Big Oil Impact on Policy and Regulation

Jessica Lynn

10.6.20

Policy and Regulations set major precedents for utility companies. Big oil continues to have a major foothold on how these governmental structures are shaped. Through lobbying, subsidies, and tax cuts as seen during the Bush administration, companies like Exxonmobil and BP seem to get accommodations, allowing them to operate in a “grey area” (PBS, 2008). Last week when I was doing some digging on the energy industry, I stumbled across a fun fact “There is no national oil and gas company in the United States. Instead, there are numerous private businesses operating in the sector.” (Investopedia, 2020). Down the rabbit hole we went and discovered how big oil formulates a strategy to mitigate uncertainty (for their benefit) and how it relates to coal.

(source: WoodMac, 2019)

State and Federal government use regulation and policy to maintain a symbiosis “utilities services from private companies that are regulated at the state level by public service commissions. Larger federal or state power utilities are run directly by the government, as are many rural and municipal utilities.” (Ross, 2020). Surprisingly, the energy market majority is owned by state-owned companies “multinational oil companies produce just 10% of the world's oil and gas reserves. State-owned companies now control more than 75% of all crude oil production.” (Bremmer, 2010). This factor leads to the earlier point regarding regulation and policy manipulation. Big oil means big money. They have a strong revenue stream to pull, supporting self- serving initiatives by helping them hedge their bets (i.e monetary donations to presidential and congressional campaigns) “The dynamism and market power of the U.S., Western Europe, and Japan—fueled by private wealth, private investment and private enterprise—seemed to have fully established the dominance of the liberal economic model.” (Bremmer, 2010).

The Federal Trade Commission came out with a guidebook to mitigate concerns stemming from previous bad practices “from engaging in fraudulent or deceptive conduct (including making false or misleading statements of material fact) in connection with wholesale purchases or sales of crude oil, gasoline, or petroleum distillates.” (Federal Trade Commission, 2009). Exxonmobil is a good example of this, ranging from their publicized deceit to investors and deception on climate change to the public (Wasserman & Kaiser, 2016).

Electricity is the major driver for coal, along with steel manufacturing. Coal being one of the more expensive energy suppliers and steel market slowly seeming to die out (as discussed in last week's lecture), does Coal have a seat at the table? As the economic need for coal decreases, and new entrants rival the existing oil and gas companies, it would seem they have a short shelf life. Even though they make up a major portion of the energy market at 39% and Natural Gas at 22%, it’s clear there is a demand for a cheaper supply (Wind at $86 and Geothermal $84). However, because of the grasp big oil has on the state and federal level, it makes you wonder how much slower we are going to progress in renewables, while other countries seem to be making major strides forward. China and India are starting to turn the tide, as their rising middle class demands more sustainable and renewable options (cleaner, healthier environment).

Resources

Barriers to Renewable Energy Technologies. (n.d.). Retrieved October 05, 2020, from https://www.ucsusa.org/resources/barriers-renewable-energy-technologies

Big Oil's Influence in Washington. NOW. (2008, August 1). Retrieved October 05, 2020, from https://www.pbs.org/now/shows/347/oil-politics.html

Bremmer, I. (2010, May 22). The Long Shadow of the Visible Hand. Retrieved October 05, 2020, from https://www.wsj.com/articles/SB10001424052748704852004575258541875590852

Coal - Price Factors, Applications, Demand and Supply, Trading. (n.d.). Retrieved October 05, 2020, from https://www.agiboo.com/commodity-knowledge-center/commodities/coal/

Federal Trade Commission. (2009, November). Guide to Complying with Petroleum Market Manipulation Regulations. Retrieved October 05, 2020. https://www.ftc.gov/sites/default/files/documents/rules/prohibition-energy-market-manipulation-rule/091113mmrguide.pdf

IEEE USA. (2019, November 22). National Energy Policy Recommendations. Retrieved October 5, 2020, https://ieeeusa.org/wp-content/uploads/2019/11/NEPR1119.pdf

Mackenzie, W. (2019, July 25). Big Oil and climate change: The long road. Retrieved October 05, 2020, from https://www.woodmac.com/reports/macroeconomics-risks-and-global-trends-big-oil-and-climate-change-the-long-road-326483)

Reiff, N. (2020, August 28). 10 Biggest Utility Companies. Retrieved October 05, 2020, from https://www.investopedia.com/articles/investing/022516/worlds-top-10-utility-companies.asp

Research, R. (2018, June 28). Coal Mining Market Drivers and 2020 Forecasts in 2015 Research Report. Retrieved October 05, 2020, from https://www.prnewswire.com/news-releases/coal-mining-market-drivers-and-2020-forecasts-in-2015-research-report-538677382.html

Ritchie, H., & Roser, M. (2019, September 20). Access to Energy. Retrieved October 05, 2020, from https://ourworldindata.org/energy-access

Ross, S. (2020, September 16). How strongly does government regulation impact the utilities sector? Retrieved October 05, 2020, from https://www.investopedia.com/ask/answers/070915/how-strongly-does-government-regulation-impact-utilities-sector.asp

Timeline and History of Energy Deregulation in the United States. (n.d.). Retrieved October 05, 2020, from https://www.electricchoice.com/blog/timeline-history-energy-deregulation/

U.S Dept. Of Energy (2019, January). Valuation of Energy Security for the United States. Retrieved October 05, 2020, file:///C:/Users/pyro_/Downloads/810599.pdf

Wasserman, L., & Kaiser, D. (2016, September 22.). The Rockefeller Family Fund Takes on ExxonMobil. Retrieved October 05, 2020, from https://www.nybooks.com/articles/2016/12/22/rockefeller-family-fund-takes-on-exxon-mobil/

Warren, I (2017). Comparative Costs of Geothermal, Solar, and Wind Generation Based on California Independent System Operator Electricity Market Data. Retrieved October 5, 2020, from http://pubs.geothermal-library.org/lib/grc/1033705.pdf