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Running head: Environmentally Wise and Globally Peaceful Alternatives

Environmentally Wise and Globally Peaceful

Alternatives to OPEC Crude Oil

Roger “Chip” Browne

Stevens-Henager College
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Abstract

In this paper, I research the oil industry with a focus on what are referred to as the major

oil companies. I give an assessment of the general market conditions facing these firms and

explain what is changing in the global arena regarding both geopolitics and environmental

concerns. I conclude by explaining how a major firm such as Exxon/Mobil should respond to the

political changes and new environmental demands in order to remain profitable in the years and

decades ahead.
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Environmentally Wise and Globally Peaceful

Alternatives to OPEC Crude Oil
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Crude oil is the primary source of energy found naturally. During the last century, this

decomposed organic matter has been the raw material at the base of multiple industries that have

fueled the industrial revolution and now the computing revolution. These industries have grown

around a variety of raw gaseous, liquid, and solid products that are extracted from the earth.

Petroleum or mineral oil is the liquid form, and natural gas is the gaseous form. These products

are explored and produced, processed and transported, and then refined and marketed. The

world's largest oil and gas company is the National Iranian Oil Company, while the second

largest oil and gas company is the Saudi Arabian Oil Company - both of which own over 300
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trillion oil equivalent barrels of reserves. Natural gas and liquid reserves are in addition to these.
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Figure 1 World's Largest Oil and Gas Companies

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World Refiners of Petroleum

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The world's largest refiners are Exxon Mobil Corporation refining approximately 6

million barrels of crude oil per day, followed by Royal Dutch/Shell (4.5), Sinopec of China (4),

and British Petroleum (3.5). The reserves of these refiners are less than one-thirtieth of the

reserves of the largest oil and gas companies. Environmental activists blame this industry for the

accumulation of carbon-dioxide gases which create a “greenhouse effect” which I will explain

below. Also, geopolitical tensions are fueled by the dependency of United States on oil,

consuming close to 19 million barrels per day. Countries like the United States are at the mercy

of the rulings of the Organization of Petroleum Exporting Countries, or OPEC, founded in 1960, to

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regulate the price of oil.

Figure 2 World's Largest Refining Companies

The perception and climate facing these firms are changing due to both environmental and

geopolitical concerns, probably the most significant of which is the charge of global warming and

the “greenhouse effect”.

The Greenhouse Effect

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Global warming has become perhaps the most complicated issue facing world leaders. Al

Gore’s 2006 Oscar winning documentary “An Inconvenient Truth” propelled this topic to

prominence and initiated a worldwide campaign aimed directly at the oil-refining industry. In the

United States, on Jan. 2, 2011, the Environmental Protection Agency imposed its first regulations

related to greenhouse gas emissions. A concise description of the greenhouse effect is given in the

Intergovernmental Panel on Climate Change Fourth Assessment Report, "What is the Greenhouse

Effect?

"To balance the absorbed incoming [solar] energy, the Earth must,
on average, radiate the same amount of energy back to space.
Because the Earth is much colder than the Sun, it radiates at much
longer wavelengths, primarily in the infrared part of the spectrum.
Much of this thermal radiation emitted by the land and ocean is
absorbed by the atmosphere, including clouds, and reradiated back
to Earth. This is called the greenhouse effect (IPCC, 2010)."

Figure 3 Greenhouse Effect Comparison

Besides environmental concerns, there are geopolitical concerns which are a direct result of the

growing demand for crude oil.

NATO vs. OPEC and the Growing Global Demand

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Many of the world's leading oil producing countries are either politically unstable or are

in public opposition to the international policies of the United States and its allies. The United

States and its North Atlantic Treaty Organization (NATO) allies invaded one of those countries,

Iraq, in 2003 stating that it was its intent to remove a regime that developed and used weapons of

mass destruction. World opinion has, however, believed that the motivation was more for

securing access to the oil reserves of Iraq and establishing a long-term military presence in the

Middle East. Recently, the United States and NATO forces have begun bombing another OPEC

country, Libya, with the intent to support the citizens of Libya in their desire to ouster Colonel

Gaddafi. These acts of military aggression are serving to sway public opinion to believe that the

interests of the United States and NATO are more about securing their interests in oil reserves

than in being the protector of liberties. Besides these developments in the Middle East, global

demand is increasing and in China will double over the next two decades.

Figure 4 Growing World Energy Demand

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Wise and Peaceful Alternatives for the Energy Industry

Managing the supply of energy for the citizens and industries of a country is a primary

responsibility of every government on earth. These governments are lobbied by and cooperate

with the vertically-aligned, global energy companies such as Exxon/Mobil and Royal

Dutch/Shell which are serving the demands of the refined petroleum industry. To remain in their

positions of market leadership, these companies and others in this industry must identify the

changes that are taking place in the marketplace and in geopolitics and respond proactively.

These companies will need to become marketers of energy - not simply refiners of petroleum.

Following are several changes that these companies must lead in order to remain profitable.

