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>> Friday, December 25, 2009
Oil Companies' Message Is They're Not Just About Oil
What's an oil company? The companies argue the answer is not as simple as it might seem, and they're increasingly using marketing campaigns aimed at persuading that they're more than petroleum businesses.
Chevron ran a full-page Washington Post ad this month that promoted the oil company's work helping businesses and schools use less power. Featuring a picture of a boy wearing goggles, the ad said, "every dollar invested in energy efficiency today could return two dollars in energy savings." Chevron's former vice chairman, Peter Robertson, has described conservation as "the best source of new energy in the world and the best thing we can do in terms of carbon emissions."
BP runs ads with images of the sun, windmills and plants alongside icons for gas and oil. "From the earth to the sun and everything in between ... BP has invested over $40 billion in the last 5 years in oil and gas, as well as alternatives like wind, solar and biofuels," the ads say. The company has pledged a decade-long investment in renewable power.
Exxon Mobil Corp. has a campaign dubbed "fuel for thought," which features New York Times and Wall Street Journal ads talking about rising fuel demand and the need for energy efficiency, conservation and investments into ways to reduce carbon emissions.
The company is making major investments in non-oil sectors. Exxon Mobil last week announced a $41 billion stock-and-debt deal for the purchase of natural gas producer XTO Energy, a move analysts described as a significant bet that businesses in the future will need to pay for their carbon dioxide emissions, making cleaner-burning gas more profitable.
The Exxon deal came five months after the company announced a $600 million investment in algae-based biofuels, a stake that positions Exxon as a dominant player in that market.
The $41 billion purchase of XTO represents more than Exxon's total expected investment this year of $25 billion to $30 billion for all energy sources.
There are fundamental business reasons for all of the oil company moves, analysts said, as they see rising energy demand and that likely future cost for carbon. There also are clear market benefits, with the companies needing to persuade Congress and consumers that their energy portfolios are diverse.
"The companies may be looking at this as sort of a win-win for them," said Ken Green, resident scholar at the American Enterprise Institute. "They get to burnish their green credentials, they get the government to lighten up on them, and they create a public perception that natural gas is the answer.
"It's a smart move that covers several bases for them," Green said.
The oil industry as a whole is signaling it wants to shift how it's perceived. The trade group for oil and gas companies, American Petroleum Institute, recently laid off 15 percent of its staff in a move its president, Jack Gerard, said was part of a reorganization aimed at making it "more nimble, more aggressive" in its lobbying efforts. API has not focused enough, Gerard said at the time, on telling people about oil and gas company investments in developing renewable energy and lower-carbon power, as well as the importance of natural gas to manufacturing.
"We've not been as effective as we could be in educating public officials or the public about the critical role of oil and gas in our economy," Gerard said.
API also launched an ad campaign linking oil and gas companies to 9.2 million American jobs. One API flyer argues that "everyone is touched by America's oil and natural gas industry. ... Farmers use fertilizer made from natural gas. ... If you buy a loaf of bread, purchase a new electronic gadget or drive a car, consider yourself a part of the oil and natural gas industry."
Chevron's ads are aimed at getting people to think about conservation while also expanding their view of the company, said Helen Clark, Chevron's manager of corporate marketing.
"Oil and gas is a majority of our business, but there's a lot else we do that's important," Clark said.
"We want people to see past the rhetoric and past the view of 'Big Oil,'" she added. "We want to make sure it's showing all sides of the corporation."
Yet for all three companies, the alternative energy investments still are a small part of their overall business. BP, for example, puts $1.3 billion to $1.6 billion a year into alternative energy projects. That's about 1 percent of the company's total $20 billion investment this year in future business prospects.
Exxon Mobil predicts that its investment in alternative energy sources like wind, solar and biofuels will grow 10 percent a year through 2030, but even with that will remain just 2 percent to 5 percent of its total energy mix.
The companies said that they must plan for operations 20 years or more in the future, and that both the investments and the marketing show they are aware they need to include energy sources beyond oil and even cleaner-burning natural gas.
"Customers are going to want cleaner fuels," BP spokesman Tom Mueller said. "We're looking at ways we can meet that demand. ... There's a lot of business value in developing these cleaner technologies."
