Exxon Looks Best Positioned on Emissions

By RUSSELL GOLD

When it comes to Big Oil, forget about who is the greenest. The real question: Who is the lightest?
If the U.S. government finally gets around to slapping a cost on carbon emissions, oil companies will be affected differently. Exxon Mobil looks best positioned. It has a higher exposure than rivals to light, sweet crude.
Reuters
Not all barrels of oil are the same. There is the gunky, heavy oil coming out of Canada's tar sands. It takes a lot of energy, and a lot more carbon emissions, to get it out of the ground and then refine it into something U.S. drivers can put in their gasoline tanks.
In comparison, it is a walk in the park to pump out light West African crude and refine it. Moreover, from each barrel, light crude produces more relatively low-carbon gasoline and naphtha for chemical manufacturing than heavier crude, which generally produces a greater proportion of carbon-heavy fuels, such as heating oil.
Oil companies don't hand out information on who has the lightest and heaviest crude, but there are ways to figure it out. According to federal government data, the average oil "gravity" was 28.7 for a 12-month period ending in February. Gravity is a measure of crude's density and fluidity. The higher the gravity, the lighter the oil.
Exxon's imports averaged 29.8; BP and Royal Dutch Shell both were lighter than average, but trailed Exxon. The heaviest of the bunch were Chevron at 27.8 and ConocoPhillips at 28.2. These differences might look marginal, but oil production and refining are high-volume businesses, where small distinctions matter.
Then there is refining. The energy efficiency of refineries and internal processes required to turn crude into gasoline, diesel and other products is mostly hidden. Kevin Book, managing director of Clearview Energy Partners, an energy-policy consultancy, said Exxon clearly has the most efficient refineries of the group, with ConocoPhillips at the opposite end of the pack. BP, Shell and Chevron are in the middle.
That means Exxon would have to purchase fewer costly emission allowances, leaving its profit margins looking sweeter than those of rivals.
Write to Russell Gold at russell.gold@wsj.com