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