Exxon Mobil in its energy outlook report published Dec. 8 projected that global energy demand in 2030 will be nearly 35 percent higher than it was in 2005, even with the lower demand caused by the ongoing recession.
"Our energy and environmental challenges are intertwined and their scale is enormous," Exxon Mobil spokeswoman Cynthia Bergman said in an e-mail. "Improving energy efficiency is a triple win -- it saves money, reduces energy demand and curbs CO2 emissions."
Rethinking brands
The oil company marketing efforts likely are aimed at broadening how people view the companies, said Bob Kenney, principal at Context Marketing, a market consulting firm that advises companies on consumer preferences and how to address societal issues.
"What I might call it is expanding the brand," Kenney said. "A brand by its creation brings a certain set of images and ideas to you. What happens is brands sometimes expand the range of images that they're trying to create. You can expand the brand to mean more than it used to without damaging the brand."
The move is also defensive, Kenney said, as the companies are targeted by activist groups.
"Having a prominent corporate responsibility message helps you defend against people who are attacking you in the court of public opinion," Kenney said. "Companies realize the court of public opinion is very important to them. They need in a sense to project their virtues."
Chevron's ads have been met with suspicion, with some questioning whether the company sincerely wants people to use less of its product.
"It's about P.R., and it's dumb P.R." Green said, arguing that the company is going to invest in the energy source that is most profitable, not necessarily the greenest. "They want people to love them."
Robertson, Chevron's retired vice chairman, acknowledged the doubt people might have, saying in a company video, "Oftentimes, people will ask, 'Why in the world would Chevron be encouraging its customers to use less energy?' After all, we sell energy -- that's our product."
Before launching the ads, Chevron held focus groups in which it asked people how they felt about the messages. One of the reactions, Clark said, was questioning Chevron's motives and whether it really wanted people to use less of its product.
"We did get a level of cynicism, 'Why are you really doing this?'" Clark said. But at the end of the interviews, people in the focus groups said that although they were suspicious, they thought Chevron still should run the ads because the message was worthwhile.
Consumers want companies to behave well, Kenney said.
"The consumer is saying, 'I'm glad to hear you saying these things, because it's important,'" Kenney said. "What consumers are saying is they like to hear companies acknowledge that they have social responsibilities."
But consumers also have what Kenney called a "set of elastic expectations" and struggle to define what makes a good company or to know whether a company is really doing what it says it is.
While higher energy prices might mean more revenue for oil companies, Clark said, "That's really not a good operating environment for our company. It's just more difficult for us to do our jobs in a really high-price environment. Our chairman really strongly believes that we need to keep supply and demand in balance. A really good solution is energy efficiency."
High prices lead to heated rhetoric, Clark said, including talk of a windfall profits taxes.
"We get put under a lot of pressure from consumers and regulators," Clark said. "We just prefer to operate in a more stable price environment."
The intent of BP's ads is "that our customers understand the company's diverse here in terms of approach," Mueller said. "This is our way to demonstrate how we're taking action to act on those values. Our approach is all of the above."
Mueller said he has heard the cynical comments along the lines of BP being the KFC of oil companies, KFC having changed its name from Kentucky Fried Chicken. British Petroleum became BP, with the slogan "beyond petroleum."
Some customers might have the idea, Mueller said, that you can "flip a switch" and move to renewable power.
While renewables are "still a very small piece of our capital investment," Mueller said. "A lot of research has to be done on new technologies."
"That research takes time to get done," Mueller added. "It takes time for that to percolate through. It's what we are doing. We are making steady efforts to expand production of low-carbon energy here in the U.S. We are a significant player in that space."
Many of the ads have run in Washington, D.C. Those are less about reaching customers and more about reaching Congress,
"It's concerned with contributing information in the public debate at a governmental level," Kenney said. "It may look like a public campaign sometimes, but sometimes it's not."
Banking on biofuels
Oil company investment in algae is noteworthy, analysts said.
If oil companies can produce biofuels, they can sell it alongside oil products without having to significantly change their infrastructure, said Charles Ebinger, director of the Energy Security Initiative at the Brookings Institution, a Washington think tank.
Exxon Mobil's investment in both algae and natural gas shows that they believe there will be a cost for carbon emissions in the future, Ebinger said.
"They think this is inevitable," Ebinger said. "They want to be positioning themselves in the non-carbon fuel market."
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