Christopher Palmeri of BusinessWeek wrote an article last week on why Exxon won’t be producing more oil.

A few things the article points out: (1) that Exxon made a “record” $40.6 billion on $404 billion in sales; (2) that Exxon’s oil output won't keep pace with its own projections of worldwide oil demand growth of 1.3% a year; (3) that Exxon is motivated by considerations of what might be an “acceptable investment return” for stockholders (the very idea!); (4) that unlike oil, Exxon's production of natural gas is projected to climb over the next four years.

The only conclusion Palmeri can draw is that “The energy giant is being managed to achieve an acceptable investment return for shareholders, not for the benefit of consumers.” Wow. We really don’t need much verbiage wasted to tell us that a company is being run so that its investors can get a return on their investment. I’m sure, of course, that McGraw-Hill (NYSE: MHP), which owns BusinessWeek is not managed similarly. McGraw-Hill is managed solely for the benefit of its consumers, the stockholders being perfectly willing to lose money on their investments rather than make money. Happens all the time. (Normally, companies which consistently lose money eventually go out of business if they can’t somehow bail themselves out. Even then, they must start making money in order to remain in business. Thought you should know.) In fact, that is not the case. In 2007, McGraw-Hill made 14.7% profit, in contrast with Exxon’s consistent 10% each of the last couple years. This tells me that McGraw-Hill must surely be engaging in some price gouging at the news stand! (For further contrast McGraw-Hill employs about 20,000; Exxon employs over 100,000.)

Unlike Palmeri, I took a keen interest in item (4). “Why?” I asked myself, “is Exxon increasing production of natural gas and leaving its production of oil at present levels?” Oh, sure, it’s true enough that lower crude supply means higher prices, but while a company has to make acceptable return on investment it also has to please consumers. So, consumer activity has to be factored into the planning somewhere. One has to look at certain trends. One simply must take human action into account. And one question anyone in the oil business has to ask is, “What does the future of oil consumption look like?” I think there are good reasons for thinking that oil consumption may – just may – not increase sufficiently to warrant the sort of increase in production which Palmeri thinks Exxon should make.

One reason stands out: the desire for alternative fuels. If I were involved in planning at Exxon, why might I think it a good idea to leave oil production unchanged and increase natural gas production? If Exxon’s planners think that there is a greater return in natural gas than in oil, then they must also think that consumption of natural gas may increase. Assuming that (and I grant it is an assumption), what grounds might there be for thinking so? Unlike Palmeri (who seems to have no interest in pursuing answers to the “five journalistic questions”) I got curious and did some checking. Lo and behold if I didn’t locate a possibility.

As anyone knows, what with the concerns about global warming (or is it global cooling this month?) many are looking around to automobiles which will operate on alternative fuels, fuels which will burn cleaner. A very popular model has been the hybrid. But another type of auto runs on (this is just shocking!) natural gas, like, for example, Honda’s Civic GX. (See Larry West, “Sales of Honda's New Natural Gas-Powered Car Pick Up Speed as Fuel Prices Accelerate”.) Sales of the GX haven’t taken off as one might hope, yet. The main reason for this is that fuel for such cars is not as easy to come by as fossil fuels. (And maybe that’s why so many people are still using fossil fuels, eh?) However, sales are expected to increase as it becomes easier for consumers to fuel them. And how is it going to become easier for consumers to fuel them? Well, as West explains:

[A] Toronto-based company, FuelMaker, Corp…sells a home-based refueling machine that motorists can keep in their garage and use to refuel their cars overnight. The machine, about the size of a suitcase, compresses natural gas from the lines in your home and pumps it into the fuel tank of the Honda Civic GX. Refueling takes about eight hours.

Other benefits of driving a car powered by natural gas include hefty tax credits in some states and a new federal tax credit (beginning January 1, 2006) of $3,600 for the car and $1,000 for the home-based refueling machine. Another federal tax credit of $30,000 for anyone who builds a public refueling station, plus 37 cents for every gallon sold, may also increase the number of refueling stations along the highway.

Let’s see now. More natural-gas consumers. More natural gas production. Wow. I think I see a connection. Could be because, unlike Palmeri, a journalist, I actually looked for a connection. Evidently, Palmeri heard “acceptable investment return”, stopped paying attention, and missed the significance of the mention of natural gas.

You know, if I were a planner at Exxon and I had even a hint about this potential increase in use of natural gas, a new market for natural gas, I’d find a way to…uh…capitalize on it myself. It staggers the imagination that Palmeri expresses wonder that a company would plan for no growth and still hope to survive a period of projected increase in oil consumption. The problem is that he just wasn’t paying attention. Exxon – and he as much as told us this – is not planning for no growth. It is planning to grow something else instead of oil. What Palmeri managed to miss (surely because he wasn’t interested in looking) is that Exxon is not in the oil business; it’s in the fuel business. Planning to grow natural gas production (but not oil production) is not zero growth, zero production; it’s a net increase in growth, an increase in production. If there suddenly opened up a sizeable market for nuclear power, then (if I were an Exxon planner) I’d suggest moving into plutonium production, which might also be attended by zero growth in oil production.