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Drill Baby Drill - And They Will

By November 17, 2008

The PR folks at Exxon Mobil must have loved the headline in yesterday’s New York Times Sunday Business section. Beneath a photo of Exxon Chief Executive Rex W. Tillerson, as he sat at a table with a long white cloth and the company’s “Exxon Mobil” in bright red letters, was this headline: “Green Is for Sissies.” (On the website the headline reads "At Exxon, Making the Case for Oil.")

Headlines aside, for traditional investors the article was a good overview of the oil industry’s dominant producer, with at least one analyst calling Exxon “the world’s greatest company.” But for green investors, Exxon continues to be the company that causes them to think there’s no justice in the investing world. The company that is considered the poster corporation for global warming by many critics, has seen its stock price fall less than 25 percent year to date, while numerous alternative energy mutual funds or green funds have lost twice that in value.

For years Exxon has been hearing from environmentalists about the climate crisis and the need to develop alternative forms of energy. Most recently there was a shareholders uprising led by members of the Rockefeller family, whose patriarch John D. Rockefeller founded the original Standard Oil more than 100 years ago. It got a lot of publicity, but the company didn’t change course.

That’s because Exxon Mobil is a business that sees demand for its product continuing unabated. The company believes global oil demand will reach 116 million barrels a day by 2030, up from 86 million barrels a day today. On top of that, the company expects that oil, gas and coal will represent 80 percent of global energy needs by 2030.

With that as the forecast, why would anyone expect that Exxon would put its money in windmills and solar panels? It had a third quarter profit of $14.8 billion. Exxon says it is investing in research to reduce greenhouse gases and other projects. But it is basically looking at the world and expecting little to change in terms of the appetite for its product.

If you’re an activist shareholder who likes to negotiate change with companies whose policies clash with various environmental, social or moral principles, plan on a long discussion with Exxon. When consumer behavior changes so will its business model.

November 23, 2008 at 8:42 am
(1) Sean says:

What are your thoughts on MarketGuru.com as a social investing tool?

November 23, 2008 at 2:52 pm
(2) Bill D. says:

Not quite sure what you mean when you say “as a social investing tool.” I haven’t roamed the site long enough to comment on all its features. Generally if something helps you to screen out companies that violate your social, moral or environmental principles it works as a tool.

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