ExxonMobil CEO Defends High Profits
Rex Tillerson Discusses Industry's Future in Exclusive Interview With Charles Gibson
By LAUREN SHER
Aug. 13, 2008—
ExxonMobil CEO and chairman Rex Tillerson defended his company's staggering $11.7 billion in profits for the second quarter, saying that the company's earnings reflected the magnitude of its business operation.
"I saw someone characterize our profits the other day in terms of $1,400 in profit per second. Well, they also need to understand we paid $4,000 a second in taxes, and we spent $15,000 a second in cost," Tillerson told ABC News' Charles Gibson. "We spend $1 billion a day just running our business. So this is a business where large numbers are just characteristic of it."
ExxonMobil earned the best quarterly profit ever for a corporation, up 14 percent from last year but still below investors' expectations. While Wall Street was slightly disappointed by Exxon's earnings, some Americans were outraged by what they saw as big oil profiting at their expense. Tillerson recognized that consumers are angry about the escalating price of gas.
"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," Tillerson said. "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."
When asked whether he agreed with Phil Gramm, Sen. John McCain's former economic adviser, who labeled America as a "nation of whiners," Tillerson said he empathizes with American consumers.
"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 [are] causing a lot of problems for a lot of Americans. ... Their budgets just are very difficult for them to accommodate this."
Supply and Demand
But Tillerson also said that the combination of new technology on the supply side and energy efficiency on the demand side will make gas more affordable for the average American.
"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," Tillerson said. "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."
Tillerson's suggestions for energy efficiency echoed recommendations by presumptive Democratic nominee Sen. Barack Obama, who called for tire-inflation and proper car tuneups to provide relief to distressed voters.
"Things like providing lighter weight tires, tires that retain their pressure more efficiently, lighter weight plastics to go into vehicles to reduce vehicle weight" will help consumers use gas more efficiently, according to Tillerson.
Energy has been center stage on the campaign trail, with both Democrat and Republican sides attacking one another's proposals and calling for energy independence.
But Tillerson added that energy independence is "not realistic for the United States or almost any other country."
"I'm not sure that it's even desirable for the United States to pursue that as a goal," he said. "Our country's economy is so interdependent with the rest of the world in so many areas of, not just commodities, but capital markets. ... So I'm not sure why we would view energy any differently than the way we view the rest of our economy."
'No One Solution'
When asked about the fragility of the global market to geopolitical developments across the world, especially in oil-rich nations such as Saudi Arabia, Tillerson suggested that energy diversity provides security.
"I think the response to that is to have as many diverse supplies of energy as possible. And that means both in terms of geographic diversity. You want to expose yourself or certainly have access for the American people to as many different geographic sources of supply as possible. So the disruption in one area does not leave you ... hostage to any one area."
Last week, Obama called to "end the age of oil in our time," claiming that the United States could produce enough renewable energy to replace all U.S. imports of oil within 10 years.
But Tillerson said that "it's going to be very challenging to achieve that goal, in that period of time. And again, so much of the energy issue that the United States deals with and the world deals with, people I think do not have an appreciation for the lead times that are required."
As for John McCain's solution to "drill now, drill here," Tillerson said that instead we should focus on both efficiency and drilling.
"We can't drill our way out of this problem, just like we can't conserve our way out of this problem, just like we can't alternative fuels our way out of this problem," he said. "There is no one solution to this; there's an integrative set of solutions. And you have to undertake them all. So when the whole debate focuses around we have to choose this one solution or that, people are missing the point."
Tillerson stressed that energy policy is bigger than any one candidate, and "for people or policymakers to pick one as being the winner is really shortsighted," he said. Policy must instead be a comprehensive, long-term approach.
"And that does get to the question of are we doing everything here at home that we could be doing. And I think most people have come to the realization that, for many, many years, the United States has not fully developed its own natural resources."
The Next Generation
Instead of focusing on independence, Americans "should be developing, again, all the supply sources and all the options that we can develop in a way that's efficient and is going to provide energy at a cost that Americans can afford."
Tillerson sees ExxonMobil as more than an oil company -- more of an energy company that provides natural gas and coal while exploring alternative, renewable fuels and nuclear power. He said that the company is investing $100 million in a pilot plan to examine a new technology that can separate CO2 from gas streams.
"For ExxonMobil to make a meaningful difference, we've really got to find a way to change those technologies to provide those alternative forms of energy on a much larger scale and at a cost that people can afford," Tillerson said. "It doesn't do the consumer a lot of good to substitute an alternative fuel that costs $5 for gasoline that costs $4."
Tillerson explained that the percentage of funds invested in alternative energy does not compare to the amount invested in stock buybacks for company shareholders, because "we haven't found an alternative to invest in that makes a lot of sense for us."
ExxonMobil invested $12.5 billion, a record amount of capital into exploration expenditures, in the first half of 2008. But 55 percent of their profits go to stock buyback.
"Where we need to be 20, 30, 50 years down the road is to continue to be the most efficient producer and most environmentally responsible producer of oil and natural gas, to develop the next generation -- which is not available today -- the next generation of replacement fuels for the future."