ExxonMobil CEO Undaunted by Lower Oil Prices

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ExxonMobil CEO Undaunted by Lower Oil Prices

IRVING, Texas -- Two days after Chevron’s CEO David Reilly brushed off any fears that lower oil prices would adversely impact the Big Oil company, ExxonMobil CEO Rex W. Tillerson was similarly confident in his company’s competitive position.

After six years of rising prices, the oil industry has been reporting record profits. Although oil prices rose above $58 Monday as cold weather headed East and drove up heating oil and natural gas futures, prices have fallen more than 60 percent since peaking at more than $147 per barrel in mid-July.

"It’s not that we like lower prices, but our competitive advantage is more obvious to people in a low-price environment," Tillerson told The New York Times in an interview appearing over the weekend. "But in a high-price environment, our competitive advantage has been quite evident as well."

The Irving, Texas-based company is worth around $375 billion—more than General Electric, Bank of America and Google combined—making it the world’s largest corporation, according to the Times, which described Exxon’s balance sheet as "pristine" and its credit rating as "better than that of most governments." As oil prices peaked this summer, the company once again set a record as the most profitable American corporation, earning $14.8 billion in the third quarter. Since 2004, the company has rung up profits of about $180 billion, according to the report.

Such excellent financial results have made the company the target of much criticism, though, and it likely faces a more difficult future under the new Barack Obama administration.

However, in a lengthy interview with the Times,
Tillerson pointed out the company’s formula of discipline, patience and long-term vision has enabled it to thrive through countless commodity cycles. It calls this formula the Exxon Way.

The Exxon Way has paid off in Exxon’s bottom line, according to the Times. Last year, Exxon’s profit per barrel was $17, exceeding BP’s $12 a barrel, Shell’s $14 and Chevron’s $16, according to the report.

"The business model is based on a disciplined and rigorous approach to dealing with scientific data and facts," he said. "What we do is largely invisible to the public. They see the nozzle at the pump, and that’s about it. They don’t see the enormous level of risk that is managed very well to get that gallon of gas."

However, Tillerson, at an analyst meeting on Wall Street in March, acknowledged the difficulty of finding new oil reserves in the future.

In the 1960s, the so-called Seven Sisters oil companies, including Exxon and Mobil, controlled most of the world’s oil reserves. Today, state-owned companies, like Saudi Aramco, hold the vast majority of these reserves, while other resource holders such as Russia and Venezuela have become increasingly assertive about limiting access to their reserves, according to the article.

The article goes on to note that Exxon will eventually have to reconcile rising energy use worldwide with the need to reduce carbon emissions and find low-carbon energy sources.

Over the last three years, Exxon has moved away from a more extreme position that questioned the impact of human activities on climate change, and this year, sought to soften its image with a $100 million advertising campaign featuring real company executives, scientists and managers.

However, despite growing pressures on oil companies to invest in alternative energy, Exxon’s long-term view remains unapologetically tied to fossil fuel, claimed the article. As populations expand and economies grow in developing countries, Exxon expects they will aspire to the comforts and amenities of industrialized nations, and this will mean more cars on the roads—and more oil to power them.

According to Exxon’s outlook, global oil demand will soar to 116 million barrels a day by 2030, up from 86 million barrels a day today.

Meanwhile, renewable fuels, such as solar, wind and biofuels, will grow rapidly but will account for only 2 percent of the world’s energy supplies by then, according to Exxon, while oil, gas and coal will represent 80 percent of global energy needs by 2030.

"For the foreseeable future—and in my horizon that is to the middle of the century—the world will continue to rely dominantly on hydrocarbons to fuel its economy," Tillerson said.

For the entire article, go to www.nytimes.com.