A lot of people use social media, especially Twitter, to rile others up and get reactions. It generates attention and thus helps their brand. We should probably normally ignore these people as they likely don’t believe the drivel they put out there. The problem, however, is that a lot of people genuinely do agree with what they say. Maybe it’s confirmation bias or maybe these people are very trusting of their heroes, but it’s a cheap way to stir your support up.
Following the destruction caused by Hurricane Harvey, Cenk Uygur decided to tweet this out:
Horrified at human toll of #HurricaneHarvey. Not sad about billions of damage to oil industry. Chickens coming home to roost. #ClimateChange
I don’t want this to be about climate change and whether crude extraction, refining, and its consumer use caused this hurricane. That’s another conversation for a different day. I care more about the ridiculousness of this statement regarding the economics behind it.
How does Uygur think “billions of damage” is a good thing? Even if you absolutely hate the industry and its products that make modern life possible, the reality is that oil isn’t going anywhere anytime soon. The refineries likely aren’t going to just shut down permanently following this storm. They’re going to repair their equipment to start operating again. Spending money to get back to where you already were is not the most efficient and productive use of money, so of course the players in the oil industry would rather use the money for something else. Perhaps it even puts enough stress on a company that they need to lay off some of their employees. And of course it raises prices for consumers.
Is that what Uygur wants?
But it gets worse and even ironic for someone like Uygur. Companies usually set aside money for making capital improvements. Making unexpected repairs like this tends to wipe those capital budgets out. Now those capital improvements must be delayed along with the benefits that come along with them. Usually, these improvements are designed to make production more efficient, which increases profitability. Stripping it down to the basics, this is done in one of a few ways: they use less money to make their product or they produce more product from the same inputs.
While refiners today waste very little, there is still room for improvements and there is no reason to believe that waste products today won’t be sold as useful products at some point in the future. This line of thinking is part of why John Rockefeller was so successful when he entered the oil industry:
High prices and dreams of quick riches brought many into refining, and this attracted Rockefeller, too. But right from the start, he believed that the path to success was to cut waste and produce the best product at the lowest price. Sam Andrews, his partner, worked on getting more kerosene per barrel of crude. Both men searched for uses for the byproducts: they used the gasoline for fuel, some of the tars for paving, and shipped the naphtha to gas plants. They also sold lubricating oil, vaseline, and paraffin for making candles. Other Cleveland refiners, by contrast, were wasteful: they dumped their gasoline into the Cuyahoga River, they threw out other byproducts, and they spilled oil throughout the city.
The oil industry doesn’t dump its waste into rivers anymore. But some waste is necessarily put into the atmosphere (from a production standpoint). What other than the pursuit of profit could lead to turning trash into treasure? When businesses have no money to spend on capital improvements that bring better technology, they end up getting stuck doing what they’re currently doing.
So Uygur’s celebration of “billions of damage” is actually a celebration of the status quo and not an improvement for the environment.
All of that said, we’ve ignored one extremely important part to all of this: insurance. The oil industry and their investors are not so dense that they don’t recognize that their refineries are located in a normal path of hurricanes! Whether they self-insure or have a policy with a different company, they take steps to prepare for these events. The fact that Uygur (or at least his followers) doesn’t recognize this just provides glaring evidence of ignorance.
Just remember, the people running businesses that earn billions of dollars a year probably have a better handling on dealing with these issues than some jerk on Twitter.
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