WHAT MATTERS WEBLOG

The Anglo-Dutch oil company Royal Dutch Shell plc announced recently that it will no longer be investing in solar and wind power projects. When I first read that Shell dumps wind and solar power in favor of coal, natural gas, conventional oil and biofuels, I couldn’t believe how they tried to justify this incredibly stupid management decision. The oil company’s executive director of gas and power  - Linda Cook - said in the Guardian: “If there aren’t investment opportunities which compete with other projects we won’t put money into it. We are businessmen and women. If there were renewables [which made money] we would put money into it.”

“It’s now looking like bio­fuels is one which is closest to what we do in Shell. Wind and solar are interesting [but] we may continue to struggle with other investment opportunities in the portfolio even with big subsidies in many markets. We do not expect material investment [in wind and solar] going forward.”

(source: http://www.guardian.co.uk/business/2009/mar/17/royaldutchshell-energy)

Obviously, Shell’s image will suffer a significant blow due to shifting its focus from renewable energies to fossil fuels - shifting from 21st century energy sources to 20th century energy sources. To be honest, I didn’t expect such a huge amount of short-sightedness on a par with enormous incompetence from a company whose CEO has already admitted publicly that Peak Oil is only six years ahead. Shell now is convinced that alternatives to oil and gas do not offer attractive investment opportunities. Paradox 180! Shell’s current management will look incredibly stupid in a couple of years from now.

Alternative energy not economical? That’s nonsense. Energy technology is probably the best investment opportunity in more than a century!! When making investments, it’s important to take into consideration how conditions might change in the medium and long-term. It looks like the management of Sheff ignored the enormous progress going on in the energy tech sector. (the solar power breakthrough) By getting out of alternative energy, Shell is digging itself into a deep, deep hole. The oil giant is about to become a sunset company - declining at the same pace as it’s oil output, loosing ground to competitors such as BP which is constantly increasing its investments into the renewable energy sector.

Shell is only serving its short-sighted shareholders. But the positive effect on returns won’t last for long. In the medium and long-term, investments, especially those in renewable energies pay back. But Shell is missing out on this opportunity while it will lose direct access to oil fields in many regions of the world. In the process, Shell is about to be considered a bad investment.

Describing alternative energies as “not economic” might be a correct description with oil trading around $50 a barrel, but even if you’re not an expert you can predict that oil prices will sky-rocket again and finally make renewable energies the better source of energy.

Investing in biofuels is not only a waste of money and time, but also a threat to the environment. Although Shell claims that its second-generation biofuels are made from plants that do not compete with food crops, it’s pretty obvious that there’s hardly enough land to grow enough of any kind ofplant for fuel production. Thus, biofuels will never replace oil, nor will they become anywhere close to competitive with electricity.

Instead of seizing a once-in-a-lifetime opportunity in the energy sector, Shell is isolating itself while its competitors are pouring billions of dollars into energy tech to tap new sources of income. The announcement to cut investments into renewables is equally self-destructive as if e.g. Toyota decided to focus solely on the production of SUVs.

This entry was posted on Wednesday, March 25th, 2009 at 5:36 PM and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.