Why is ExxonMobil messing with batteries?
I couldn’t believe it when I first read about it. ExxonMobil is doing battery research? That just seems completely out-of-place. But when I sat down and thought about it some more, I got some different thoughts on the matter.
ExxonMobil is already known as the prototypical oil company. They epitomize everything that people stereotype about oil companies - stuffy, overpaid executives with no regard for their impact on the environment.
So what is there interest in developing technologies for batteries? I don’t know - but that won’t stop me from speculating.
There are two theories I can think of:
1) They see batteries as a unique investment opportunity
Batteries as a general investment area is a pretty low risk business proposition. If these batteries that companies like A123Systems are producing end up not being good for cars, they can always be put into many different types of applications. Biofuels by comparison is a much longer term committment with many inherent risks associated with it.
So it could be just an interest in getting into a new investment area, if not only for the return potential, but for more positive publicity.
2) More conspiratorially, this could be a ploy to have a long-term impact on their company’s oil reserves. In this sense, this would be a way of creating “negabarrels” of oil - oil that doesn’t need to be consumed, but within their own ownership.
There are two issues going on with oil - increased demand (world economic growth) and reduced supply (peak oil). It’s not quite clear how one impacts the other (mostly because we don’t really know how much oil is out there still) other than one of them acts as an accelerant.
Oil reserves are a big metric for a company’s success. They are essentially a measure of the company’s ability to generate revenues in the future. From an oil company perspective, they will have to evaluate how fast they can grow their reserves with respect to the growth in oil demand. Growth in oil demand will be a driver for keeping oil prices high. But if that demand increase is significantly faster than the ability for an oil company to grow its reserves (i.e. the quickly growing “dry”) than the company could face long-term financial issues with regard to suppling oil to the market.
Hybrids, in many ways, help oil producers to enhance the lifetime of their oil reserves. It serves as a means of reducing their future financial viability by curbing the oil demand in the long term.
Of course, so do biofuels, gas-to-liquids, and other types of technologies which they believe will not be of any significance in the future. I wonder if that’s an intentional belief (meaning, they’ll make sure it’s the case).
So I don’t know what this means for Exxon, but I no longer think it’s so strange anymore.
