Big Oil is in Big Trouble: Hydrogen and Biofuels as Greenwashing
The communications response by corporate Big Oil to the climate crisis is a masterclass in divide and distract public relations; while annually spending nearly $200 million dollars on lobbying to delay and weaken climate change policies, the industry sought to rebrand itself. Shell Oil, the USA subsidiary of Royal Dutch Shell, now refers to itself as an “energy company” and lauds its (as of publication — minimal) investments in sustainable energy solutions while stating its support of the Paris Climate Agreement. The company formerly known as British Petroleum hired Landor, visual communications super-agency to the Fortune 100, to rebrand British Petroleum first as beyond petroleum and then again simply as BP in the wake of the Deepwater Horizon disaster when BP was forced to sell off holdings including those in renewable energy projects to cover the financial shortfall and penalties resulting from the spill.
This is blatant greenwashing; BP’s new logo belongs on organic sunflower seed bags rather than on oil barrels. BP’s 2020 annual report discusses the firm’s investment in “low energy” (yet another BP communications innovation) solutions like wind and solar. As an example of how far oil companies are now going to discuss anything but the environmental impact of oil, ExxonMobil leans heavily in its 2020 annual report on the notion that the firm’s mission-driven focus is to provide access to electricity for the world’s poorest 770 million residents. As in the case of most of the spin coming out of oil companies, facts weakly support ExxonMobil’s positioning:
As of 2015, only 3.28% of the world’s electricity was generated using oil and that generation is mostly found in nation-states that have limited centralized infrastructure planning capacity, a recent history of conflict, and/or low per capita income:
The peninsular micronation of Gibraltar obtains 100% of its electricity from oil-powered sources, Eritrea — one of the world’s ten most common countries of origin for refugees — obtains 99.5% of its electricity from oil, and the newly-formed and often-turbulent South Sudan obtains 99.4% of its electricity from oil. Except in the cases of Haiti (92%), Niger (57.6%), and Honduras (56.7%), electricity derived from oil is rapidly trending downward or holding steady in all of the world’s top fifteen largest consumers of oil-derived electricity. None of these fifteen nations — with the exception of Kuwait which holds 9% of the world’s oil reserves within its borders — individually exceed $30 billion in gross domestic product.
Implicit industry-wide commitments on investment in sustainable energy are also not supported by facts. Only Equinor, the state-owned Norwegian oil and energy firm, is currently investing in renewable generation projects in a meaningful way:
If Equinor’s project investments are removed from the accounting, Rystad’s analysis actually shows a decline in renewable spending prior to 2026. The Royal Dutch Shell corporation, somehow able to project its renewable spending out to 2026 when few other major oil firms are willing or able to do the same, anticipates a never-before-seen increase in sustainable energy investment:
Investments in solar and wind energy projects by the world’s oil majors until 2025 are expected to exceed $18 billion…But a closer look at the numbers reveals that some $10 billion, or 55% of the amount, is expected to be invested by a single company, Equinor… If Equinor is removed from the outlook, renewable investments from major oil and gas companies can be seen in a very different light, showing decline over the next three years. This fall does not even factor in any of the recent [COVID19-related] capex cuts announced by the majors.
To put this investment in renewables in perspective, projections from within those same oil and gas companies indicate an industry-wide spend of $166 billion on new oil and gas projects over the same time period in which they plan on investing only $18 billion in renewable energy.
A Trio of Threats to the Way Oil Does Business
While each energy multinational exists primarily to sell oil and oil derivatives like gasoline, oil companies are fundamentally logistics companies — they find or create a scarce resource, package and refine it for consumption using high complexity methods that massively benefit from industrial scale, and then profitably ship it in the most efficient way possible while leveraging scaled network effects. Governmental emissions reductions targets and climate change initiatives upend the upstream (discovery and exploration), midstream (transportation), and downstream (refinement and consequent sale) components of the industry’s vertically integrated business models; no mom and pop business can discover, refine, process, and efficiently ship oil to the extent that they can reliably generate profit. The same is generally not true — especially in the case of solar and wind — in the renewable energy industry. Upstream exploration and discovery costs for widely available renewable energies (Is it usually sunny and/or windy here?) are orders of magnitude cheaper and more democratized than the exploratory geologic sounding and drilling processes used by oil companies, midstream transportation done by large tanker ships and eighteen wheel trucks in the oil business is handled by existing publicly-protected electrical grid infrastructure in the case of electric renewables, and there is no such thing as downstream refinement in the renewables business as “refinement” is a necessary byproduct of generation. Absent the beautiful metaphor used to sell Florida orange juice, it is not possible to capture sunlight in photonic form for later processing at some centralized de-photonizing/juicing facility.
