Banderbind’s Blog

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oil companies bail out the automotive industry

I have an idea, rather than setting another bad precedent by having the government bail out the big three, let’s have the American Petroleum Industry bail them out. 

Recently, the House of Representatives heard testimony from the auto industry on why they need a multi -billion dollar bailout package. They were sent packing and are now back again with a better plan on how they will spend the money. While the auto industry is here because of their own bad business decisions, they are not the only ones that should be testifying.

Let’s take a look at how they got here.

While President Carter put in place CAFE standards that would have achieved fleet auto mileage standard to 48 miles per gallon by 1995, (Even U.S. automakers admitted at the time that they could easily achieve 30 mpg by 1985), Reagan made sure to relax those standards as soon he entered office. In the meantime, gasoline has continued to be less than half of what it costs in Europe and other countries because of the higher road taxes abroad, put in place primarily to discourage unnecessary driving.

So if I am GM, why in the world would I increase mileage standards on my fleet if the government is telling me I don’t have to and gas prices are so much cheaper here in the US where most of my cars are sold?

I won’t, but I still might look to the future and start building cars that run on alternative fuels. After all, these fuels could reduce our dependence on foreign oil, strengthen our national security, and also address global warming.

What would my fuel partner in the supply chain say to this?

The American Petroleum Industry can’t argue with how independence from foreign oil will strengthen our national security however they have consistently balked at the science linking excessive fossil fuel usage to increased global warming and therefore have not put significant investment behind alternative fuel production. Exxon’s CEO, Rex Tillerson, recently argued that the science of climate change is far from settled and that his company views it as its “corporate social responsibility” to continue to supply the world with fossil fuels. (see link below )

If Exxon, a company that made record profits last quarter, is not spending anything substantial on renewable energy resources, and gasoline prices are less than half of what they are in Europe, what message does this send to the American automotive industry?

It sends the message that gasoline is here to stay and any innovations in developing products that run on alternative fuels will not be supported by the American Petroleum Industry.

And that is a very strong message. After all, there is no other viable and convenient fuel source for the consumer to buy.  In fact when you look at the transportation industry as a whole and all of its suppliers, fuel is arguably the most important and critical piece of the supply chain.

If we look at alternative automotive fuels the first one that comes to mind is ethanol; ethanol from corn.  There are plenty of reasons why corn made ethanol is a bad idea. It takes too much energy in fossil fuel products and too much water to make corn based ethanol a viable fuel source.  And it is certainly not a “greener” alternative. Just google “ethanol and pollution” and you will see what I mean.  But there are several companies like Mascoma,  Amyris, Bluefire, and Zeachem,  with technologies utilizing other feedstocks to produce ethanol that will make it a much more viable fuel. 

But the issue is not corn based ethanol versus gasoline produced from Oil at 200 dollars + a barrel, or current compression ratios and octane levels.  It is really about investing in our country’s energy future. It is about investing in bridges to the next best fuel source. Helping out distributors with the cost on installation for E85 tanks will not look good on paper for Exxon or any of the other petroleum company now. What it will do is to help move us in the right direction, towards ethanol produced by other feedstocks that are more efficient and perhaps other fuel sources like hydrogen or bioengineered gasoline.

In the same way, an investment in the Big 3 will not look good for Chevron right now. However when you consider what the right partnership could mean for the future of the automotive industry and the energy industry, the possibilities are endless.  And they can call it an INVESTMENT. Together, the API and automotive industry can design the cars of the future- cars that run on alternative fuels- fuels that they develop!! It will be the first substantial investment they will have made in our energy future, and it would do wonders for their image.

 If it sounds ridiculous for an oil and gas company to invest in an automotive company consider the fact that Exxon already has a technology investment deal going on right now with Toyota.

So let’s send a message to congress that we do not want the taxpayer to bailout the automotive industry. Exxon will make 40 billion in net profit on over 400 billion in revenues this year – they can afford it.

Here is a link to find your representatives in Congress:

Here is a link for the Senate:

Here is the phone number for Hal Kramer, the VP of Marketing for Exxon:


Here is the number for Rhonda Zygocki, VP of corporate affairs for chevron:


Here is a link on Exxon’s oil exploration spending:

Exxon on renewable:

Rex Tillerson and Exxon on climate change:



December 8, 2008 Posted by | Uncategorized | 4 Comments