The New York Times reports that oil companies are loath to invest in green energy projects. To which we say: Good! They should be.
Oil companies may be in the energy industry, but it is not a one-size-fits-all business. Solar, wind, ethanol and oil are all different things. Of those industries, only oil reaps hundreds of billions of dollars in profits. The rest pull in tiny–if any–profits.
Michael Eckhart, president of the American Council on Renewable Energy, an industry trade group, tells the Times that “Big Oil does not consider renewable energy to be a mainstream business. It’s a side business for them.”
That, we imagine, is why they’re called Oil companies, not Grab-bag Of Energy Projects companies.
If we were shareholders of Exxon and the company announced it thought the timing was right to go full bore into polysilicon we’d either get the CEO fired or get our money out of the company. Big Oil has enough problems of its own– Oil prices are falling, dragging down profitability and oil exploration is making it harder to find new oil.
If oil companies start to get clobbered because they ignored the opportunities, they are big enough to simply scoop up smaller rivals that create great technology.
Look at what’s happened with ethanol. In the past few months corn-based ethanol companies have watched profits erode, and demand dry up. Verasun went bankrupt last year, and Valero bought the pieces for next to nothing. It happened to OptiSolar, too, as that company sold off its project pipeline before it bit the dust.
The leader in the solar industry, First Solar (FSLR) has a market cap of $11 billion. Exxon (XOM) had $31.4 billion in cash at the end of 2008. If solar really does turn out to be a great business proposition, Exxon can just bully its way in through an acquisition.
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