A Free-Market Energy Blog

Empty Shell: The Unbearable Lightness of U.S. CAP (A critical look at Marvin Odum’s Op-Ed)

By -- March 11, 2010

Yesterday (Mar. 9), the Houston Chronicle published an op-ed by Shell Oil CEO Marvin Odum titled, Why Shell Oil Co. and I are staying in the U.S. Climate Action Partnership. It’s pretty thin on substance. Kinda reminds me of that ’80s film, “The Unbearable Lightness of Rent-Seeking.”

Maybe Mr. Odum got his marching orders from The Hague (Netherlands), or maybe he really believes cap-and-trade is good for the oil (and natural gas) business. These are strange times. Confusion abounds in high places.

In this post, I provide a running commentary on Odum’s column.  Odum’s verbiage is indented; my comments follow in bold type. 

Today, Washington is having the wrong energy and climate debate, and the future of the U.S. economy may be the biggest casualty.

A rather amazing statement, considering that the party of cap-and-trade controls the White House and the leadership of both the House and Senate. Saint Barack, Czarina Browner, Lisa Endangerment-Finding Jackson, General Boxer, and Inquisitor Waxman occupy the commanding heights of energy and climate policy in the nation’s capital, yet “Washington is having the wrong energy and climate debate.” How did they let that happen? Odum offers no explanation.

Rather than developing sensible legislation that creates a viable market for low-emission energy while developing more of our own oil and gas resources, Washington is engaged in a snowball fight over the science of global warming.

Yep, move along, nothing to see here. “Snowball fight” indeed. Top IPCC-affiliated scientists conspired to bias the peer-reviewed literature they would assess, ignored research that did not fit into the “nice tidy story” they wanted to tell, and violated the UK freedom of information act to prevent independent researchers from checking their data and methods. These IPCC insiders repeatedly flouted U.S. Government standards of openness and transparency, rendering the IPCC reports  unsuitable as basis for policymaking, as Peabody Energy documents in its 240-page examination of the Climategate files.

In addition, the IPCC recently has been caught four times presenting false, biased, or unsubstantiated claims –that Himalayan glaciers will disappear by 2035, that hurricane damages are strongly linked to global temperature, that 40% of the Amazon rain forest is at risk, and that Antarctic sea ice is not growing significantly. 

More importantly, as Chip Knappenberger has shown (here and here), recent research calls into question the IPCC’s centerpiece assertion that “most” of the warming of the past 50 years is “very likely” due to greenhouse gas emissions.

Contrary to Odum, debating whether the IPCC really knows best is the right energy and policy debate. So is the debate over who should make climate and energy policy — the people’s elected representatives or politically unaccountable bureaucrats, trial lawyers, and activist judges. Alaska Sen. Lisa Murkowski’s Congressional Review Act resolution to veto EPA’s endangerment finding would safeguard not only our economy from regulatory excess but also the separation of powers and accountable policymaking (see here, herehere, and here). Murkowski’s resolution could come to a vote in the Senate as early as next week.  Although there is much debate about the Murkowski resolution, Odum says not a peep about it.

 Meanwhile, other countries are quietly going about building the vast infrastructure necessary to win the real fight — the one that will determine who will lead the new, clean-energy economy.

This is just a green variant of what Friedrich Hayek called the “fatal conceit,” the belief that the “best and brightest” know what the “next big thing” is, and therefore should be allowed to rig the market via mandates, taxes, and subsidies to create the infrastructure of the future. Just describing this mindset should be enough to discredit it. If Odum and others are the visionaries they profess to be, they could all make a killing just by putting their money where their collective mouth is. Instead, they lobby for policy privileges because the future they envision utterly depends on the triumph of politics over markets. Their plan would lead to a net loss of jobs and wealth, as I discuss in a related post, Energy Secy. Chu’s convoluted climate economics.

Recent news reports concerning the withdrawal of three companies from the U.S. Climate Action Partnership have been cited as evidence that energy and climate legislation is stalled. If anything, these decisions indicate that we are closer to, not further from, enacting climate and energy legislation because difficult choices are being made about the best way to achieve legislation. The fact is, USCAP members continue to demonstrate a solid commitment to addressing the nation’s climate and energy challenge through strong cooperation among businesses, environmental organizations and policymakers.

This is whistling past the graveyard. Three companies withdraw from U.S. CAP, and “If anything these decisions indicate that we are closer to, not further from, enacting climate and energy legislation.” So if six members quit, that must mean we’re even closer to enacting climate and energy legislation. And if everybody quits, victory is assured!

So why has Shell Oil Co. remained an active member of this important organization? Consider that by 2050 the world’s population will increase 50 percent to 9 billion people and 98 percent of that growth will occur in what today are considered developing countries. In only 15 years’ time, about two-thirds of the world’s economic activity will be in these developing countries. Citizens there will naturally want the same standard of living we enjoy today — and this will create an enormous demand for energy.

These are reasons to oppose cap-and-trade policies! Cap-and-trade is designed to increase the cost and decrease the supply of fossil energy. Yet the pressing need in developing countries is to make energy more abundant and affordable. The top priority of the global warming movement is to stop new coal power plants from being built. Yet countries like India and China absolutely depend on the expansion of coal-based power to lift millions out of health- and life-destroying poverty (see here and here).

