How to cover the energy and oil industry
Robin J. Phillips
John Hofmeister, former Shell Oil Co. president and author of "Why We Hate the Oil Companies: Straight Talk From an Energy Insider", was part of an energy and sustainability discussion at Arizona State University where he spoke about a range of topics including climate change, energy independence, and global energy leadership.
Hofmeister has been interviewed by numerous reporters in his career, including PBS’s Charlie Rose, American Public Media’s Scott Tong, and Fox News’s Neil Cavuto. Hofmeister shares his experiences with energy and oil reporting and how reporters can do it better. | From his ASU appearance,VIDEO: Moving by Degrees - The Future Energy Abyss: Hofmeister at ASU's Cronkite School. This video is also the final slide in this slideshow.
Misconceptions about the oil industry
John Hofmeister: "One of the great challenges that journalists face is how to gain credibility and respect with oil and gas companies. (Oil and gas companies) tend to be internally focused, they tend not to be outreaching, they run a business that carries many risks associated with it, it can be a dirty business, and too may companies have concluded that no news is good news.
"That is the opposite approach to what most journalists would expect from companies that operate in our economy. Most companies tend to be outgoing, in the general economy. But unfortunately, most oil and gas companies tend to be introverted by choice. Therefore, gaining respect for a journalist is a very difficult thing to do. But it can be done.
"I personally have many many respectful relationships with journalists from all over the country, but I would say that is atypical for most oil executives. So often the journalists have attacked or written up companies in negative ways that many executives tend to avoid journalists. And I think that’s wrong.
"My bottom line is the industry and companies have a great story to tell and they should tell it."
The role of the customer
John Hofmeister: "It’s what I write about in my book. One of the reasons we hate the oil companies is they act like they hate us, which is a big image problem for the industry. Consumers have a view that the oil companies don’t care about the consumers.
"And many companies don’t pay much attention to consumers because in many cases they’ve franchised out and so they don’t have consumer. Most consumers believe they’ve bought from a brand. But the companies believe they’re a wholesaler who has sold a product to a retailer, and (the retailer) should take care of the consumer.
"The image that is left is that the oil and gas companies don’t care, which is very unfortunate for everybody."
Just how big is big?
John Hofmeister: "One of the greatest difficulties to comprehend is the question or issue of oil company profitability. Reporters looking at the facts see huge profit numbers and they report those huge profit numbers and sometimes they attach a word like “excess” profits and “huge” profits. And these are big big numbers of profitability. But what they don’t report is the percentage of profitability as a return on sales revenue.
"The actual numbers are big, but if you look at the revenue, the gross sales number, it is ever so much bigger. So on a percentage basis, oil companies make average profits compared to most manufacturing companies.
"Profitability is about 6 or 7 percent, as a return on sales. Which is about what most companies strive for."
Massive scale and profitability
John Hofmeister: "What they also don’t report on is the incredible amount of money it takes, the capital investment, the billions and billions of dollars, to produce new oil rigs to produce more of the same energy, plus research and development for new ways of doing it and for new forms of energy.
"All of that profit doesn’t just go line the pockets of oil company executives, which is what impression is often left. The profits are used to provide more energy for consumers, and when that capital is spent, there’s actually not much left.
"What also is underreported is the amount of taxes and royalties that companies pay to local, state and federal governments where they’re allowed to operate. That is rarely reported and it’s a huge number, a number that’s often more than what most corporations pay. It’s about 40 percent. That’s after taking into account all of the deductions and tax rules, they still end up paying about 40 percent net tax. And you almost never see a story about that.
"That’s not to say that the companies are not successful, and we don’t want them to be unsuccessful. If they’re unsuccessful we run out of energy."
Focus on sustainability
John Hofmeister: "Another thing that is challenging for reporters to write about are the environmental consequences of producing energy. Extraction industries, meaning they poke holes in the earth and pull out products, are by definition both dirty and risky. That’s a fact. Nobody’s going to deny that.
"But what (companies) do about it is they try to do it as safely and as tightly managed as possible to reduce risk. Risk management, health, safety and environment are absolute priorities with companies, but still, bad things can happen.
"Reporters tend to focus on the bad things that happen because that’s the story. And understanding and learning about the extent that companies take precautionary steps, have redundant systems to avoid blow outs, it’s a more boring story to describe the redundancies than it is to explain and describe the disaster. Once again it’s about the wholeness of reporting.
"A great story would be, how did your redundant systems fail leading to the disaster? What actually went wrong?"
Report on safeguards too
BAD THINGS HAPPEN:
John Hofmeister: "Planes have redundant systems to prevent crashes. They don’t just fall out of the sky. They’re designed to fly, not crash. Oil wells are the same. They have redundant systems to make sure they don’t blow up. So the story behind why, that’s a fundamental question behind a disaster.
"The companies are more inclined to provide information about the safeguards. So if a reporter is only interested in what went wrong and not the safeguards, you’ll get much better cooperation from a company if you talk about both the safeguards and what went wrong.
"Go back a year ago to the BP disaster. I was on a lot of TV, radio, I spent a lot of time talking about what are they doing to fix the problem. You could see on TV oil going into the ocean, unstoppable. I had hundreds of interviews, reporters asking, what are they trying to do to stop it? And then that gets you to, what should they have done to prevent it?
