Truth or Consequences

In this space I have been clear about where the price of gasoline is going and, more importantly, what Americans and all global citizens need to do regarding energy.  The next twenty years are a critical time, a time of potentially great peril unless we have visionary leadership and full scientific and entrepreneurial mobilization toward first reducing and then replacing our consumption of petroleum based energy.

The reality is that we are now living in a country of $3.00 plus gas in the United States, with $4.00 likely by the end of the year. This has become a catalyst for consumers to take a harder look at driving less, buying cars with a higher MPG rating and generally thinking about conservation.  This means that people are more aware of and sensitive to environmental and conservation messages and advice.  There is a direct cause and effect here.  It is no surprise that Toyota just became the second largest auto company in the United States in terms of sales because they offer and sell more fuel efficient cars than Ford does.  The absolute stupidity of the American car companies’ long term is almost beyond comprehension, but that is for another day.

What I want to focus on is the concept of intentionally misleading consumers with environmentally oriented marketing messages to try to influence consumers who are just trying to do their part, to do the right thing.  Wave the ‘green’ flag in advertising and those gullible consumers will fork over their money.  This is about bp (lower case because that’s cool), formally known as British Petroleum.

British Petroleum morphed into bp which they said stood for ‘beyond petroleum’ and we all know they chose green as their corporate color.  You know the line:  we care about the environment, we are working to find new energy solutions, we are greener that the other guy, so pull into our gas station to fill up.  So who just had to shut down the Alaskan oil pipeline because of an oil spill?  bp   Why was there an oil spill?  Because, as Joe Nocera pointed out in a detailed and forceful column in the New York Times, bp didn’t monitor the physical state of it’s’ pipeline, letting parts of the pipeline corrode to the thinness of a beer can. Care about the environment? Evidently while extolling the fact that they were investing $8 billion in research on new energy fuels — over ten years — they pulled down $10 billion in profits this year and didn’t want to spend money to protect the environment.

When this is put within a larger historical context, the oil companies should be really clear that their own survival is at stake, but they don’t seem to get it.  Depending on what expert you believe, Earth will run out of oil sometime between 2040 and 2100 — the latter number being the one supplied by oil company experts and the former number offered up by the most respected experts in this area. This is not even taking into account the coming dramatic increase in oil prices due to declining supplies and exploding demand and the economic havoc that will create. Logic would dictate that the energy companies of today, the oil companies, would want to continue to be energy companies, and would be urgently working to discover, invent, and create new sources of energy.

We all know the story of the railroad companies in the nineteenth and early twentieth centuries in America.  They thought they were in the railroad business, period.  They did not understand that they were in the transportation business and the real estate business.  As a consequence of this narrow thinking, as an industry they gave way to the automobile and aviation industries.  The transportation industry that basically helped to create a nation became so smug about it and the profits they were making that they stopped looking forward.  Why would the oil companies not have this macro business case study always in mind?  Maybe they do, but I have yet to see it.

I know this is a bit of a rant, but the future of humanity is, to some degree at stake here.  If we do not dramatically slow down the global consumption of oil to buy time for human innovation and scientific effort to create replacement and renewable energy sources, we, and our children for sure, are all in serious trouble.  So, if a company tries to sell product by using environmental messaging and they are not truly working with urgency to solve this huge problem, we should not buy their product and let them know that “We won’t get fooled again!” When it comes to energy companies, have truth in advertising, truth in purpose, or suffer the consequences of public embarrassment and if we can act with any concerted effort, lowered sales.

12 Responses to “Truth or Consequences”

  1. Mando Says:

    from a marketing point of view, it is brilliant advertising by bp. from an ethics point of view, the one that really matters, it’s beyond fraudulent – closer to criminal. i’m going for a hybrid!

  2. Mike Shatzkin Says:

    As much as it is offensive that oil companies use phony “green” positioning, it is only one of a number of ways they can offend, including their behavior toward governments and the people in places like Nigeria, where BP is (relatively) benign. Trying to pick the least objectionable oil company is difficult, maybe impossible, but certainly requires weighing more than one factor. I think choosing for price, location, and service is probably still the consumer’s best choice (after they choose a car and life habits that will minimize oil consumption.)

  3. Dave Kustin Says:

    Amen brother. I say let the energy companies die a slow and painful death. It’s a lost cause, and the politician with enough guts to take them on has not even been born yet.

    Maybe you saw in the latest issue of Wired an article about a high performance electric car being built in Silicon Valley by essentially, techies (http://www.wired.com/wired/archive/14.08/tesla.html). The founder of PayPal is a major investor.

    The car goes 0-60 in 3.6 seconds and is gorgeous (designed by Lotus). It is expensive, $100k, but the point is, the ability exists to build an attractive, all-electric car that peforms better than a Prius…or in this case nearly everything else on the road.

    If, say, a Dell, or Microsoft or Oracle, wanted they could invest a few billion and create the first new car company (car of the future) in decades. Shouldn’t the car of the future come from Silicon Valley? Not Detroit, or an energy company?

