Lauer Prosecutes 'The People vs. Exxon' in CEO Interview
‚ÄúGas prices hit yet another record high this morning and as you suffer, the oil giants are making billions,‚ÄĚ 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.
‚ÄúMost analysts say prices at the pump will get even worse during the summer driving season,‚ÄĚ co-host Matt Lauer said, ‚Äúbut 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.‚ÄĚ
‚Äú‚ÄėHow can you justify the record profits you‚Äôre making when people can‚Äôt afford to put gas in their cars to go to work?‚Äô‚ÄĚ Lauer asked ExxonMobil CEO Rex Tillerson with a question from ‚ÄúElaine in Pennsylvania.‚ÄĚ
Tillerson pointed out that Exxon‚Äôs profits are not large because of high profit margins, but because of high volume.
‚Äú[W]hen you take our profit of $40 billion [in 2007], that‚Äôs 10 cents on every dollar of revenue that we generate,‚ÄĚ he said. ‚ÄúThat puts us about in the middle of most Fortune 500 companies, so we‚Äôre not at the top in terms of profit per revenue; we‚Äôre not at the bottom.‚ÄĚ
But that wasn‚Äôt enough for Lauer, who suggested Exxon should operate differently than other Fortune 500 companies because "a lot of Fortune 500 companies, Mr. Tillerson, don‚Äôt so directly impact people‚Äôs ability to go to work, do their jobs, feed their families and that sort of thing, and that‚Äôs where the problem comes in."
Taking a cue from Robin Roberts‚Äôs Nov. 14, 2007, ‚ÄúGood Morning America‚ÄĚ interview with Shell CEO John Hofmeister, Lauer suggested that Exxon isn‚Äôt investing enough of its profits in finding ways to bring down prices ‚Äď as if the company wasn‚Äôt already heavily invested in exploration, development, and improving its own efficiency.
‚ÄúWe invest heavily in making our own refining operations, our own producing operations, very efficient from an energy standpoint. We‚Äôre also finding ways to increase the capacity of our existing facilities,‚ÄĚ Tillerson said.
On exploration for new sources, Tillerson later added, ‚ÄúWe 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‚Äôs driving the pace of what we‚Äôre doing is access to those opportunities.‚ÄĚ
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, ‚Äú‚ÄėIf we cross that line ‚Äď that walk away price line ‚Äď that we‚Äôre going to see a miraculous drop in oil, in gas prices.‚Äô Is that true?‚ÄĚ
Tillerson pointed out that the real driver of price is demand. ‚ÄúThis is a demand-driven price run-up, no question about it,‚ÄĚ he said. ‚ÄúI 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‚Äôs a good thing. The negative effect is there‚Äôs huge demand on energy and that‚Äôs put a lot of pressure on the price.‚ÄĚ
When pressed by Lauer‚Äôs prediction that oil would reach $200 a barrel ‚Äď a prediction on which analysts disagree ‚Äď Tillerson said that would probably mean gasoline prices ‚Äúapproaching $5 a gallon.‚ÄĚ 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 ‚Äď one of the highest in the nation ‚Äď 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.