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Seeking Alpha: Big Oil’s Big Problem: Time is Running Out

Posted on: February 20, 2008 | about stocks: DBO / OIL / PBR / PBW / PUW / USO / XOM

By “Echo To All”: Bio & more articles

Big Oil is having a hard time replenishing their reserves and Wall Street is concerned. The concern is obvious, but playing devil’s advocate, does it really matter?

The WSJ’s recent article on Exxon’s (XOM) lack of new reserves states that XOM will run out of oil in a generation. That is about 40 years or so.

The last, and most recent, big oil find is controlled by Petroleo Brasileiro (PBR). Where does this level the reset of the industry… other than crying that Peak Oil has arrived, and the easy life is slowing ending? IMO, Big Oil will be forced to reinvent themselves. They should not be viewed as Oil companies, but instead, they need to view themselves as Energy companies, and attack all aspets of Energy.

That means a huge push into alternative energies, specifically to what oil is used for. By ignoring innovation, along with the lack of reserves, they are running down a dangerous course. Big Oil will fall victim to innovation the same way TV networks lost out to the internet.

Car makers are in no position to stop innovating. They see how well hybrids are selling in a crappy market, and they will keep pushing. If Big Oil does not step up, and change with the times, arrogance will kill them.

Too many former hippies have too much money, and their money is forcing disruptive innovation in all aspects of life. There is no more room for lobbiests and tax breaks.

A slogan that should be reinforced in every company should be ‘innovate or die’. Ultimately, that path has already started, but a generation is a good amount of time for Big Oil to get crack-a-lacking to redefine itself.

The U.S Governement should be concerned about this as well, as it threatens our way of life. (Unless politicians enjoyed the oil shocks of the 70s.) Legislation should be passed to force Big Oil to throw money at innovative technologies. For instance, give XOM a $50 million tax credit only if they truly spent $50 million toward alternative energy.

http://seekingalpha.com/article/65300-big-oil-s-big-problem-time-is-running-out?source=d_email

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