Utility regulation of the electrical grid and its suppliers also limits the methods by which electricity is marketed and sold. Within the United States, electricity is nominally distributed to household outlets at 120 volts at 60 hertz regardless of supplier or generator. Whereas Shell can build a gas station and sell gasoline with proprietary additives that claim to more effectively lubricate engine components thereby promoting mechanical longevity, electrical utilities cannot claim that their electricity makes lightbulbs burn brighter because they mixed some extra-punchy heavyweight neutrons into the copper-borne electron stream. Further, the centralization inherent to oil companies — heretofore a competitive scale and efficiency advantage — is also not necessarily desirable in the case of sustainable electrical generation as there are substantial unavoidable transmission losses (estimated by the U.S. Energy Information Administration at about 5% of total generation between 2015 and 2019) associated with moving electricity over distance. Sub-national businesses, limited to competing contracts for highly specialized labor (e.g. groundwater hydrology, underwater welding, etc.) in the vertically-integrated oil industry, are freed to compete in the renewables sector at the same base generation level as any other business of any other size; the hardware mechanisms by which renewable generation take place are relatively simple and deployable which means that individual consumers and small/mid-size businesses can effectively contribute to total grid generation capacity.
The national security argument for distributed generation of renewables is also compelling. A maligned entity cannot hobble an entire population by destroying one small node of a well-distributed system in the same way that one could when processing are done at a centralized refinery and shipped using a single primary transfer method. This exact scenario played out in the 2021 ransomware attack by hacker collective DarkSide on the Colonial Pipeline wherein the arterial pipeline that supplies most of the eastern United States with oil and gasoline was seized and shuttered. Gas stations along the pipeline’s supply route ran dry and prices for gas and oil spiked throughout the duration of the crisis.
Preservation of the Status Quo by any Means Necessary: Biodiesel and Hydrogen
While an all-of-the-above approach to addressing climate change is clearly preferable, oil conglomerates are driven to invest in “clean” technologies which preserve existing technological and supply chain advantages. Profitable oil extraction, like the centralized refinement and production of any form of energy, are obviated by widespread decentralized generation. Clean hydrogen and ethanol are two such technologies.
A variety of measures including the Energy Independence and Security Act of 2007 effectively subsidized corn — an ethanol feedstock— by dictating minimum national biofuel consumption levels under the premise of lowering vehicular emissions. Lobbying in support of these pro-oil standards was heavily funded:
Unfortunately, research published in Science strongly suggests that biofuels like ethanol are somewhere between 50 and 90% dirtier than gasoline when factoring in the additional greenhouse gas emissions generated during feedstock production. EISA lobbying efforts were likewise catalyzed under the banner of protecting the American farmer from anticompetitive agricultural import/export practices elsewhere in the world. Similar lifecycle research into biofuels shows that, while EISA and legislation like it may protect the American farmer, such legislation hurts the American consumer by driving up food prices at a time when population growth is actively pressuring food production.
Meanwhile, Shell is investing heavily in hydrogen generation in Norway. The project relies on natural gas — another energy product which is integral to Shell’s existing infrastructure — for power but emissions from burning are in turn captured and then sequestered at point of combustion. The rhetorical remains: why?
Within the USA, the world’s largest car market and one of the few in which hydrogen vehicles are for sale to regular consumers, as of Oct. 1, 2021 only 11,674 hydrogen vehicles have ever been sold. Note that this figure details total all time sales — not just sales in 2021. Just under twelve thousand vehicles represents just .00422% of the 276,491,174 total highway vehicles registered in the USA as of 2019. Additionally, hydrogen is hard to find in nature in pure form; the molecule is tiny and also highly energetic so locating and electrolytically creating the gas are both dangerous (explosion!) and energy intensive. Ultimately, hydrogen is still only a third as efficient as a battery electric powertrain in the best case scenarios.
Calling It Like It Is
It would be great if ethanol production did not effect consumer food prices and was extremely efficient. It would likewise be amazing if hydrogen were easy to obtain and highly productive as compared to other means of energy generation. Unfortunately basic science proves otherwise yet energy conglomerates still seek to influence public discourse by investing in the green technologies that they claim have the potential to change the rate of climate change. In reality, these technologies are actually end-runs around regulation; they are inefficient and their primary benefits are felt by the energy companies themselves as widespread adoption would necessitate little structural change on the part of the energy conglomerate business model.
An all of the above approach is needed to combat climate change but that approach must be grounded in scientific reality independent of the financial whims of legacy multinational corporations.