Transcript: Rex Tillerson, ExxonMobil CEO

Aug. 13, 2008 — -- The following is a transcript of Charlie Gibson's exclusive interview with Rex Tillerson, chairman and chief executive of ExxonMobil, examining the oil crisis in this country, for ABC News' "World News With Charles Gibson," Aug. 13, 2008.

CHARLES GIBSON: Mr. Tillerson, you probably know the oil markets as well as anybody. If you can factor out speculation, and you can factor out emotion, what should the price of oil per barrel be right now?

REX TILLERSON: Well, Charlie, that's really a difficult question to answer, because there are so many factors that influence the price. And, obviously, oil is based on the fundamentals, though, of global supply and demand. Oil is a global commodity. And you've mentioned a couple of things that do have a significant impact on the price. And, certainly, the strength of the dollar plays an important role, because oil is priced in dollars the world over.

If you look at just basic fundamentals of supply and demand, clearly we've been at a price level that, my view has been for some time, is not reflective of strictly fundamental supply and demand, but also is reflective of a lot of uncertainty about the future of supply that you can attribute to any number of causes.

CHARLES GIBSON: Well, we're taught in college that markets are rational. And, yet, with demand increasing about 4 percent a year for oil, we've had a doubling of price in the past year. That doesn't seem rational.

REX TILLERSON: Well, this market has been demand-driven, because of the expansive growth that's gone on in these very rapidly growing developed economies around the world, the ones we're all familiar with -- China, India -- but also rapidly developing economies elsewhere. So this has been a demand-driven price phenomenon. And...

CHARLES GIBSON: But the increase in price is far greater than the increase in demand.

REX TILLERSON: Well, demand has gone up from 2001...

CHARLES GIBSON: Right.

REX TILLERSON: ... through this last year from 77 million barrels a day to 85 million barrels a day. So that is a very rapid run-up in demand at a time when supply has not been capable of responding as quickly. That is always the case. There are significant lead times involved in bringing large supplies of new crude oil on. And so there has been a supply lag in the ability to supply to respond.

CHARLES GIBSON: But you talked about a 10 percent increase in demand over those years. And we've had a far, far greater -- we've had a multiple in the price of oil over that period of time.

REX TILLERSON: Well, again, it's all dependent upon that strong demand pull that's going on in these rapidly growing economies.

CHARLES GIBSON: We learned today that Americans drive 12.5 billion fewer miles in June of this year over June of last year. Where's the price of gas headed?

REX TILLERSON: Well, again, hard to say, but clearly the high price is taking its effect on the American people. It's very difficult, we know, for families, particularly families that are dealing with tight household budgets already, to accommodate the kind of high price that they've had to deal with. And that has been the response that we would expect is that Americans would be wise. They would begin to find ways to reduce their demand, economize their trips, cut back on their consumption to deal with that high price.

In the meantime, allow us to get to work to respond with additional supplies around the world where we're able to gain access to develop new supplies and bring new supplies of gasoline and motor fuel on.

CHARLES GIBSON: But you know the markets. Is that kind of a decrease in driving habits going to have an impact on gas prices?

REX TILLERSON: Well, I think it already is having an impact on gas prices. Again, as the markets try to price looking forward, the commodities of crude oil and natural gas and gasoline, the products that we use, it's looking -- the market is looking at supply-demand. And this demand response, I think, the market now has taken note of. And that's why I think you're beginning to see them. We have seen a fairly rapid rundown in crude oil prices just in the past couple of weeks.

CHARLES GIBSON: And will that continue in terms of crude oil prices? Goldman Sachs made the prediction that oil prices could be $200 a barrel.

REX TILLERSON: Well, yes, I'm not in the business of predicting prices. We never have been, because we've never been any good at it. But what I can make the observation is that the demand response is having an effect. New supplies are being brought on around the world. Supply is up in the month of July, approaching nearly 88 million barrels a day of oil available in the world. And so those two working in combination with the third very important factor, the strength of the U.S. dollar, are having their effect. And I think that's why we're seeing the oil price now coming down.

CHARLES GIBSON: Do you understand, and can you appreciate from your position with the escalation of the price of a gallon of gas, why people are fed up, angry, indeed disgusted with the oil companies?

REX TILLERSON: Well, I can understand why people are very upset and why they're very worried and concerned about their ability to deal with these high prices. In terms of where they should direct their anger, I don't think it's useful for me to comment on that; although it does bother me that much of that is directed at us.

Our job is to provide energy, to provide it in a means that is reliable. And we hope we can provide it in a means that's convenient as well to the consumer. And that's what we're continuing to do.

CHARLES GIBSON: Former senators had the temerity to say the other day Americans are whining. Are they whining? Or do you really -- can you, from where you are, feel their pain?

REX TILLERSON: No, I don't think it's whining, Charlie, because I don't think there's any question that if these prices -- $3.50, $4 a gallon for gasoline -- and the follow-through effects on the cost of electricity, that this is causing a lot of problems for a lot of Americans, again, who their budgets just are very difficult for them to accommodate this. And they don't have other options. Much of the world, certainly here in Texas where you're visiting, we do not have large mass transportation systems. And so people don't have a lot of other options than to get in their car and have to drive to get about their daily requirements.

CHARLES GIBSON: You and some of the other people in the oil business have said look, you've got to understand that markets drive the price. It is a market-driven economy. But is there nothing that ExxonMobil can do to make gas more affordable for the average Joe?

REX TILLERSON: Well, what we can do is add new supply and to provide means for people to use the energy more efficiently, which will help reduce demand. And that's what we're spending a lot of our effort doing, is working on both sides of the demand equation and the supply equation. And it's by providing new technology, new capabilities.

On the demand side, we want to provide means for consumers to use energy more efficiently. And that's in a lot of simple things, like providing lighter-weight tires, tires that retain their pressure more efficiently, lighter-weight plastics to go into vehicles to reduce vehicle weight; and, on the supply side, finding new ways to access energy where we are allowed to go and bring the technology to bear on new sources of energy to provide increasing supplies in the future. Fundamentally, that's all that's going to affect prices over the long term are the impacts of lowering demand and increasing supply.

CHARLES GIBSON: But you mentioned a couple of times supply now. Let's talk about that a little bit. There's a growing concern among a lot of the academicians who look at your profession that the curves of demand, new demand for oil, and the curve for new supply, new oil sources coming online, that the demand curve is going up faster than the supply curve. IEA says we'll be having a shortfall by 2015. Other people say 2020. Are we in a position where we're going to have demand outstripping supply soon?

REX TILLERSON: That's not our view of the future. The global endowment of oil and natural gas resources is clearly sufficient to meet the growth and demand that almost any economic forecast would foresee. Give you an example, Charlie, of how things have changed over the years. In 1950, the U.S. Geological Survey estimated the world's endowment of conventional oil at 1 trillion barrels. Fifty years later, the U.S. Geological Survey now estimates that endowment to be 3 trillion barrels.

What changed? Well, in 1950, the people making those estimates did not foresee the impact of technology on increasing the resource base. And I would say the same is true today. In many of the forward forecasts of people who are looking at future supply, it is myopic again; and they're not properly accounting for the impact that technology will have on making new supplies available.

CHARLES GIBSON: Fifteen years ago, the numbers I've seen, we were taking 15 percent more oil out of the ground each day than we were using. You just mentioned we're pulling about 87 million barrels a day out now. We're using 85 million. That's about a 2 percent cushion there. Doesn't that make us hostage to geopolitical developments in a lot of parts of the world, particularly in Saudi Arabia?