Are fossil fuel companies confused? Or desperate?

Fossil fuel companies seem confused.  They derisively dismiss renewable energy as unreliable, intermittent, expensive and unfit for widespread use, and electric cars as expensive and unproven, with limited range or usefulness.  At the same time, they are engaged in an all-out political and media campaign against renewable energy and electric cars.  But consider a future where most Americans had solar panels and/or wind energy generators and drove electric or hybrid cars, and their angst becomes clearer.  How much would fossil fuel companies be selling then?

Like all companies, fossil fuel companies want to increase their revenues and profits by selling more of their products for higher prices.  For decades, it was easy for fossil fuel companies to increase their revenues and profits. They either sold a product for which there is what economists call an inelastic demand (i.e. we’ll still line up like lemmings to buy their products – regardless how high they jack up the prices), or they enjoyed a “natural monopoly”, which is essentially a governmental decision that there should only be one provider in a given market.  They were shooting fish in a barrel.

But things have become tougher for them lately.  For the oil companies, demand has fallen as the total number of miles driven by Americans peaked in 2007 and has been dwindling ever since. Coupled with the increasingly fuel-efficient cars and trucks, and, even worse, an ever expanding number of electric cars, you have a blue print for decline.

For the big, centralized, monopolistic electricity companies, the future is even bleaker. They grew and prospered in an environment free from competition. Now they face formidable competition.  Not from another big, monopolistic, government-regulated company, but from hundreds of thousands or millions of their own customers.

The cost of producing electricity from solar panels and wind turbines has steadily and dramatically declined for years due to technological advances and more widespread manufacturing, while the cost of producing energy from extracted fuels increases.  Can there be any doubt where those trends are leading the energy industry?  Considering the long-term implications of those trends, where does that leave the fossil fuel companies?

Unless they adopt, fossil fuel companies will either disappear, or be just a remnant of their current size within 30 to 35 years.  Now 30 to 35 years may seem like a long time, but their decline will become evident much sooner. There are a lot of smart people working for the fossil fuel companies, and they do strategic planning, so they know what is coming.

That’s why they are spending huge amounts of money on campaign contributions, lobbyists, political parties and 3rd party front groups to influence public opinion; they’re increasingly desperate to politically tilt the field in their favor that is increasingly being tilted against them by technological advances, market forces and the free enterprise system.

Fossil fuel companies aren’t confused, they’re desperate.

About the Author

Mark H. Witte is a strong proponent for energy efficiency and renewable energy, and believes individuals should have more control over how the energy for their homes is produced.