Develop Renewable Energy Sources

Besides having a transportation industry focused on electrical or hybrid vehicles, the United

States can focus on renewable energy such as solar energy and wind power. Renewable energy

accounted for more than 10 percent of the domestically-produced energy used in the United States

in the first half of 2008. Several solar thermal power stations have been built, including solar

thermal power stations in the Mojave Desert which forms

the largest solar plant of any kind in the world

(EBR_EBdaily, 2009). Other sources of renewable energy

are geothermal power, hydro power, and hydrogen fuel.

Figure 5 Renewable Energy Sources

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Increase Biofuel Production

The United States is currently one the largest producers of biofuels which are based on fuel

derived from organic biomass from recently living animals or plants or their byproducts. These

biofuels are refined mainly from corn and soybeans

grown in the United States. Ethanol is produced from this

process. The global production and wholesale pricing of

ethanol and biodiesel reached $44.9 billion in 2009 and is

projected to grow to $112.5 billion by 2019 (GLOBE-Net,

2011). Biofuels can be used to produce ethanol; however

they can also be burned to make electricity to power cars

using 81% more energy and 100% lower per unit

greenhouse gas emissions per unit area of land Figure 6 Biofuel Cycle

(LaMonica, 2009).

Facilitate the Transformation of Transportation to Electrical and Hybrid

The dependence of the United States on crude oil production from the OPEC countries could

be relieved by pursuing energy technology that is not dependent upon petroleum products. Over two

thirds of the usage of oil in the United States is due to transportation. Less than one fourth is due to

industrial usage, and the remaining percentage is residential. By developing automobiles that are

either powered by electricity alone or a hybrid type of automobile powered by petroleum and

electricity, the dependence upon petroleum would not only decrease but also there would be a

decrease in the creation of carbon dioxide, the greenhouse gas.

Increase Domestic Oil Production

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Another option that is available to the United States is to increase its production of

domestic oil reserves. There are oil wells that are already present that are capped which can be

uncapped. In addition the oil potential of the state of Alaska is not currently maximized and can

be pumped using the Alaskan pipeline to the mainland United States. There are other deposits

such as oil shale which require a different method of extraction. The United States has more than

2 trillion barrels of in-place shale oil resources (United Nations Statistics Division, 2011). These

reserves represent more than twice the total reserves of crude oil.

Figure 7 Crude Oil Production by State

Conclusion

The liquids, gases, and solids of decomposed organic matter, millions of years old, have

become the fossil fuels of this century. This raw material which began as the key ingredient of

the Industrial Revolution continues to be the primary source of energy for transportation and has
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now become the key ingredient of the Computer Revolution going on now. The Organization of

Petroleum Exporting Countries (OPEC) controls pricing over its reserves of crude oil. Large

refiners such as Exxon Mobil Corporation and Royal Dutch Shell are at the mercy of OPEC. In

addition, these refiners are being faced with growing concerns about global warming which

come from the increased carbon dioxide in the atmosphere. Demand from developing countries

such as China will impact the global demand for crude oil. To remain in their positions of

market leadership, these companies must identify the changes that are taking place in the

marketplace, in the minds of the consumer, and in geopolitics and respond proactively. These

companies must develop renewable energy sources, increase biofuel production, facilitate the

transformation of the transportation industry to electrical and hybrid fuel sources, and increase

domestic oil production. In conclusion, these companies will need to become marketers of wise

and peaceful energy alternatives - not simply refiners of petroleum.

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References

EBR_EBdaily. (2009, June 9). Energy Bill Supporting the Development of Renewable Energy

Closer to Passing. Retrieved May 15, 2011, from Energy Business Daily:

http://energybusinessdaily.com/renewables/energy-bill-supporting-the-development-of-

renewable-energy-closer-to-passing/

GLOBE-Net. (2011). GLOBE-Net. Retrieved May 14, 2011, from Clean Energy Trends 2010:

http://www.globe-net.com/articles/2010/march/31/clean-energy-trends-2010.aspx?

sub=11

IPCC. (2010). Historical Overview of Climate Change Science. Retrieved May 14, 2011, from

Intergovernmental Panel on Climate Change: http://www.ipcc.ch/pdf/assessment-

report/ar4/wg1/ar4-wg1-chapter1.pdf

LaMonica, M. (2009, May 8). Study: Bioelectricity bests biofuels on miles per acre. Retrieved

May 14, 2011, from CNET News: http://news.cnet.com/study-bioelectricity-bests-

biofuels-on-miles-per-acre/

United Nations Statistics Division. (2011). Crude Petroleum. Retrieved May 15, 2011, from UN

data: http://data.un.org/Data.aspx?d=EDATA&f=cmID%3ACR%3BtrID%3A1621
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Table of Figure

Figure 1 World's Largest Oil and Gas Companies..........................................................................3

Figure 2 World's Largest Refining Companies...............................................................................4
Figure 3 Greenhouse Effect Comparison........................................................................................5
Figure 4 Growing World Energy Demand......................................................................................6
Figure 5 Renewable Energy Sources...............................................................................................7
Figure 6 Biofuel Cycle....................................................................................................................8
Figure 7 Crude Oil Production by State..........................................................................................9