"It was a preventable situation, but things went terribly wrong. And that’s generally the case of any incident that happens in hydrocarbons. The system is designed to be a closed system, and when things break or open up, bad things happen."
'Hardworking people made judgment errors'
BP'S NEW CHAPTER:
John Hofmeister: "Hydrocarbons should not be exposed to the earth’s surface, water. You need a completely closed system and that’s what the companies try to do. And just like most airplane crashes are human error, most hydrocarbon incidents are human errors. Somebody didn’t replace a valve, check the strength of the pipeline, somebody didn’t do the checking or rechecking. Usually it’s some human failing that leads to a disaster.
"In the case of oil and gas, it’s both a human and an environmental disaster. Occasionally you will come across an irresponsible operator that does not want to invest in the safeguards. That’s reckless. Just like sometimes the driver of a car will be reckless and bad things happen. It’s rare but it happens.
"For a reporter to have a sense of balance and judgment around when bad things happen is very important. It’s important not to infer or project their own judgment on things and stick with the facts.
"There’s a new BP chapter in the paperback version of my book to come out in September 2011. The people on the rig that had the explosion didn’t get up in the morning on the day of the explosion intending to blow up that rig. But bad things happened on that rig that led to the explosion.
"I describe a combination of bad things that happened that in retrospect never should have happened. Hardworking people made a collection of judgment errors that led to the loss of life, loss of the rig and environmental consequences."
Tips for working with executives
MEET AND GREET:
John Hofmeister: "My advice to a reporter is to look at the total picture, be persistent in terms of trying to talk to companies, don’t give up, keep trying, be fair, be complete.
"I’ve known a lot of reporters who just give up, or they’ll get someone from the PR department who will say we’re not making any comments on that.
"Try to go see them. Try to meet people, go to conferences where you can meet people from companies. (Reporters) will find out that the people they meet are still real people. They might have constraints about what they can talk about, but they’re still real people."
Stories under the radar
John Hofmeister: "For a reporter to cover energy, they have to really commit himself or herself to the field for a long period of time because there’s so much that’s happening. There are so many challenges that the industry faces.
"The aging of the energy infrastructure, power plants, pipelines, transmission lines, the older it gets the less reliable it becomes. There are preventative maintenance programs in place, but I think it’s underreported how old and how tired the infrastructure system is even with preventative maintenance.
"There are two sides to the energy coin. Innovation and new technology, the improvements that are continually happening. And the things that need to be replaced in the aging infrastructure. Those are two things that are underreported. For a reporter to jump in and jump out of energy, they’re going to miss out on a lot. But if they stay in it, you’ll get to see both sides of the coin."
What makes a good reporter?
John Hofmeister: "I always judge media people based on their curiosity. Are they just looking for a story, or do they really want to understand what’s going on. They read about it, think about it, talk about it.
"My best relationships with journalists are those who don’t necessarily like gas or energy, but want to know the why’s and how for’s. I can tell by the way they ask questions whether they just want a story or if they really want to understand what’s behind the story."
Who's doing great work covering oil?
John Hofmeister: "Loren Steffy is a columnist for the Houston Chronicle. I invited him to go on a trip a few years ago to spend time with me and the people around me and he had no constraints. No rules on who he should talk to or what he could ask. I just said, have at it Loren.
"I understand he’s going to be critical, that’s his job. But he is always curious, he’s fair because he reports what he sees accurately, he tells good things when good things happen and bad things when bad things happen.
"Some people always want journalists to be nice. But that’s not a reporter’s job. A reporter’s job is to report what they see and what they know. The good and bad, boring and exciting, and all the above.
"The business executive needs to have enough maturity and awareness and self-confidence to know they’re not always going to do things the best way possible and if someone observes that and reports it, that’s just the way it is.
"Looking up Loren on Google, you’ll se he’s very professional and he’s been at it for quite a while. He’s probably been doing it 20-plus years. We’re not friends, but he expects to do his job and I expect to do my job, and if we can help each other we do that."
ASU Global Institute
Moving By Degrees - The Future Energy Abyss:
On June 16, 2011, American Public Media's MarketPlace senior correspondent David Brancaccio and Sustainability Scientist John Hofmeister met for a candid talk about The Future Energy Abyss.
This wide-ranging conversation spanned issues such as climate change, energy independence, and the Middle East, as well as former energy executive John Hofmeister’s journey from big oil to sustainable farmer. A rare and provocative dialogue followed by Q&A.
Moving by Degrees is presented by American Public Media’s “Marketplace” and The Gary Comer Global Agenda. This event is in partnership with ASU’s Global Institute of Sustainability.
About the Author
I am digital director at the Reynolds Center for Business Journalism, which I joined in 2009. Before that I was Online Community Manager for azcentral, the online site for The Arizona Republic. Before arriving in Arizona, I worked at Newsday where I was Deputy Business Editor. I was the small business editor at BusinessWeek Online. I teach journalists to use Twitter, Facebook and other social media tools to expand and manage their networks. And I am a cofounder of #wjchat, a weekly Twitter chat about web journalism. You can reach me at Email: Robin.Phillips@BusinessJournalism.org
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