  4. david Says:

    hybrids – yes!
    Changing habits – yes!

    Mike you are so right. But to discuss with any depth all the objectionable practices of oil companies would result in the world’s longest blog post.

    Keep in mind that heroin and cocaine dealers do all sorts of bad things, but if there were no addicts willing to pay for their goods, they wouldn’t be doing those bad things

  5. david Says:

    Dave-

    Yes I have read stories about that car. I could not agree more with you. May silicon valley – and any group of grease monkeys- rise up and do the obvious, create a new car company. Stick it to Detroit because they have been sticking it to us for so long.

    The single greatest opportunity for wealth creation in the history of man lays before us: creating new ways to better utilize existing energy sources and creating entirely new ones. The current market is 10,000 times larger that the one that John D. Rockefeller or Henry Ford had when they launched their products.

    Gentlemen, start your companies!

  6. Marilynn Preston Says:

    I met a fellow in my building elevator the other day. He had his Sedgeway with him. He rides it to and from work –no gas, no car, no parking fees– and he is in bliss. I think they cost about $6,000. A good bicycle costs even less. Do we have to be victims of the stupidity of the Combustion Engine industry? No. We just have to slow down and adjust our lifestyles. It sounds crazy but it just might work. . .

  7. Everyday Economist Says:

    I have spoken to many, many members of all levels of oil companies. From purchasers of gasoline for the local gas stations, up to the big boy accountants for Exxon and the like.

    Oil companies have taken to investing in land in the Rockies.

    Think about that for a minute. How much oil is in the Rockies?

    That’s right, they are buying coal. Fields and fields of coal land. They see the future not lined with green, but with black soot, and dark rocks hauled out of bottomless mines.

    They are inventing in technology to extract oil out of lower level coal deposits.

    They are anti-green, trying to keep their investments of refineries and the like producing revenue, rather than find a completely new model.

    And if you think about it, it makes sense. They want to maximize profits in the short term with as little investment as possible. $300,000,000 for a new green technique not requiring consumers to re-fill up tanks on a day to day basis, or $1,000,000 for a coal mine that can keep consumers burning up fuel day and night and paying for it… business sense says go for the one that extracts value from the consumer.

  8. Jay Glickman Says:

    the oil companies are definitely to blame, but the american car manufacturers are no less stupid. what with gm and ford offering free gas for one year with the purchase of gas guzzling suvs and pickups, they are still unable or unwilling to recognize the need for change even tho they are falling farther and farther behind foreign manufacturers and basically stuggling for survival.

  9. Grant Says:

    I can understand how BP comes off as purely hypocritical, but economically, doesn’t BP have the most to lose by leaving 400,000 barrels out of the market place? It doesn’t matter what the price of oil does if you can’t get your product to market. Consequently I find it a little hard to believe that BP did this intentionally.

    In my opinion, you have to leave the supply and demand structure of the oil and gas market alone. The effects of increasing gas prices aren’t felt for months. Until people can’t afford to drive luxury cars and take road trips (gas consumption in July was up 2% in spite of $3 gas), the price will, and should continue to go up. Pure and simple, if demand rises, supply must rise to meet it, if it doesn’t the market drives down demand.

    This is why the government absolutely has to keep there hands out of the cookie jar.

    Too easy to get off subject here, so I’ll just quit!

    Another well thought out post, David.

    -Grant
    TheCornerOfficeBlog.com

  10. Dave Kustin Says:

    “…. $300,000,000 for a new green technique not requiring consumers to re-fill up tanks on a day to day basis, or $1,000,000….”

    Tough to argue with, but also agree with David on this, in that “cracking” the alternative energy code will give birth to more wealth than the computer and oil industries….combined.

  11. david Says:

    To Marilynn – of course you are right. We have two things called legs. I was recently in Berlin and Munich and both cities have bike paths on all major streets and the emphasis was such that pedestrians stayed off the paths, as did autos. Thousands of bikes everywhere. And then there were all the tiny two seater cars.

    To Grant – I couldn’t agree more about the price of gas. I hope it goes to over $4 a gallon and stays there – which it will by the end of this year. Two reasons: 1. it will allow alternatives to become economically worth investment and 2. our country seems to care about conservation only when it hits home to the pocketbook.

    Also Grant, I don’t think that bp did this intentionally. I am calling them out on spending so much money trying to convince us about how concerned they are for the environment while at the same time allowing conditions for environmentally damaging oil spills to occur that could be prevented. Walk the talk.
    Finally Grant, and I know this would be unpopular, but I would have no problem if the Federal Government implemented a $1 a gallon tax with 100% of the money going to a well managed R&D fund for alternative energy.

  12. Imran Says:

    I encourage everyone to see the new documentary: Who killed my electric car?
    For more information on this eye opening documentary please visit: http://www.cnn.com/2006/US/07/25/paul.commentary/index.html

    Thank you for revisiting the energy crisis issue. I strongly believe we need to change the status quo. The questions is how do we go about educating the masses about the problem when energy companies, automobile companies and other interest groups have all the resources, connections and means to constantly distort the truth.

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