Irving, Texas—Published at the apogee of Barack Obama’s apotheosis, the April 2009 issue of Condé Nast Portfolio, a business magazine, faulted ExxonMobil for not joining the green parade, for not investing more in alternative energies, and for not understanding oil’s eclipse as humanity emancipates itself from carbon-based energies. The magazine said “the company’s prospects for the next decade or two are starting to look shaky.”
Later that month, the magazine died. ExxonMobil lives.
It has surpassed Walmart as the U.S. corporation with the largest revenue. Its placid CEO, Rex Tillerson, is Big Oil in a blue suit, his serenity grounded in a certainty: His company can continue providing fossil fuels for a world that for the foreseeable future—at least 20 years—will demand them in ever larger quantities.
“You can’t rise above the facts,” says Tillerson, who was born in Texas’s oil patch: Wichita Falls. His foundational fact is that his company will be “not much different” in 20 years because the energy mix over that span “is not going to be markedly different.” Eighty percent of the world’s energy comes from oil, natural gas, and coal.
When the first commercial incandescent lightbulb was produced in 1879, 75 percent of U.S. energy demand was supplied by burning wood. In the 1880s, coal surpassed timber; in the 1950s, oil surpassed coal. “Once we started using oil seriously,” Tillerson notes, “it still took 75 years to replace half of coal’s portion” of the energy mix.
What about the “peak oil” theory—that we have passed the point of maximum production? “We are,” he says, “very good at [predicting] demand” but regarding supply “we have blown it every time.” He estimates that the world has used “probably well less than half” the recoverable oil. In fact, he says, “we’ll probably never exhaust the world’s supply” of oil because recovering the last, say, 10 percent would be so costly that alternative energy forms would make economic sense.
Herewith a recapitulation of the recalculations: In 1914, the Bureau of Mines said U.S. oil reserves would be exhausted by 1924. In 1939, the Interior Department said the world’s petroleum reserves would last 13 years. Oil fueled a global war and the postwar boom, and in 1951 Interior said the world had … 13 years of proven reserves. In 1970, proven reserves were estimated at 612 billion barrels. By 2006, more than 767 billion barrels had been pumped and proven reserves were 1.2 trillion. In 1977, Jimmy Carter said mankind could “use up” all the world’s proven reserves “by the end of the next decade.” Since then, the world has consumed three times more oil than was in the proven reserves. Today, shale rock formations in Texas and Louisiana; Montana and North Dakota; and New York, Pennsylvania, and other Eastern states may contain 2,000 trillion cubic feet of clean-burning natural gas.
A modern city of 1 million people requires 6 million BTUs of energy per second, 1,000 gallons of oil per minute. But 1.5 billion people still have no electricity; 2.5 billion people still burn wood, dung, or other biomass fuels for cooking and heating, a dependency that is harmful to their health and to air quality. It is not deplorable that developing countries such as India and China are joining the prosperity party. By 2035 they will have pushed global demand for energy 35 percent higher than it was in 2005.
Although the economies of developed nations are expected to be, on average, 50 percent larger in 2035 than in 2005, energy demand is expected to be slightly lower because of efficiencies. Recently, Tillerson says, “more than half the growth in demand has been met by efficiencies” driven by higher prices.
Today, however, “we’ve got the entire country in a crouched position.” He is not. He is temperamentally percussive, as befits someone who, as a University of Texas undergraduate, manned the bass drum in the Longhorn Band. Ethanol? A monument to “the power of the farm lobby.” The Chevy Volt, the $41,000 four-passenger electric car with a tax credit of up to $7,500 to bribe people to buy it? “That’s your government at work.” ExxonMobil at work includes labs doing research on algae-based biomass fuels.
So: There is ethanol promoted by government, which need not turn a profit. There is algae research by Exxon-Mobil, which does need to. Which do you think is most apt to serve the nation’s needs?
George Will is also the author of One Man's America: The Pleasures and Provocations of Our Singular Nation and With a Happy Eye But . . .: America and the World, 1997—2002.