?When I first entered the oil industry in 1967 as a writer for then-New York-headquartered Shell Oil Co., I received what amounted to a post-graduate course in macro-energy fundamentals from some the brightest minds in the industry.


One of the biggest lessons learned? Successful oil companies have to recognize that, long term, they’re in the energy business, not the oil business.


As one senior Shell executive explained at the time, “At the end of the 19th century, those providers of kerosene for oil lamps who thought they were simply in the kerosene business, rather than in energy, weren’t around by the time electric power-generation became widespread in the early 20th century.


“Similarly, in the early 20th century, those operators of trolley cars who thought they were simply involved in the trolley business, and not transportation, soon fell by the wayside.”


Today, as the nation looks toward a U.S. presidential election, it’s more relevant than ever to be reminded of this lesson.


Very simply, the world is very near peak oil production, whether that occurs in 2010 or 2015, and global oil demand is increasing annually. This year, daily demand is expected to grow by 1.2 million barrels, according to estimates by the International Energy Agency (IEA), the Department of Energy (DOE) and OPEC.


But U.S. presidential candidates—Democratic and Republican—are in lock step with most of Congress in being inexplicably opposed to opening the Alaska National Wildlife Refuge (ANWR) to drilling.
Their rationale? ANWR wouldn’t produce a drop of oil for 10 years, and even if the industry drilled there for 20 years, that would only reduce the price of oil one penny, sums up Senator Charles Schumer (D-N.Y.).


This view by Schumer, who apparently has added to his resume geologist, petroleum economist, reservoir engineer and commodity-price clairvoyant, is remarkably at odds with the DOE’s assessment of ANWR’s hydrocarbon potential.


The DOE indicates that drilling the most promising 2,000 acres within ANWR’s 20 million acres could allow the U.S. to produce an additional 1 million barrels of oil daily—about 27 million gallons of gasoline and diesel daily—which would likely result in cheaper fuel prices for Americans lined up at the pump.


Currently, the U.S. consumes some 20 million barrels of oil per day, with more than 60%, or 12 million barrels, of that imported. If the DOE’s estimate of potential daily oil production from ANWR is correct, that would cut oil imports 8.3%, to under 52% (1 million barrels as a percent of 12 million). And, more than likely, output would come online in less than 10 years, if the drilling history in Alaska’s Prudhoe Bay next door is any barometer.


Of course, with the industry likely facing a hostile White House and Congress in 2009, drilling in such an oil-rich refuge won’t be on the table as a viable path to cheaper, more secure domestic energy supply.
The solution? A far more aggressive approach by the industry to bringing online alternative-energy sources, including solar cells, wind farms, biofuels and hydrogen.


Sure, it’s encouraging that a major oil like BP is spending $500 million to help build an alternative-energy research center in California during the next few years plus another $8 billion during the next 10 years to build solar cells and wind farms. But let’s remember that BP’s earnings in 2007 alone were $28 billion.


So this oil and gas producer, which claims its logo stands for “Beyond Petroleum,” appears at best to be merely paying lip service to pursuing long-term, alternative-energy solutions.


Ditto for Chevron. It will be spending $2.5 billion on alternative-energy sources during the next three years; however, that’s a miniscule slice of its annual profit pie—nearly $18.7 billion—last year.


In short, the majors need to start putting their money where their energy future lies—and that isn’t going to be entirely oil and gas.


Shell Oil observes that, by 2050, alternative-energy solutions may supply about one-third of the world’s demand for energy. The implicit advice: Abandon the kerosene lamps and trolley cars and aggressively grow renewable energy resources.

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