For Shell, the scale of our activities puts us on the front line of the global energy challenge. Shell operates in more than 100 countries, producing more that 3 million barrels of oil and gas every day. Worldwide, there are some 45,000 Shell service stations, selling transportation fuels to some 10 million customers a day. And we run more than 25 major refineries and chemical plants around the globe.

Yes, and that’s evidence of what exactly — that the world will need more fossil energy in the foreseeable future or that governments should gang up to restrict access to fossil energy and promote more costly, under-performing alternatives?

Our belief is shared by many, that in the coming decades all countries must find more energy at a much-reduced cost to the environment as we transition to a low-emission fuels economy. That transition will take time — decades. In the interim, a leading option is to expand access to oil and natural gas. Together these sources meet 60 percent of U.S. needs because they are reliable and abundant and technology has allowed new and innovative ways to lessen the environmental footprint of oil and gas operations.

Huh? How does “expand access to oil” help us “transition” to a “low emission fuels economy?” Odum might as well say that drilling more oil will help us transition to a “beyond petroleum” economy. Yes, access to oil is critical to prosperity and wealth fosters innovation.  But that’s not what Odum means. He means that government should pick winners and losers. As soon becomes apparent, he wants government to hammer coal, which his company does not produce, in order to increase market demand for natural gas, which his company does produce. Such Enron-like behavior is par for the course at U.S. CAP.  

Natural gas, in particular, will play an important role. It is the fastest-growing and cleanest-burning fossil fuel, and some estimates say the U.S. contains enough natural gas resources to meet current demand into the next century. Shell and others are advancing technologies to safely access and develop these supplies. Enabling reasonable and environmentally sensitive access to these resources would strengthen U.S. energy security by making more domestic supply available to American consumers. It would also support the creation of American jobs and strengthen our economy while allowing research to continue on exciting new forms of energy, including biofuels and other alternative sources of energy.

Policymakers should lift moratoria and other political impediments to the development of natural gas supplies. But it would be folly for government to put all (or most) of our energy eggs in a single basket. Only a few short years ago, high natural gas prices were destroying manufacturing jobs and squeezing consumers. There is no guarantee this won’t happen again, especially if climate policies eliminate coal as an alternative to gas.

What does this mean for the United States? By working together, stakeholders, both individually and through organizations like USCAP, can set the course for comprehensive energy and environmental legislation that puts us on a path to a secure and sustainable energy future.

Okay, I’m sold, let’s all hold hands and sing Cumbaya!

It is easy to call for this kind of unified action. Delivering on-the-ground progress is a lot tougher. One thing is clear, though: Without cooperation across party boundaries and ideological divides, we run the risk of finishing the race for responsible energy and environmental legislation behind the pack.

Translation: Don’t let trifles like “party boundaries and ideological divides” hinder Shell’s quest for windfall profits!

And if there is one thing we all can agree on, it is that America cannot afford to receive the bronze medal in the race for our energy future.

The only race worth having is one in which contestants compete on a level playing field. Odum envisions a race in which government handicaps coal on behalf of oil and gas companies. If there’s a medal at the end of this race, it’s bound to be made of fool’s gold.


  1. tmtisfree  

    E.M.Smith has had an illuminating comment in its “Assume A Spherical Cow – therefore all steaks are round” post (http://chiefio.wordpress.com/2010/03/08/assume-a-spherical-cow-therefore-all-steaks-are-round/):

    “Ignoring for the moment than ANY big company funds both sides – they want access whoever wins – the notion that Oil is against CO2 sequestration is just a hoot. THE biggest thing standing between them and $BILLIONS from the latest enhanced oil recovery from their old “depleted” fields is a cheap supply of CO2. Liquid CO2 injection is the new hot technique. Roughly 1/2 the oil in an ’empty’ field is still in it; so we’re talking BIG Bucks. And coal is their major competitor. So here they are faced with a proposed CO2 sequestration mandate that will whack their major competitor hard and force that competitor to PAY to have the CO2 taken away? And they will be PAYED to put it in the ground and recover billions of bbl of oil?”


  2. Noblesse Oblige  

    Alexander Pushkin: “As long as you have a trough, there will be shortage of swine.”


  3. MarkB  

    When you start with name-calling, things generally don’t get better.


  4. Lachesis  

    Shell Oil and Canwest recently ran a series of 4-color full page global warming/climate change advertorials in the National Post. What a pile of hypocritical and 1970’s-style promotional stuff it was. I can’t give up buying the National Post because it is the only Canadian mainstream paper that isn’t full of socialist propaganda. But I can – and have – stopped buying my gas at Shell. Your story confirms the wisdom of my decision.


  5. Charlie Peters  

    A random ‘Smog Check’ inspection & repair ‘secret shopper’ audit, ethanol cap and elimination of dual fuel CAFE credit can cut California car impact over 50% in 2010. (Prevent Over 2000 tons per day of sulfur, PM, HC, O3, NOx, CO & CO2.) Improved performance of AB32 at reduced cost. (support H.R. 1207)

    * * * California Smog Check providers fail millions of cars but Chief Sherry Mehl, DCA/BAR, has never found out if what is broken on a Smog Check failed car gets fixed.


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