Lee Raymond, the chairman of Exxon Mobil, promised plain speaking to the Energy Institute Annual Dinner in London this week, and despite the protests of environmentalists who broke into the event, that's precisely what he gave. You can have as many Kyoto protocols as you like, yet there is little merit in soft-pedalling some of the hard truths about energy, Mr Raymond began in his usual no-nonsense style.
The reality is that the combination of economic growth and population increases alone can be expected to lead to a rise in primary energy demand of 50 per cent by 2030, equal to about 100 MBD of oil equivalent, or about 10 times the current output of Saudi Arabia. More alarming still for those who worry about where on earth it is all going to come from, let alone the effect such consumption might have on the climate, this is if anything a conservative estimate. According to Mr Raymond, if energy consumers do not make wise choices and effective investments to improve energy efficiency, then the actual figure is going to be much higher.
Any notion that acceleration of conservation measures, an expansion of nuclear or the growth in renewable energy may be capable of filling the gap is just pie in the sky, according to Mr Raymond. In these circumstances, Europe and the UK need to take a reality check on attaining their environmental targets. Achieving even the quite limited targets envisaged by Kyoto is going to be extraordinarily challenging given the realities of energy supply and demand.
Exxon Mobil is still very much at the redneck end of the oil industry, always ready to call a spade a spade and, unlike its main competitors, not willing to pay even so much as lip service to the mores of the environmentalists. Mr Raymond's quest is serving his customers and the bottom line; all else is irrelevant. Dubbed by Greenpeace as "the No 1 climate criminal", if Mr Raymond had secretly funded Michael Crichton's novel, State of Fear, which paints man-made climate change as an illusion cooked up by alarmist liberals, it would surprise no one. Alone in the oil industry, Exxon still funds research to challenge the established orthodoxy on climate change.
Mr Raymond's message to European policymakers is that they are being naive, both in believing they can meet their environmental targets and in thinking that present arrangements are adequate for the Continent's future energy needs.
So what's Mr Raymond's solution? Market forces, he thinks, will eventually come to everyone's rescue. This means refraining from "damaging intervention" and "over-regulation".
On one level he may be right about this, though not, I suspect, in the way he meant it. If there is to be ever greater demand on finite sources of energy supply, then eventually the cost of established forms of energy will rise to a level where demand begins to fall. This need not necessarily be through economic contraction, though that's obviously a danger, but rather through the discovery of cleaner, more efficient and alternative technologies. Using less energy doesn't have to mean giving up your car, or the American way of life.
Mr Raymond is dismissive of the advances that can be made through conservation, as he would be for he is in the business of selling as much oil as he can, yet the potential energy savings to be had from relatively small amounts of spending on insulation, more efficient boilers, more eco-friendly cars, and so on and so forth, are in fact vast.
Let's be realistic by all means, but regrettably, realism as far as the energy market is concerned cannot mean relying on market forces to stem consumption of fossil fuels. Climate change is a classic example of market failure. Given the choice, the consumer will always buy on price, however green he pretends to be. Nor will the need for self-sacrifice on energy consumption become obvious until it is already too late.
Kingfisher must have been so busy watching its sponsored heroine, Ellen MacArthur, sail around the world in record time that it plain forgot about the business. There were plenty of excuses for the 1.2 per cent fall recorded in like-for-like sales by the core B&Q brand for the final quarter of last year, but none of them really wash for a business which as market leader should still be firing on all cylinders despite the slowdown in consumer spending.
B&Q seems to have been caught napping by competitors in flooring, lighting and wall decorations, while even in kitchens and bathrooms the company has been losing its edge. More importantly, the company seems to have lost sight of its "everyday low prices" selling proposition, swapping the obvious allure of constantly deflating prices across the board for less appealing, selective price promotions. Continued improvements in the supply chain mean that despite top-line disappointment, Kingfisher will still meet the City's profit expectations for last year, but that wasn't enough to stop the shares falling nearly 2.5 per cent yesterday.
Kingfisher has done an excellent job in decoupling the business from the ups and downs of the UK housing market, to which it used to be joined at the hip. In 2003, for instance, B&Q's sales rose 10 per cent, despite a 15 per cent drop in the number of housing transactions. Yet unlike Tesco, it doesn't yet seem to have decoupled itself from wider trends in consumer spending. Tesco has managed this by moving progressively into new markets in non-foods and overseas. Kingfisher's efforts to replicate these strategies have so far proved less successful. It can only thank its lucky stars that the mighty Tesco hasn't yet moved into the DIY business alongside everything else.
The hope is that the fourth-quarter sales setback is no more than a hiccup. Smaller stores are being revamped, in underperforming lines there's been a programme of product renewal and innovation, and the price-reversal strategy has been reintroduced across a wide range of items. Still, Gerry Murphy, the chief executive, needs to watch his back and raise his game. The shares have badly underperformed in the past two years and Home Depot, the big daddy of the global DIY industry, remains as keen on European expansion as ever. Were it not for the weak dollar, Home Depot's Robert Nardelli would already be instructing his bankers. Ellen MacArthur is back on land but B&Q is all at sea.
Blue phone calling
One of the talking points of this week's GSM, mobile phones conference in Cannes is the so-called "Blue phone", a combined mobile and landline phone which BT plans to launch into the UK market sometime this year. Outside the house it acts just like a conventional mobile phone, but indoors or close to a wi-fi hotpoint, it picks up the broadband connection on the landline, thereby saving you a fortune on your phone bill.
The technology is still somewhat unreliable and the initial handsets may be too clunky to appeal to fashion conscious mobile phone users. Yet the potential is obvious, particularly once wi-max is sufficiently developed to allow the new phones to bypass traditional cellular networks even when outside the house. Full development of this technology is still some years off, in part because the big mobile operators have such a strong interest in holding it back. But it is coming, and the implications for the established mobile operators are quite plainly negative.
Most of the big telecoms incumbents in Europe also own or control a substantial mobile operation, so the natural enthusiasm a landline company would have for introducing this technology has to be tempered by the damage it might do to to the mobile arm of the business. Having been forced to demerge Cellnet (now mmO2), BT is under no such constraint. Thus is opportunity born of necessity.Reuse content