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The Oil Industry's Bid for Leadership:
a commentary upon a recent ad from Chevron Chairman & CEO, David J. O'Reilly

by
Dale Allen Pfeiffer

© Copyright 2005, From The Wilderness Publications, www.fromthewilderness.com. All Rights Reserved. May be reprinted, distributed or posted on an Internet web site for non-profit purposes only.

On July 15th, 2005, the following paid, two-page ad appeared in The New York Times, The Sacramento Bee, The San Francisco Chronicle, and who knows how many other newspapers.

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

http://www.chevron.com/about/advertising/docs/real_issues_print_02.pdf

It took us 125 years to use the first trillion barrels of oil.

We'll use the next trillion in 30.

So why should you care?

David J. O'Reilly
Chairman & CEO
Chevron Corporation

Energy will be one of the defining issues of this century. One thing is clear: the era of easy oil is over. What we all do next will determine how well we meet the energy needs of the entire world in this century and beyond.

Demand is soaring like never before. As populations grow and economies take off, millions in the developing world are enjoying the benefits of a lifestyle that requires increasing amounts of energy. In fact, some say that in 20 years the world will consume 40% more oil than it does today. At the same time, many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract, physically, economically and even politically. When growing demand meets tighter supplies, the result is more competition for the same resources.

We can wait until a crisis forces us to do something. Or we can commit to working together, and start by asking the tough questions: How do we meet the energy needs of the developing world and those of industrialized nations? What role will renewables and alternative energies play? What is the best way to protect our environment? How do we accelerate our conservation efforts? Whatever actions we take, we must look not just to next year, but to the next 50 years.

At Chevron, we believe that innovation, collaboration and conservation are the cornerstones on which to build this new world. We cannot do this alone. Corporations, governments and every citizen of this planet must be part of the solution as surely as they are part of the problem. We call upon scientists and educators, politicians and policy-makers, environmentalists, leaders of industry and each one of you to be part of reshaping the next era of energy.

Signed,

Dave

Without a doubt, this is the boldest public admission of Peak Oil to date by a sitting oil executive. Oil company CEO's have not been known for their candor, particularly where the availability of oil resources is concerned. And so it is very momentous that Chevron Chairman and CEO David O'Reilly has made such a public statement. This is a warning light flashing in the face of the public. Mr. O'Reilly must really be concerned.

The cynic in me wonders if perhaps Mr. O'Reilly is just covering his butt. Animosity towards the oil industry is climbing, and will continue to do so with each rise in gasoline prices. Does Mr. O'Reilly foresee a day when angry mobs will roam the countryside looking for oilmen to lynch? Perhaps that is a little too paranoid, but I'm sure Mr. O'Reilly can see a day coming when he will have to address a Congressional investigation into the energy crisis. Undoubtedly, without efforts such as this advertisement, the investigating committee would want to know why Mr. O'Reilly gave no warning. Now the Chevron chairman has a way out. He can say that he did give warning once he was aware of the problem. And, when asked why he did not sound a warning sooner, he can say that he was truly unaware of the seriousness of this problem. He can point to the US Geological Survey, the EIA and the IEA and say, "How could I know that such a problem was on the horizon, when the scientists and the agencies who were supposed to be monitoring the situation painted such a rosy picture?" He can even say that, with this ad, he gave the public its warning of the problem in advance of those agencies.

This could be just the beginning of an oil industry ad campaign to make us aware of Peak Oil. Perhaps we will soon see television ads from Exxon and BP warning us that we must cut our consumption, and promising to lead us into a new energy future. Such an ad campaign would help prepare the public for shortages and rationing, and might even help to take the edge off any ensuing economic panic. Such statements might help to keep the public pacified until such a time as martial law (or some shoddy, ineffective version of it) is instituted.

Okay, let's back up and give Mr. O'Reilly the benefit of the doubt. Perhaps he has only now become aware of this problem, and is performing a public service by warning us all. Perhaps, at the worst, the oil industry has been guilty of wearing rose colored glasses. Maybe the mindset of the oil business is such that employees have disregarded or misinterpreted any evidence that there might be a problem with oil stocks and consumer demand. Maybe it is only now dawning on them that such a problem could exist.

