Lauer: 'Would Exxon Lower Profits to Help Out in This Time of Need?'
Exxon-Mobil: private-for-profit corporation or social service agency? The question arises in the wake of Matt Lauer's wide-ranging interview this morning with Rex Tillerson, Chairman and CEO of Exxon/Mobil. Lauer's tone was not antagonistic; for that matter he was manifestly grateful to Tillerson for being the lone CEO among the Big Oil companies to accept an invite from "Today." Still, there was some bad economics on display, along with a notable attempt by Lauer to make the GOP look like ingrates to an industry with which they've been cozy. Tillerson put in a solid, undefensive performance.
Here are highlights:
Lauer: "Critics say the big oil companies crushed the competition and they are manipulating the prices. What is the truth?"
Tillerson: "Obviously the truth is we do not get together to manipulate prices. That would be illegal. There have been investigations in our industry over 30 years and none found price collusion."
Lauer: "The average price of gas is $2.92 for self-serve unleaded regular across the country. You can drive down the road here and see it for a lot higher -- $3.40. Up 60 cents a gallon from a month ago. Your company recorded record profits for the first quarter. $8.4 billion. People say 'wait a second: this doesn't sound right.' What do you say to those people?"
Tillerson: "Our profits, it's a large number. You have to remember that Exxon-Mobil is a global corporation. 70% of our profits are earned outside of the United States. We do business in 200 countries the world over. So of the $8.4 billion only $2.3-billion was earned in the United States. Still a big number."
Lauer: "You have a responsibility to your shareholders. You are a public company. In announcing profits you announced a 32-cent per share dividend. You are meeting your responsibility to the shareholders. Does Exxon-Mobil have any responsibility to the other people in the general public when consumers are hurt by gas prices, companies and entire industries? The airline and automobile industry. Does Exxon-Mobil have any responsibility to curb profits and help out those people?"
Tillerson: "I think our responsibility is to ensure people have the energy to go about their daily lives and support the economy in this country and the world over. To do that, you have to have energy. I understand when people pull up to the pump, they don't like the price . . . I understand it's very difficult for a lot of families. But the alternative of not having the gasoline at all or having long lines, I don't think is one people [would] find attractive."
Lauer then displayed a question from a viewer complaining about "excess profits" and asking what constituted a "reasonable profit."
Tillerson: "Well, the profit we earn is what the market gives us. We do deal in a commodity. We deal in large volumes of that commodity. The price is set on the open market. It is traded down the street at the Mercantile Exchange and that's where the price is determined by what the market feels the commodity is worth. This commodity goes up. It goes down. I know a lot of people don't look back in history very far, but it was only in 1998 that the price of crude oil fell below $10 a barrel. It requires enormous investments to find and develop crude oil and the refining capacity to deliver the energy to consumers. That has to occur over a long period of time. We are going to have some good years and some years that are not so good."
Lauer: "Perhaps the poster child for all of this in the public relations side of this was the former CEO of Exxon-Mobil who left the company about a year ago [Lee Raymond]. According to the New York Times he was paid something in the neighborhood of $400 million. Is that an appropriate amount?"
Tillerson acknowledged "It's a large amount of money," later distancing himself from it in this way: "that compensation is determined by a committee of independent directors of the corporation who are responsible to the shareholders and the management have no input."
Lauer then recited a laundry list of the ways in which the government is going after big oil, from President Bush saying "the public won't accept . . . manipulation of the market and neither will I" to other actions by the Justice Department, the Federal Trade commission and the Senate, adding "some politicians are even discussing a windfall profits tax."
That's when Lauer not-so-subtly tied Big Oil and the GOP: "Do you think that some of the very same politicians who have been in your corner over the years are now turning on you to posture prior to elections?"
Tillerson: "There's no question we are in an election year. This is the top-of-the-mind issue for all the American public . . . but in terms of these investigations again as to price manipulation . . . there have been many investigations and never has any collusion ever been found. "
Lauer: "Do you think you're being made a scapegoat in Washington, the big oil companies?"
Tillerson: "I guess I never look at things that way, Matt. It's an important issue. In terms of the examination of our tax records, that's fine. I think what they will find is our profits from 2002 to 2005 went up 3-fold, our tax payments went up 4-fold. So to the extent we had a windfall profit, the government has had windfall taxes already."
In response to a viewer question suggesting big oil is intentionally restraining refinery capacity to keep prices high, Tillerson mentioned, among other things, that Exxon-Mobil has expanded refinery capacity in recent years at a rate greater than the expansion of demand.
In response to another viewer question about Exxon's investment in alternative sources of energy, Tillerson drew an interesting distinction between Exxon's approach and that of some of its competitors. Whereas some of the other companies are apparently investing directly in currently available alternative energy sources, Tillerson said "we do not see any of those alternatives as providing a meaningful alternative to oil and natural gas in the near term or the long term. What we do think is needed are some breakthroughs in the technology, so we've chosen to invest in technology that we hope will lead to some meaningful alternatives down the road."
Lauer: "Are we going to run out of oil someday?"
Tillerson: "We're not going to run out of oil any time in my lifetime or in yours. The resource base of the globe is enormous. It can support the current demand and it can support the future economic growth as well."
Lauer finished on a populist, some might say a demagogic note: "Would Exxon-Mobil be willing to lower profits over the summer to help out in this time of need and crisis as it's been described?"
Tillerson first responded with a bit of populism himself: "Well, we work for the shareholders. And the investors who own our stock are over two million Americans. A lot of pension plans, a lot of teacher retirement plans and our job is to go out and make the most money for those people so their pensions are secure so that they see the benefits of our work.
Lauer: "That's a no?"
Tillerson concluded on a refreshingly frank note: "That's not the business -- we're in the business to make money."
Finkelstein lives in the liberal haven of Ithaca, NY, where he hosts the award-winning public-access TV show 'Right Angle'. Contact him at firstname.lastname@example.org