With dwindling oil supplies, pollution concerns and the ever-present threat of gas prices soaring again, talk of new and better ways to fuel our cars, heat and cool our homes, and power our factories has never been greater. What's more, the conversation is emanating increasingly from a source that's been surprisingly quiet until recently — the oil companies themselves.
When some of the industry's top executives gather in Houston next week to discuss global energy challenges, finding new and more effective ways to produce oil and gas — as well as alternatives to fossil fuels — will dominate the discussion.
And, as the year progresses, expect to see industry leaders — including the chiefs of ConocoPhillips and Royal Dutch Shell PLC's U.S. division — speaking in cities across America in an unprecedented campaign to educate consumers on energy related issues and discuss topics such as ethanol and renewable fuels. It's also an opportunity for the companies to polish their images.
Why now? The reasons are varied, but increased public and congressional scrutiny of oil companies because of up-and-down gasoline prices and record profits certainly is a factor. The companies' own bottom lines also play a key role: The cost of finding and tapping new oil and gas reserves is on the rise while the worldwide appetite for energy is only getting bigger.
"There's never been as much effort going into technological innovation across the whole energy industry as we're seeing today," said Daniel Yergin, chairman of Cambridge Energy Research Associates, a consultancy, and author of "The Prize," the Pulitzer Prize-winning history of the oil industry.
At CERA's annual weeklong conference that begins Monday, dozens of the industry's heaviest hitters — the chairmen of Exxon Mobil Corp. and Chevron Corp. and a top OPEC official, among them — will discuss topics such as the tricky balance of supply and demand and initiatives to develop new sources of energy.
Already, the discourse is in full swing across the country, led by some unlikely figures.
John Hofmeister, head of Royal Dutch Shell's U.S. arm, and James Mulva, ConocoPhillips' chairman and chief executive, are taking part in separate national speaking tours with other representatives of their companies, talking and listening at town hall meetings in places like Edwardsville, Ill., and Little Rock, Ark.
Outlining his company's 35-city tour in Houston recently, Mulva acknowledged that he and others have traditionally done a poor job of conveying to the public how their businesses operate, the challenges they face, the advances they're making.
Often, consumers' main connection with oil companies comes from filling up their vehicles or, recently, reading headlines of record profits. For example, Exxon Mobil this month shattered its own record for the largest annual profit by any U.S. company, bringing in $39.5 billion. And ConocoPhillips reported its best-ever full-year earnings, $15.5 billion for 2006.
But what folks probably don't know, Mulva said, is U.S. oil companies have invested $11 billion in North America on renewable and other forms of energy in the past five years.
Still, the task of weaning Americans and the rest of the world off fossil fuels will be monumental and lengthy. At present, renewable energy sources such as wind and solar supply only about 6 percent of America's energy needs, according to the federal government's Energy Information Administration. That figure is expected to grow only to about 7 percent in the next 20 years, the EIA forecasts, meaning fossil fuels will still carry the bulk of the load.
Mulva said all types of efficient energy sources are needed, but market forces and consumer preferences, not federal mandates, should determine how they're used.
Mulva called President Bush's proposal for expanding ethanol use to reduce gas consumption "very well motivated," but he said industry leaders "want a seat at the table" when state and federal officials set standards for the use and development of alternative energy sources.
"We believe very strongly the best way of meeting those metrics is to determine what they are and then let the industry ... come up with the resources and plans to meet those, (rather) than have mandates saying specifically, 'You have to do it this way and that," he said.
Oil companies already are investing heavily in alternatives and new ways to get oil and gas out of the ground more easily and cheaply.
BP PLC, which earned $22 billion in 2006, says it plans to spend $8 billion over the next decade developing alternative energy using wind, hydrogen and other means. Its alternative energy arm, created in 2005, is slated this year to begin building wind-powered plants that generate carbon-free electricity in California, Colorado, North Dakota and Texas.
At the same time, Shell is testing technology that involves drilling holes in fields and inserting electric heaters to gradually heat rock over long periods of time, causing the trapped organic matter — kerogen, in this case — to be released as oil and gas. The process is more environmentally sensitive than traditional drilling.
Yergin said another clear indication of the rising interest in cleaner and more efficient energy is growing investment by venture capitalists. Last year, venture capital investments in industrial and energy deals more than doubled from the year before to $1.8 billion, according to figures from PricewaterhouseCoopers, Thomson Financial and the National Venture Capital Association.
About 40 percent of that money was earmarked for alternative energy projects.
"I've taken to calling it 'the great bubbling,'" Yergin said. "Some of it is going to lead to very major changes."
John Parry, a senior analyst at energy consulting firm John S. Herold Inc., said it's no wonder much of the emphasis at big oil companies on exploring alternative energy sources dates to the past decade or so.
In the past 10 years, he said, several industry mergers and higher oil prices have given the big players the money to pursue such endeavors — investments that weren't feasible before.
"If you looked at a company's liquidity 10 years ago, and they said they were going to put $1 billion in alternative energy, their stock would have collapsed," Parry said. "No one saw the wisdom of that. Now, we can see certain technologies that begin to make some sense."