Let's not spend too much time pointing fingers at the oil companies. In the end that gets us nowhere. And we must all take a share of the blame. After all, no one held a gun to our heads and told us to consume, consume, consume.

So let us look at Mr. O'Reilly's statement itself. On the surface, it is a very frank and open statement of our energy situation. My problem with this statement is in what it implies and what it leaves out.

It took us 125 years to use the first trillion barrels of oil. We'll use the next trillion in 30.

This is a very bald statement of the situation, which should make it quite plain to every reader just where we stand with regard to oil. However, the likelihood is that we will never use up that next trillion barrels. Prices will rise and production will diminish in such a fashion that we will never get to the last barrel of that next trillion barrels. And before that point, our civilization will likely collapse.

Mr. O'Reilly does clarify this a little in the following paragraph.

Demand is soaring like never before. As populations grow and economies take off, millions in the developing world are enjoying the benefits of a lifestyle that requires increasing amounts of energy. In fact, some say that in 20 years the world will consume 40% more oil than it does today. At the same time, many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract, physically, economically and even politically. When growing demand meets tighter supplies, the result is more competition for the same resources.

Perhaps Mr. O'Reilly is trying to avoid wild speculation about the effects of rising demand and falling production. But it is not wild speculation to say that this 40% rise in consumption within the next 20 years is, in reality, quite impossible. The prediction that "in 20 years the world will consume 40% more oil than it does today" is the result of economists juggling with numbers and projecting demand graphs upward into the future without taking any other factors into account. The fact is that present demand will be unsustainable once production begins to diminish.

It is an understatement to say that the result will be more competition for the same resources. That competition is already underway with the US militarily taking possession of energy resources while China is trying to outbid us monetarily. What remains to be seen is, will the US consolidate its imperial hold on energy resources for US use first and foremost, or will blind capitalistic avarice leave us guarding the oil spigots while the product is sold to China, the highest bidder? Or will China eventually react to continuing US military imperialism by dumping the dollar and calling in their markers on the US?

Mr. O'Reilly avoids this sort of speculation entirely. And who knows, maybe it is for the best that he does so, focusing instead on a simple message of supply and demand. It is probably best not to muddy up the waters too much at this point.

Mr. Reilly's next paragraph echoes something which I and others have been saying for several years now: we cannot wait for the crisis to hit us; we must act now.

We can wait until a crisis forces us to do something. Or we can commit to working together, and start by asking the tough questions: How do we meet the energy needs of the developing world and those of industrialized nations? What role will renewables and alternative energies play? What is the best way to protect our environment? How do we accelerate our conservation efforts? Whatever actions we take, we must look not just to next year, but to the next 50 years.

The only problem here is that I am afraid it is already too late. Where was Mr. O'Reilly 30 years ago when we had time to research and implement possible solutions? Where was Mr. O'Reilly - or, to be fair, his colleagues of equal rank in the industry - when Ronald Reagan had the solar panels taken down from the White House? I would imagine he was enjoying the party on the front lawn, rubbing elbows with policy makers in Washington and building his own fortune. And so, now that the crisis is upon us and Mr. O'Reilly cannot profit anymore by denying it, he is preparing to lead us to a new solution - and no doubt squeeze out every bit of personal profit that he can along the way.

Finally, we come to his call that everyone should help Chevron to profit from this venture.

At Chevron, we believe that innovation, collaboration and conservation are the cornerstones on which to build this new world. We cannot do this alone. Corporations, governments and every citizen of this planet must be part of the solution as surely as they are part of the problem. We call upon scientists and educators, politicians and policy-makers, environmentalists, leaders of industry and each one of you to be part of reshaping the next era of energy.

Standing shoulder to shoulder, we can all make sure that Chevron will survive this coming crisis.

Conspicuous in its absence from this ad is any mention of irreversibly diminishing oil production; much less the fact that none of the known alternatives, either alone or in combination, is capable of replacing oil. To state this would be to admit that our current socio-economic system is doomed. Far from the continued growth that our economy requires, it must now begin to shrink, constricted by diminishing energy input. We are looking toward the ultimate failure of capitalism and the American Way. And, given that the history of industry and policy makers so far has been a story of personal aggrandizement at the expense of the environment and common people, why should we trust Mr. O'Reilly and his associates to lead us into the next era of energy?

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