thecash-rich, high-profile business.

This is just one of the many items that will be on the docket in the first 100 hours.

Also, as a side note, The Blue State blog will have full coverage on January 4th, and will track bills as they get passed.

84% of country could use plug-in hybrids

A new study released by the Pacific Northwest National Laboratory finds that there is enough electricity in this country for 84% of the nation's 220 vehicles to convert from gasoline to electric energy.  This is absolutely huge because gasoline accounts for 73% of all oil imports.  If the conversion was made, the United States would be substantially less dependent on foreign sources of petroleum.

So how would this work?  Here is the PNNL press release:

A new study for the Department of Energy finds that "off-peak"electricity production and transmission capacity could fuel 84 percentof the country's 220 million vehicles if they were plug-in hybridelectrics.

Researchers at DOE's Pacific Northwest National Laboratory alsoevaluated the impact of plug-in hybrid electric vehicles, or PHEVs, onforeign oil imports, the environment, electric utilities and theconsumer.

"This is the first review of what the impacts would be of very highmarket penetrations of PHEVs, said Eric Lightner, of DOE's Office ofElectric Delivery and Energy Reliability. "It's important to have thisbaseline knowledge as consumers are looking for more efficientvehicles, automakers are evaluating the market for PHEVs and batterymanufacturers are working to improve battery life and performance."

Current batteries for these cars can easily store the energy fordriving the national average commute - about 33 miles round trip a day,so the study presumes that drivers would charge up overnight whendemand for electricity is much lower.

So what would this mean for consumers?  The report says that these vehicles would initially cost between $6,000 and $10,000 more than gas-powered cars.  Of course, the price would likely decline over time.  When you add in the amount that you would save by not having to pay $2.60 per gallon to fill up, it becomes quite a bargain.

An analysis of the study over at HybridReview blog cited the environmental implications that these vehicles would have:

The added electricity would come from a combination of coal-fired andnatural gas-fired plants. Even with today's power plants emittinggreenhouse gases, the overall levels would be reduced because theentire process of moving a car one mile is more efficient usingelectricity than producing gasoline and burning it in a car's engine.

Total sulfur dioxide emissions would increase in the near term due tosulfur content in coal. However, urban air quality would actuallyimprove since the pollutants are emitted from power plants that aregenerally located outside cities. In the long run, according to thereport, the steady demand for electricity is likely to result ininvestments in much cleaner power plants, even if coal remains thedominant fuel for our electricity production.

Of course, this study does not factor in the extensive lobbying effort that would take place on K-Street, as oil companies would try to prevent lawmakers from allowing this conversion to happen.

Cartoon: Checking the gauge

Andrew Wahl, The Wenatchee World, OfftheWahl.com

Here is Andrew's weekly commentary:

Finally, aresend of “Checking the Gauge” [Archive No. 0617]: I’ve received wordthat this toon earned a Citation of Excellence in the 2006 UnitedNations Correspondents Association Ranan Lurie Political Cartoon Awardscompetition. That makes me the only American cartoonist to earn thathonor in each the past two years. Pretty darn cool, I think. Check itout at:

<http://lurieunaward.com/2006winners.htm>

(Note: They added the splash of color without my involvement, and I cartoon for The Wenatchee World, not “Wenarchee.”)

    I think that about does it for this week.

Cheers,
Andrew
toon@offthewahl.com

CFR: Six ways that oil dependency hurts US foreign policy

A study released this month by the Council on Foreign Relations (CFR) found that foreign oil dependency is counter-productive to American security.

Titled the National Security Consequences of U.S. Oil Dependency, the 67-page CFR report lists six ways that oil hurts our ability to implement a sound foreign policy:

1. "..control over enormous oil revenues gives exporting countries theflexibility to adopt policies that oppose U.S. interests and values."
2. "..oil dependence causes political realignments that constrain theability of the United States to formpartnership  to achieve commonobjectives."
3. "..high prices and seemingly scarce supplies create fears— especiallyevident in Beijing and New Delhi, as well as in European capitals andin Washington—that the current system of open markets is unable toensure secure supply.
4. "..revenues from oil and gas exports can undermine local governance."
5. "..a significant interruption in oil supply will have adversepolitical and economic consequences in the United States and in otherimporting countries."
6. "..some observers see a direct relationship between the dependenceof the United States on oil, especially from the Persian Gulf, and thesize of the U.S. defense budget."

All of these excerpts can be found between pages 26 and 30, which make up the most important part of the report (view pdf).

In particular, number four adds credibility to a column written on The Blue State two just days ago, which concluded the following: governments that rely on a small number of resources such as oil  for economic well-being are more likely to be plagued by corruption than countries with diverse economies.

In other words, almost all the oil countries that the United States is doing business with are corrupt.  The CFR report cited Russia as an example.  "Russia is able to ignore Western attitudes as it has moved to authoritarian policies in part because huge revenues from oil and gas exports are available to finance that style of government," the report read.

Even more alarming, countries that import oil are less likely to confront those outlaw regimes.  The study cited France, Germany and China as examples of oil importers that are becoming more hesitant to respond to Middle East violence out of fear that it might upset oil-producing states such as Iran and Syria.  It goes to show how oil dependency forces countries to choose between protecting themselves and keeping their business partners happy.

Why should a country ever have to outsource its own foreign policy?  Two words: oil dependency.

Offshore oil drilling will be GOP's last bill

In the coming week (assuming Congress won't convene again after next Wednesday), the Republican Congressional majority is expected to pass a bill that would open up drilling just miles off the coast of Florida.  This is expected to be the last legislative bill passed before the Democrats take majority of both houses in January:

With time running out on the party's majority rule, GOP leadersdecided to send the measure to the floor for a vote next week, KevinMadden, a spokesman for Majority Leader John Boehner said.

It wasn't clear, however, whether Republican leaders would press forits passage or simply offer it up for a vote anticipating it wouldfail. They have previously blocked it, hoping for a more ambitious billthat would open coastal waters across the country to drilling unless astate objects.

It's interesting how they will go out of their way to pass an offshore drilling bill, yet refuse to vote on nine bills that will fund our government in 2007.  Some priorities.  Don't worry though, on behalf of their oil friends, the Republicans will get this drilling bill passed.

Shell: We have to deal with greenhouse gases

Now even some oil companies are accepting this inconvenient truth.

Al Gore's documentary An Inconvenient Truth was met with strong cynicism from conservative talk radio and much of the traditional media.  In general, a large plurality of the country still does not believe that greenhouse gases are warming the planet and contributing to drastic changes in our climate that we have been witnessing these last few decades.  This comes despite the fact that the overwhelming majority of scientists have found that there is a correlation between carbon dioxide levels and temperature -- both of which are increasing and will be expected to increase even more in the coming years.

The effort to smear anyone or any group that raises awareness about global warming is losing allies fast.  One year ago, even President Bush acknowledged global warming existed, calling it a "serious problem."  And just this week, Shell, one of the world's most profitable companies, said that their firm will no longer dispute the scientific consensus:

"We have to deal with greenhouse gases," John Hofmeister, president ofShell Oil Co., said in a recent speech at the National Press Club."From Shell's point of view, the debate is over. When 98 percent ofscientists agree, who is Shell to say, 'Let's debate the science'?"

The Democrats, who took back majorities in both the House and Senate, have pledged to push for energy reform -- investing in alternative energy, giving green tax incentives for business and becoming less dependent on foreign petroleum.  The real question is how many Republicans in both chambers of Congress will vote against science?