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Published: May 3, 2010
 / Summer 2010 / Issue 59

 
 

Why We Hate the Oil Companies

Thus the electric utility’s insights, like those of the oil company, often go unheard. I recall a conversation in 1994 with a Southern California Edison executive at a social function in Hollywood. He told me that he was retiring from the company so that he would not be part of — and therefore not bear responsibility for — the pending upheaval and ultimate catastrophe that deregulation would mean to customers in the years ahead.

He said, in essence, that California consumers did not know how good they had it in their regulated markets and that it was a shame that they would have to experience deregulation to find out. He predicted that deregulation would lead initially to lower prices for consumers but ultimately would take the market to un­precedented high wholesale prices and then lead to shortages of power.

Turns out he was pretty much right on all counts. The ill-conceived legislation of the late 1990s in Cal­ifornia set up a deregulated electric power market by capping wholesale prices to “protect” retail prices. This led to shortages in the state’s internal supply system that made it necessary to bring in hugely expensive uncapped supplies from outside the system. The resulting energy shortages and price hikes not only inconvenienced people, but also led to a number of tragic deaths (for example, among those caught in rolling blackouts). Like the Standard Oil abuses in the oil industry 90 years earlier, the experience tarnished the power industry and has poisoned the well of deregulation for a long time to come.

When oil and utility companies are seen as the problem, it is easy to avoid looking at some of the deeper social and political issues that need to be addressed. If the oil companies have the answers to the energy crisis — and in many cases they do — who will believe them? Would you accept a fox’s plan for a chicken coop? Ig­norance leads in one direction: bad public policy that ultimately hurts all energy consumers. If oil company leaders want to act against this ignorance, the place to start is within their own companies: toward transpar­ency, better collaboration with outsiders, and more attention to understanding their customers.

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Author Profile:

John Hofmeister is the founder and CEO of the nonprofit association Citizens for Affordable Energy. He was the president of Shell Oil Company from 2005 to 2008.

  • This article was adapted from Why We Hate the Oil Companies, by John Hofmeister. Copyright © 2010 by the author and reprinted by permission of Palgrave Macmillan, a division of Macmillan Publishers Limited. All rights reserved.
 
 
 
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Resources

  1. Stewart Brand, “City Planet,” s+b, Spring 2006: How the profound consequences of increasing urbanization are changing the way we think about demographics, cultural vital­ity, and economic development.
  2. Viren Doshi, Gary Schulman, and Daniel Gabaldon, “Lights! Water! Motion!s+b, Spring 2007: Rebuilding the world’s urban infrastructure can be done only by integrating energy, transportation, and water.Peter Senge, Bryan Smith, and Nina Kruschwitz, “The Next Industrial Imperative,” s+b, Summer 2008: Why facing up to climate change requires a revolution in business thinking.
  3. World Wide Fund for Nature and Booz & Company, “Reinventing the City: Three Prerequisites for Greening Urban Infrastructure,” (PDF) March 2010: More analysis and ideas on why we need to aggressively pursue urban sustainability.
  4. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/sustainability
 
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