ExxonMobil (XOM) CEO Rex Tillerson Q&A in the New York Times. Mostly smart and reasonable. Key points:
- Of course you can’t fix oil prices in a year or two. But this is what the American public demands, so that is what politicians fall all over themselves trying to give them.
- The low oil prices of the 1990s were in part the result of overinvestment on the part of the oil companies in the 1970s and 1980s.
- Windfall taxes targeting specific industries are ridiculous.
- Speculation is different than manipulation. There’s nothing wrong with speculation.
- The only near-term fix for oil prices is conservation, but that won’t solve the problem long term.
- ExxonMobil is an oil company, not an alternative energy company. We’re good at finding and pumping oil, which the world will still need in 30 years. So we’re going to keep doing it.
Q. [T]he argument is that we should focus on the demand side of the equation and that we cannot drill out of this problem.
A. Well, you can’t conserve yourself out of this problem either. You can’t replace your fuels with alternatives out of this problem either. The reason the United States has never had an energy policy is because an energy policy needs to be left alone for 15 to 20 years to take effect. But our policy makers want a two-year energy policy to fit with the election cycle because that is what people want. The answer is you can’t fix it right now
Q. Aren’t we paying the price for more than a decade of underinvestment in new oil supplies when prices were low in the 1990s?
A. This business is always a function of, can you earn an acceptable return for the risks you are taking. This is still an enormously risky business. We don’t advertise our $100 million dry holes. We’ve been able to do that thanks to careful risk management. The costs of our failures are born by our ability to be successful in other areas. In the 1990s, there was a big surplus. You could also say the industry paid a big price for having overinvested in the 1970s and 1980
Q. Would it be wrong then for government to tax windfall profits to finance research into alternative fuels?
A. Why would you want to tax windfall profits to do so? Why target a specific industry when you are looking to raise revenue? The last time government taxed windfall profits, it was a disaster. Why would you want to do so again? Any taxing program that targets a specific industry is never a very good idea.
Q. What can be done today to reduce oil and gasoline prices?
A. In the near term, the most immediate steps we can take are going to largely be around efficiency. We’re already seeing people responding that way, by using mass transportation and economizing the trips they take
Q: Where do you see your company in 20 years? Will oil and gas still be your dominant business?
A: Yes. In 2030, oil and gas will represent 60 per cent of the world’s energy needs. My view is I am going to keep doing what we do better than anyone else in the world — finding, developing and delivering oil and gas to the world. We will still be doing it in 20 years because people will still be needing it.