“Gas prices hit yet another record high this morning and as you suffer, the oil giants are making billions,” co-host Meredith Vieira teased at the top of the show. With an introduction like that, viewers got a clue of the type of interview to follow.
“Most analysts say prices at the pump will get even worse during the summer driving season,” co-host Matt Lauer said, “but the oil companies are posting huge profits. ExxonMobil, the biggest U.S. oil and gas company, made a $10.9-billion profit in the first quarter of this year.”
“‘How can you justify the record profits you’re making when people can’t afford to put gas in their cars to go to work?’” Lauer asked ExxonMobil CEO Rex Tillerson with a question from “Elaine in Pennsylvania.”
Tillerson pointed out that Exxon’s profits are not large because of high profit margins, but because of high volume.
“[W]hen you take our profit of $40 billion [in 2007], that’s 10 cents on every dollar of revenue that we generate,” he said. “That puts us about in the middle of most Fortune 500 companies, so we’re not at the top in terms of profit per revenue; we’re not at the bottom.”
But that wasn’t enough for Lauer, who suggested Exxon should operate differently than other Fortune 500 companies because "a lot of Fortune 500 companies, Mr. Tillerson, don’t so directly impact people’s ability to go to work, do their jobs, feed their families and that sort of thing, and that’s where the problem comes in."
Taking a cue from Robin Roberts’s Nov. 14, 2007, “Good Morning America” interview with Shell CEO John Hofmeister, Lauer suggested that Exxon isn’t investing enough of its profits in finding ways to bring down prices – as if the company wasn’t already heavily invested in exploration, development, and improving its own efficiency.
“We invest heavily in making our own refining operations, our own producing operations, very efficient from an energy standpoint. We’re also finding ways to increase the capacity of our existing facilities,” Tillerson said.
On exploration for new sources, Tillerson later added, “We have very, very robust exploration programs that span the globe. We would do more if we could gain access to more areas to apply our technology, let our geoscientists go to work. Certainly we have the financial capacity to do more. Much of what’s driving the pace of what we’re doing is access to those opportunities.”
But Lauer implied oil companies are driving up prices to find out just how much consumers will pay for gasoline before reducing their consumption, noting that unnamed cynics say, “‘If we cross that line – that walk away price line – that we’re going to see a miraculous drop in oil, in gas prices.’ Is that true?”
Tillerson pointed out that the real driver of price is demand. “This is a demand-driven price run-up, no question about it,” he said. “I think all of your viewers are well aware of the rapidly growing economies in China, India, other parts of the world. And with those rapidly growth economies, tens of millions of people have been lifted out of poverty. That’s a good thing. The negative effect is there’s huge demand on energy and that’s put a lot of pressure on the price.”
When pressed by Lauer’s prediction that oil would reach $200 a barrel – a prediction on which analysts disagree – Tillerson said that would probably mean gasoline prices “approaching $5 a gallon.” His prediction pointed to another cause for gas prices that Lauer ignored: crude oil prices.
The California Department of Energy estimates that of the $3.93 statewide average – one of the highest in the nation – for a gallon of gasoline, more than 75 percent ($2.96) goes to cover the cost of crude oil, a price set in large part by OPEC.