'Big Oil' and Climate Change

Debunking an urban myth

(Editor’s note: Jack Spencer is capitol affairs specialist for Michigan Capitol Confidential and a veteran Lansing-based journalist. His columns do not necessarily represent the views of the Mackinac Center for Public Policy or Michigan Capitol Confidential.)

Elvis Presley celebrated his 80th birthday on Jan. 8. Although his present location is undisclosed, sources suspect he lives near Roswell, N.M., where aliens from outer space crashed long ago and still stop over for lunch when they visit our solar system. Everybody knows that, right?

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Myths, urban and otherwise, are narratives often accepted because they reinforce a certain worldview. One of the most widely believed urban myths of our time is that the oil (aka fossil fuel) industry wants to and works to undermine the belief in man-made climate change.

This idea only makes sense to those (unfortunately a great many) who subject it to the most superficial analysis. It is based on the manifestly false premise that the oil industry has something to fear from the theory of man-made climate change. In reality, the oil industry — like any industry driven by the quest for profits — long ago decided to cash in on the man-made climate change dogma.

Funding available to support the argument that man-made climate change is bunk (if there is any at all) is insignificant compared with the billions of dollars promoting an impression that the theory is factual. If the oil industry put its financial muscle behind efforts to dispute man-made climate change, the politics surrounding the issue would be very different than they are today.

Here’s where things really stand:

Point 1 — Let’s say you were an executive at a huge international candy company in the early 1970s when a significant number of consumers in Western Europe and the United States joined the health and fitness movement. Would you tremble in your boots and fear the impact? Of course you wouldn’t.

As a candy executive you’d realize that tens of millions of people were hooked on your product. High levels of candy consumption would be guaranteed, regardless of how popular the health and fitness lifestyle became. Yes, the health and fitness trend would be a ‘concern,’ but wouldn’t pose an immediate threat to profits.

Facing manmade climate change claims, the oil industry enjoys an even more secure position than the candy industry did in the 1970s. The developed world is far more dependent on fossil fuels for its energy needs than portions of the population with a sweet tooth are on candy. Consider all the places on Earth with existing infrastructures that require fossil fuels to function. Alternative energy sources present no real threat to the position fossil fuels have in the world market, as the recent natural gas revolution has clearly demonstrated.

Point 2 — Any moderately intelligent candy industry executive facing the health and fitness movement in the1970s would have looked for ways to take advantage of it. They’d advocate development of new “healthful” candies, with reduced sugar, sugar substitutes and specific health benefit claims. They could even consider having their candy company invest in health food stores. In other words, don’t fight the health and fitness movement, join it by diversifying and prospering.

That’s exactly the approach the oil (aka fossil fuel) industry took with manmade climate change. The ads turned out by oil (now ‘energy’) companies over the past 15 years have been all about being “green” and getting “greener.” The fossil fuel industry is deeply immersed in so-called renewable energy. It was perfectly positioned in terms of expertise and technology to take advantage of these trendy developments. And, with government subsidizing renewable energy projects, profits — or at least tax write-offs — have been virtually guaranteed.

With some, or perhaps most, substitute candies the actual health benefit is dubious. Certain additives are arguably worse than sugar. The story is the same with the most prominent and ballyhooed renewable energy sources: ethanol, wind and solar. They fall far short of their advertised energy production potential and positive impact on the environment.

But the bottom line for both the candy industry and the fossil fuel industry has been to ‘go where the money is’ by adjusting to societal trends and not worrying about whether or not those trends are rational.

Point 3 — Ironically, the anti-fossil fuel movement’s clamor against further drilling and exploration — which evolved largely due to claims of man-made climate change — has tended to drive oil industry profits up. Dispensing with the intricacies of the economics involved, just look at the evidence. Some readers might remember the so-called “windfall profits” oil companies made in the 1970s. Those profits were reaped as the result of shortages perpetuated by government restrictions on drilling and exploration. After President Jimmy Carter (too late to save his job) lifted the restrictions, oil prices plummeted and in the 1980s the domestic oil industry went through a recession. Competition and innovation always drive prices down.

Now it’s happening again with the natural gas revolution bringing the price of gasoline below $2 a gallon . Meanwhile, oil (aka fossil fuel) stocks on Wall Street have been falling, not rising. As strange as it seems, that’s because the oil industry was allowed to do what man-made climate change activists tried to prevent it from doing. These realities should be a clue to those who believe the ‘Big Oil needs to dispute man-made climate change’ myth that the complexities involved are more than their simplistic assumption takes into account.


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