Blatant Reality

RiskMetrics Group’s blog recently had an article looking into why Exxon Mobil is so interested in algae biofuels.
Here is their take on the matter:

Two Clues to ExxonMobil’s Algae Agenda

Algae-produced biofuel could be an attractive alternative to petroleum. It can be grown in reactor tanks, where it does not compete with agriculture for farmland. Algae also serve as a “carbon sink,” because they absorb CO2 as they grow.

Still, it is unclear why a company that consistently derives so much profit from oil would invest $300 million in generating a petroleum substitute. On the SIRAN analyst call, Mr. Jacobs offered two clues about how algae fuel fits into XOM’s plans.

First, he said that the firm intends for algae to supplement, not supplant, its oil production. This implies that gasoline-like biofuel is a way to sustain our existing liquid-fuel, internal-combustion-based transportation system. By (potentially) holding down the cost and carbon footprint of liquid motor fuel, algae fuel could forestall the emergence of an entirely new, cleaner infrastructure – like a system of rechargeable electric cars, for example.

Second, the viability of large-scale algae biofuel production is uncertain. Mr. Jacobs said that in about 10 years, XOM/SGI research will have advanced to a point where the company can judge if algae fuel is commercially viable. If so, algae fuel output could be ramped up, and would then contribute to XOM’s bottom line.

But what if ExxonMobil instead decides that, according to its metrics, algae offers insufficient return on its investment? What will then happen to ten years of research? The firm is unlikely to simply spin SGI off, either independently or to a competitor. ExxonMobil could potentially do to algae fuel what General Motors did to its EV1 electric car, snuffing it out before it ever reaches the mass market.

Should we really be that surprised at that number? American’s want a source of energy that is both A) under our direct control and security and B) doesn’t require any change to their daily lifestyle and consumption. Increasing domestic oil production will help to achieve both of those, at least in the short term. Here are the numbers of the latest Rasmussen poll on this issue:

A new Rasmussen Reports national telephone survey finds that 72% of U.S. voters believe offshore oil drilling should be allowed. Just 12% disagree and oppose such drilling, with another 16% who aren’t sure. This is the highest level of support for drilling found in nearly three years of surveying.

The survey was taken Wednesday and Thursday nights following the president’s announcement permitting new offshore oil and natural gas drilling. But because of political opposition in those states, the president stopped short of allowing drilling off the coasts of California and New England.

Fifty-nine percent (59%) of voters say offshore drilling should be permitted off the coasts of California and the New England states. Twenty-four percent (24%) oppose drilling there, and 17% are not sure.

But 44% believe individual states should have the right to ban drilling off their own coastlines, although that’s down four points from December. Thirty-two percent (32%) disagree and do not think states should have that right. Nearly one-out-of-four voters (23%) are undecided on the question.

Numbers are pretty straightforward. You can see some NIMBY (Not In My BackYard) action going on there with the individuals who believe states should have the right to ban drilling off their coastlines. However, even I, a believer in responsible offshore drilling, believe that states should have some sort of say in how offshore drilling takes place. As a conservative, it only makes sense that I feel states should have a say on issues that could potentially directly affect them and the sometimes essential industries they rely on like beach tourism (Anyone seen any polls taken on whether vacationers would still visit a certain beach if a drilling platform was visible from shore?).

Anyways, these numbers are good and will probably ensure that the administration will not renege on their new offshore drilling promises. Overall, while I am happy with these new developments, I still support more research into alternative fuels like algae. Oil isn’t going to be available at the current prices forever and algae looks to have the potential to be a cheap fuel source that all sides of the energy debate support.