"Don't be afraid to give up the good to go for the great." --John D. Rockefeller
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Oil was very good to John D. Rockefeller. It was the fuel he used to become the first person ever to amass a billion dollar personal fortune. By the time he died that fortune is estimated to have been worth upward of $663.4 billion if adjusted for dollars in the late 2000s. Because of that, Rockefeller is widely regarded to be the wealthiest American in history. And yet, as good as oil has been to fueling the fortune of John D. Rockefeller, his heirs are now abandoning the fuel by kicking it out of their charity's investment portfolio.
How oil built the house of Rockefeller
This really is a bit of a surprising twist, as oil was the fuel that poured vast wealth into the Rockefeller Brothers Fund to bring it to its current value of $860 million. It's wealth that all started to flow in 1870 when John D. Rockefeller co-founded Standard Oil Company. He built it into the leading energy company in America. In fact, he was so good at building an oil company that Standard Oil eventually gained nearly complete control of oil refining and marketing in the U.S. His monopoly on the oil market was eventually broken up by the Supreme Court in 1911 as Standard Oil was found in violation of the Sherman Antitrust Act.
At the time of the breakup Rockefeller owned 25% of Standard Oil's stock, and because of that ownership interest he received shares of the 34 companies that resulted from the Standard Oil breakup. These companies were the early predecessors of ExxonMobil (XOM 0.23%), Chevron (CVX 1.04%), BP (BP 0.71%), and ConocoPhillips (COP 0.64%). However, once set free, these "baby Standards" grew into incredibly profitable businesses that funneled even more wealth into Rockefeller's pockets.
Fuel for philanthropy
What Rockefeller didn't do with his wealth was horde it all to himself. Sure, he lived a very comfortable lifestyle, but he was also one of the greatest philanthropists in American history. However, his wealth wasn't just given away to any needy cause. Rockefeller targeted his gifts by making conditional grants to make sure the funds would be used efficiently instead of being wasted by poor oversight. This allowed his donations to really deliver truly great results.
He created foundations to target specific causes like medicine, education and scientific research. His foundations went on to pioneer the development of medical research that led to the eradication of hookworm and yellow fever. His wealth turned the University of Chicago from a small Baptist college into a world-class educational institution while also creating what is now Rockefeller University, which has been linked to 23 Nobel laureates. The list of great achievements that came from Rockefeller's oil-fueled wealth is really impressive.
The many petroleum-based products we use every day. Source: Phillips 66
Ditching the dirty fuel
Over the years, however, oil's reputation has been sullied as it is being called a dirty fuel due to the carbon content of its emissions when burned. This is despite the fact that oil has done a lot of good. It gets us to and from work each day and is used to create many of the products we use each day. Meanwhile the profits from oil have helped support many great causes while enabling many other Americans enjoy a comfortable retirement thanks to oil-fueled dividends.
That being said there is a movement afoot to eradicate oil from modern day philanthropy, if not modern society. The Rockefeller heirs are just the latest to now abandon the fuel and jettison it out of their charity's portfolio. In just the past few years 180 institutions have pledged to kick oil out of their portfolios, representing $50 billion worth of fossil fuel investments to be divested and replaced with cleaner alternatives.
There is, however, a strong case to be made that this is a bad idea. As we look ahead over the next few decades, oil will still be the world's dominant fuel.
Source: ExxonMobil Corporation Investor Presentation
As the above slide points out, demand for oil is expected to rise by 0.7% annually through 2040 as it will still be in high demand as a transportation fuel for decades to come. That demand growth will more than likely fuel billions of dollars in future profits to ExxonMobil's investors as well as investors in other oil companies. These are profits that won't be enjoyed by those abandoning oil.
That being said, even ExxonMobil projects renewable energy demand growth to be more than twice the demand for oil over that same time frame. That growth could very well fuel strong profits for the owners of clean energy stocks, giving philanthropists and other institutions reinvesting their oil money into these companies even better returns. These are profits that can be used to support great causes in the future.
Seeking the greater good
The Rockefellers might be leaving some money on the table by abandoning oil while its demand is still high. However, they are not totally abandoning the ideals that John D. Rockefeller stood for, as he once said, "don't be afraid to give up the good to go for the great." So, while oil has done a lot of good, there is the potential for greatness in renewables. Maybe not today, maybe not for many years, but to have a world one day fueled by clean, renewable energy is a great goal and really meshes much closer to the ideal world that philanthropy is trying to bring our way. That's why oil just might be too dirty for modern day philanthropy.
