Like HowStuffWorks on Facebook!

Are oil companies promoting alternative energy?

        Auto | Biofuels

Investing in Alternative Energy

During just the first and second quarters of 2011, profits raked in by the big oil companies totaled $67.4 billion. This number more than doubled the half-year earnings of both 2009 and 2010, according to the Center for American Progress.

The big oil corporations do acknowledge that oil consumption and the recent high prices have been good for their wallets, but they also want it known that they are in the "energy" business as well as the oil business. Many of them make sure to share their "green vision" with consumers in their company mission statements, Web sites, advertisements and marketing materials. But what exactly are they contributing to alternative energy research and development?

On its Web site, Chevron says this about oil companies and renewable energy. "We're investing millions in geothermal, biofuel and solar technologies. It's time oil companies get behind the development of renewable energy." Take a closer look at the numbers and you'll see they invested $550 million on alternative energy research and development, while bringing in more than $19 billion in profits in 2010.

Many oil companies point out that for the forseeable future, their businesses will be dominated by fossil fuels. A New York Times article mentioned that Exxon expects hydrocarbon demands (oil, gas and coal) to be 80 percent in 2050, about the same as today. Exxon invested just 0.2 percent of profits ($67 million) in alternative energy in 2010.

British Petroleum (BP) notes on its Web site that "today’s oil reserves would meet 45 years of demand at current consumption rates, while known supplies of natural gas would last for more than 60 years and coal for up to 120 years." With such a finite ending, it would seem that alternative energy investing would be the way to go. However, BP further notes that "renewable, low carbon energy is not yet competitive with conventional power and transportation fuels, even with the benefit of current carbon prices." BP believes that a mix of conventional oil and gas as well as oil sands, shale gas, deepwater production and alternative energies are all required for future energy needs.

Critics of alternative energy point out that energy sources like wind and solar power have limited utility uses and extremely expensive start-up costs. One expert said the U.S. would need six times its current arable land to grow enough corn to switch completely from oil to ethanol.

Oil corporations say it's not about profits, it's about what makes sense for the future. Alternative energy advocates disagree. They say that we just haven't developed the right technology which will reduce the expensive costs of research and development of alternative energy so oil companies won't have a financial reason to pause about investing in it. Until then, the debate goes on.

  • 1
  • 2

More to Explore