Joe Kennedy on $100 Oil and His Deal with Hugo Chávez

By Maria Bartiromo

Editor's note: This is an extended version of a story published in the Mar. 10, 2008, issue of BusinessWeek magazine.

Oil prices jerked upward on Feb. 27, hitting a record $102 a barrel before falling back. Observers called it a play against a weakening dollar, but whatever the reason, it is cold comfort to millions of lower-income Americans who face increasing prices at the pump and the prospect of higher home heating bills. No one knows that better than former Massachusetts Representative Joe Kennedy, who runs the nonprofit Citizens Energy Corp., which provides discount heating oil to Americans in need in 15 states and the District of Columbia. The charitable work of Kennedy—eldest son of Robert F. Kennedy, godson of John F. Kennedy, and nephew of Senator Edward Kennedy—is not without controversy, primarily because the discounted oil is provided to Citizens Energy by the Venezuelan government of fiery U.S. critic Hugo Chávez.

MARIA BARTIROMO

So here we are, looking at $100-a-barrel oil. What's behind the sustained move in the price of oil?

JOSEPH P. KENNEDY II

Obviously there are a lot of forces at work. But the difficulty when you're running a business like the energy business is that a slowdown, whether it's caused by concern over a particular government or storms or military actions or even increased use—which the press has overblown—can have an extraordinary impact. And with the hedge funds and other financial players entering the commodities markets, we've seen an enormous eruption in price. It's interesting, though, growth rates in terms of international use have not really gone up all that much in recent years and really haven't gone up a hell of a lot in historic terms. The truth is, the industry simply has not taken these unbelievable profits and put them back into finding new sources of oil.

What about the development of alternative fuels?
The U.S. oil industry in the last five years has made something like over $800 billion in profits. None of them is putting [profits] back into developing new sources of crude. ExxonMobil (XOM) put zero percent [of profits] into renewable or alternative energy; BP (BP), six tenths of 1%; ConocoPhillips (COP), seven tenths of 1%; Shell (RDS), 1.3%; Chevron (CVX), 0.5%. And everybody says we're running out of oil. You know, 74% of the earth's surface—as we all learned in third grade—is covered with water. And we have developed less than 1% of the energy supplies contained underneath the surface of the ocean. So there's nothing to suggest to me that right now there's an imminent crisis.

What is the realistic future for alternative energy?
I think it's going to take years for wind power to become a significant player in the overall electricity market. Unfortunately, corn-based ethanol in the U.S. has a big mountain to climb in terms of becoming financially viable, and it may take a while for us to recognize that. Look at how much we depend on coal for electricity generation or how dependent on oil we are for transportation, I don't think any of that is going to change dramatically in the next few years.

You just mentioned wind power, and the Citizens Energy Web site includes multiple photos of wind turbines. But your uncle, Senator Kennedy, teamed up with former Massachusetts Governor Mitt Romney to oppose a wind farm in Nantucket Sound. Is the "not in my backyard" mentality a problem for wind power?
Oh, it's a big problem not just in Nantucket Sound. It exists in many, many communities across our country and in other countries. We find the same thing in Canada, particularly in more wealthy areas around the lakes and the St. Lawrence and the like, where there are huge wind resources.