Exxon Mobil (XOM) is not known for its environmental record. Indeed, many environmentally-friendly investors feel that Exxon could be doing much more in terms of alternative energy investment. And, interestingly, that is what XOM has been doing the past three decades. XOM just hasn't been doing it in an area where we usually think to look. The Wall Street Journal reports on Exxon's efforts to remain diversified as alternative energy comes to the fore:
Photo:Film Colourist, Creative Commons, Flickr
But even as it hunts the earth for new supplies of oil and natural gas, Exxon has worked on developing alternative energy technology. The company, which has big plastic and chemical operations, isn't keen on the long-term prospects for biofuels, but it is bullish on the hybrid market.
Exxon isn't stupid. It's not the largest company in the world, in terms of value, for nothing. Exxon knows that, even as it spends money on oil and natural gas exploration, certain tides are changing. Exxon, instead of betting on biofuels, thinks that future is the hybrid car market. That's why Exxon has been working on better lithium batteries since the 1970s.
Exxon doesn't actually make the batteries. Rather, Exxon scientists are developing ways that the batteries could withstand higher temperatures (the main problem with lithium batteries is that at some point they explode). Exxon's design is used in a large number of lithium cellphones and other electronic device batteries. Now, Exxon is paying scientists to improve lithium battery technology in order to make it a practical replacement for the bulky, less efficient nickel-metal hydrid batteries that are currently used in hybrid cars. Exxon wants a share of the hybrid car market by selling its technology to Toyota (TM), Ford (F) and other makers of hybrid cars.
Whether you agree with Exxon's environmental record or not, there's no denying that the company has made some very savvy business decisions in the past. This decision is no different. Exxon isn't moving in a green direction because it cares about going green. Exxon is doing it because the company cares about making money. And, if Exxon continues to push the hybrid car market, the company is likely to continue to do well. After all, a hybrid car with a lithium battery designed by Exxon would be a double win for the company — it still needs gas, but even though it won't need as much, the battery will make up some of the difference.
Disclosure: I do not own XOM, F or TM. I am considering TM.