Sunday, July 13, 2008

Why “Big” Oil companies aren't the ones fighting eco-socialism

If there is one message that emerges loud and clear from environmentalist propaganda, whether Al Gore’s rhetoric, green protests or dramatisations like Burn Up, it is a clear idea of the enemy: Rich, slick oil executives who supposedly fund some vast conspiracy to prevent the emerge of a brave, green new world. They form a handy target for a movement that is deeply anti-capitalist. They’re often American, wealthy and clearly have some measure of power; fine bogeymen for the modern age.

There is no vast conspiracy to prevent the public accepting the green agenda. There are millions upon millions of pounds being spent in the UK alone attempting to convince the public that it should be a priority to cut carbon dioxide emissions. The Government’s Act on CO2 programme alone has cost £5.5 million in the last year. Government departments and NGOs run countless other programmes with large staffs and sizeable budgets. By contrast, I’m not sure there is anyone working full-time in the UK to argue the case against radical carbon dioxide emission cuts. A cursory examination of their advertising shows that Exxon Mobil, BP and the other energy majors are not working to combat the idea that we should take aggressive action to curb carbon dioxide emissions. Instead, they’re kowtowing to the greens.

There is, simply, a free-rider problem which means corporations will rarely resist significant political pressure. The benefits from fighting green alarmism are diluted across such a range of firms and interests while the costs, in terms of green opprobrium, are not. Exxon Mobil initially funded sceptical scientists to a certain degree but the amounts were small compared to the budgets the green movement are playing with and that effort is now largely over. Firms respond rationally and don’t defend the broad social benefits of, for example, affordable energy.

Beyond that “Big Oil” isn’t going to be the big loser – in absolute terms – if green policies are put in place. The crucial measure here is reserves. Green policies won’t bring down prices right now so current production isn’t the crucial variable. Reserves are the crucial measure of the potential impact of green policies, were they to be successful in reducing demand for hydrocarbon fuels, on a firm. On that score the Western oil companies are minnows. Measured by reserves, Exxon Mobil is the 14th largest firm, BP 17th largest and Shell 20th. The lion’s share of world reserves are held by nationalised companies, with Saudi Aramco at the top of the list. These are the firms who will really lose out if hydrocarbon demand falls.

Of course, the argument that comes up at this stage is that we have to cut hydrocarbon demand in order to stop Iran, Saudi Arabia and other unpleasant regimes enjoying buoyant revenues that allow them to spend on weapons, promoting radical Islam and other unpleasantness. This is an argument which receives far too little scrutiny. You don’t need to ask too many questions to see that it is full of holes. The argument relies on the idea that people are less dangerous when they’re poor; that poverty actively makes people less likely to engage in terrorism.

While I don’t subscribe to the argument that terrorism is some kind of cry for help from the world’s poor neither do I think that it is dependent on serious wealth. In a world where a state as poor as North Korea can develop nuclear weapons poverty is clearly little bar to an ability to inflict terrible carnage. Our enemies must be resisted and defeated and our potential enemies persuaded. Reducing our use of oil will do little to help and if we impoverish ourselves in the process it will make things more difficult.

Of course, all this assumes that green policies will succeed in significantly reducing hydrocarbon demand. In the meantime, the main effect of green policies, if they hope to have a significant effect, has to be higher energy prices. The real impact here won’t be on energy companies, who can generally pass such costs on, but on a broad range of Britons. Particularly the vulnerable elderly trying to heat their homes; manufacturing industries trying to compete with foreign industries that are less efficient but have lower energy costs; motorists in suburban and rural areas who need their cars to get around.

These aren’t the favoured rhetorical targets of the green movement. They’re rather harder to demonise. However, they, and not the Western oil executives portrayed in countless green caricatures, are the real losers when green policies push up energy prices.

No comments: