Why Do Oil Companies Treat Us Like Idiots?

Oil companies want you to know they are doing everything in their power to drive the movement towards sustainable energy alternatives, instead of toward the substance that makes them the largest, most profitable, oligopolies in history. When an oil company advertises, we see a white-coated person, presumably a member of science, telling the audience that their employer is contributing billions of dollars to research and innovation in the field of alternative energy. But, unsurprisingly, the numbers don’t back up the chitchat. Do they really think we’re buying this?

Large numbers and images of ‘technology’
First of all, I don’t hate oil companies. Really, I don’t. Do they appear to be price-fixing, world-controlling, environment-destroying corporations who seem to win no matter what the price of a barrel is? Well, yeah. But, hey, someone has to do it, right? I respect the sacrifices they make.

What I don’t understand about them, though, is that they seem to want us to believe that they are doing everything they can to get us off the slick. For the sake of the earth, for the sake of world peace, for whatever reasons the liberal hippies can think of, oil companies are on our side, and are pushing hard for the energy revolution. At least, that’s what one would think after watching the average BP (NYSE: BP  ) or Chevron (NYSE: CVX  ) ad on television.

But how much do these guys really put toward alternative fuels? The advertisements use numbers that end in 'billion' to describe their monetary contribution to what would destroy their own business. That’s not impossible to believe -- many corporations cut off their own legs.

Behind the white-coated professional and graphics with arrows pointing at things we don’t understand, are real numbers that give a clearer image as to what oil companies are really doing for energy innovation.

BPin’, spendin’ the Gs
In an ad by BP, they boast about their alternative energy program. The commercial has average Americans, like you and me, talking about alternative energy and wondering, "will it help anything?" Well, if you believe in crazy global warming, legal business cartels, and geopolitical Armageddon’s, then, yes, alternative energy will help. But, moving past the seemingly uneducated people in the commercial, we go on to learn that, since 2005, BP has invested $7 billion in its alternative energy divisions, and plans to invest another $1 billion by 2015. If my math is correct, that's approximately an $8 billion investment over the course of 10 years for the oil giant.

In 2011, BP brought in around $375 billion in gross revenue. Net income was about $26 billion. The year before, BP lost money because of the oil spill. The year before that, the company made almost $17 billion in profit. If we divide up that aforementioned $8 billion over 10 years, that’s $800 million a year, which, for 2011, would represent about 3% of profits for BP. Now, 3% isn’t too bad, given that the company has billions to pay out to the families affected by the oil spill, the vast environmental damages it claims not to have made, and the various other legal implications of the Deep Water tragedy. But, at the end of the day, the company is devoting 3% of its after-tax resources to saving the planet. They are true champions of the human race.

Talking hourly rates
The big five oil companies -- BP, Chevron, Royal Dutch Shell (NYSE: RDS-A  ) , ExxonMobil (NYSE: XOM  ) , and ConocoPhilips (NYSE: COP  ) -- made a combined $341 million in profit, per day, during the first half of this year. That's roughly $236,000 per minute.

The American Society for Civil Engineers estimates that retooling the electric utilities sector towards solar, wind, and other alternatives, and the infrastructure associated with it, should cost $1.5 to $2 trillion by 2030. Two trillion dollars over 18 years is $111,111,111,111 per year, from now until then. That’s less than half of one year’s revenue for one of the big five oil companies.

It would take only 325 days of profit for all five combined to completely redo the U.S. electrical grid, making it more efficient, more reliable, and cheaper, while drastically reducing the enormous carbon footprint made daily by this country.

Now, of course, it's unreasonable to expect the big five to completely fund this mission. And estimated costs have a way of being … estimates. Who knows what the cost would truly be at year 2030. But these figures are illustrations. They show us that the couple billion dollars here and there graciously offered up by big oil towards alternative energy is minuscule at most, and closer to offensively trivial.

The point is…
Commenters may trash this as fuzzy math and manipulating isolated figures to prove a skewed point. Like I said, I don’t expect five companies to save the country and the earth, and I don’t expect them to singlehandedly cut themselves in half by making their own products obsolete.

But I have to laugh when I see these advertisements: Chevron working with farmers to find better ways to do their trade, for less cost and less harm to the land; BP helping rebuild the Gulf Coast while contributing billions to alternative fuel research. What BP doesn’t seem to want to mention is that, last year, it shut down its 40-year old solar program because it wasn’t making any money, even though the company profits millions every day.

I know you aren’t going to save the world, oil companies, but don’t treat us like the idiots most of us are. Trying to convince us that you are at the forefront of energy reform is like Jon Corzine telling us "I simply do not know where the money is." We may let you off the hook because we are too incompetent to do otherwise, but you’re still completely full of garbage.

Fool Contributor Michael Lewis owns none of the stocks mentioned above. You can follow him on Twitter @MikeyLewy. The Motley Fool owns shares of Exxon Mobil. Motley Fool newsletter serviceshave recommended buying shares of Chevron. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (7) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 31, 2012, at 8:02 PM, OKIEOIL wrote:

    Interesting perspective. The CEO of a public company has an obligation to maximize profits for her/his shareholders. Ignoring that obligation is a short fused career terminating move. I have never before seen billions of dollars spent suddenly trivialized simply because the entities that spent it have far more. They have no obligation to spend any of their money on "green" energy. The research they have done is done and is now a part of the global scientific community. If something is not profitable and appears not to be profitable, no public company can survive siphoning off profits from productive segments to prop up one that is not. If the author wants to spend his personal funds in such pursuits, he should feel free to do so. If he has insufficient funds to make a significant difference, he is free to go into business and providing value to his customers, earn enough to do so. Attempting to make a case to require other people or companies to spend their money foolishly or even rediculing them for their comparatively penurious contributions is disingenuous. When someone comes up with a financially viable alternative to our current fuels it won't take government subsidy to jump start it; Energy companies and smaller entrepreneurs will be falling all over each other to provide the products and services as well as reap the profits.

  • Report this Comment On August 31, 2012, at 8:47 PM, SecondButton wrote:

    This article is totally misplaced on this website. I am embarrassed for the Foolsih family having to read this trash. These companies have no obligation to do anything other than oil and gas. They make PLENTY of money from what they do. WHY would they do anything else? They extract oil from the earth, deliver the oil to refineries that then pipe the gas to distribution centers. Then trucks pick it up and regularly fill up gas stations RIGHT NEXT to your house. None of which you are required to participate in enabling.

  • Report this Comment On August 31, 2012, at 9:58 PM, Doubledip41 wrote:

    Actually, these type of articles have become more common on this website. It does nothing to enhance our knowledge for investments.

  • Report this Comment On September 01, 2012, at 3:59 AM, m0nopoly wrote:

    Let me summarize this article: "I hate oil companies. They are EVIL. They want to kill all of us. Please consider me and my opinion as intelligent and unbiased." I like to think that this guy doesn't represent the fool.com establishment. I agree with Doubledip41.

  • Report this Comment On September 01, 2012, at 7:45 AM, realmcswane wrote:

    And this little rant with its biased statistics is masquerading as investment advice? Maybe we are idiots after all.

  • Report this Comment On September 01, 2012, at 10:59 AM, RedQueenRace wrote:

    So, when is your article criticizing McDonald's for not spending enough money on researching a healthier hamburger and fries due out?

  • Report this Comment On September 04, 2012, at 12:31 AM, XMFMadMardigan wrote:

    You all make great..er...well, you all make points. To address a few of you:

    @RedQueenRace--McDonald's isnt advertising on television claiming to invest in a healthier hamburger and fries. So you are irrelevant.

    @realmcswane--It's not masquerading as investment advice. It's illuminating the fact that ignorant people like yourself see no problem in companies lying to the world claiming to want energy change.

    @m0nopoly--Your child-like use of language is fascinating. Keep it up. I, similar to you, like to think you represent nothing to do with the Fool and its values.

    @Secondbutton--Perhaps you missed the point. Yes, these companies have every right to focus on oil as gas, that is what they do best. If you were to take off your drunk goggles and read the article as written, you would see it is a discussion about how oil companies constantly advertise to the public that they are deeply invested in alternative energy, when in fact they do little to nothing. Your mastery of the product pipleine from source to delivery is truly a marvel. Are you secretly an inside oil executive? How else could you know that oil comes from the ground, through refineries, and into trucks? I salute you.

    Thanks for reading, and stay foolish.

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