In late February, President Obama proposed, not for the first time, that Congress end four billion dollars’ worth of subsidies for oil and gas companies. “They can either stand up for the oil companies, or they can stand up for the American people,” the President declared during one of his weekly radio addresses not long afterward. He seemed to be signalling that he will be running for President this year, as he did four years ago, in open opposition to the American oil industry: “These are the same oil companies that have been making record profits off the money you spend at the pump. . . . It’s outrageous. It’s inexcusable.”
The President’s policies toward the oil industry are not easy to categorize. He has backed oil and natural-gas alternatives such as solar power and wind power, and also the development of electric cars. Yet he has encouraged new domestic oil production as well. “We are drilling more,” he declared in Oklahoma last month, standing before a huge stack of copper pipeline segments. “Anyone who says that we’re somehow suppressing domestic oil production isn’t paying attention.”
The President’s actions—attacking oil-company profits while proposing more oil drilling—can be best understood as political responses to rising gasoline prices. The average price of a gallon has risen by more than fifteen per cent since January, and congressional Republicans have repeatedly attacked the President for not doing enough to keep prices down. Between 2010 and 2011, over-all spending on gasoline in the United States rose by twenty-five per cent; the percentage of household income that Americans spend on gas has tripled since the late nineteen-nineties. The President has acknowledged that there is no way that the expansion of drilling can affect gasoline prices anytime soon—it takes a long time to add to the supply, and, in any event, gas prices are tied to the global oil price, which is determined by factors such as turmoil in the Middle East and Chinese consumption rates. But, by calling for more drilling, Obama can say that he is taking action. By lambasting the oil companies, he can suggest that he is not at fault.
The contest between the Democrats and Big Oil this year will be reciprocal, and Big Oil will be led by ExxonMobil, by far the largest and most profitable oil corporation headquartered in the United States. In recent election cycles, the corporation has directed more of its political-action-committee spending to Republicans than any other of the largest American public corporations. About ninety per cent of ExxonMobil’s PAC giving during the 2010 election cycle went to Republicans. An even higher percentage has gone to them this year, according to databases maintained by the Center for Responsive Politics. Among the other large shareholder-owned corporations that maintain active PACs, Walmart, General Electric, Bank of America, and Ford gave about half or more of their contributions to Democrats during the 2010 cycle. Even Dow Chemical, historically wary of Democratic politicians, because of environmental and regulatory issues, directed about half of its PAC contributions to Democrats in the last cycle. Chevron and ConocoPhillips, the second- and third-largest American oil companies, gave to Democrats at twice the rate of ExxonMobil.
The evolution of the country’s biggest and most powerful oil company into a finance arm of the Republican Party is a story of both energy economics and style. ExxonMobil describes itself as a non-ideological corporation, yet it has developed an algorithmic formula for political spending and lobbying that has reinforced its alignment with Republican candidates in ways that Democrats could hardly see as anything but antagonistic. Over the past six years, the company has tried to adapt to the revival of the Democratic Party, but it has struggled to do so, in large part because of its own rigid internal culture.
ExxonMobil was created by a hostile act of the United States government. In 1911, the Supreme Court ordered the dismemberment of the Standard Oil monopoly, founded by John D. Rockefeller. Some of its executives, judging by the skepticism they express toward Washington, seem not to have got over the initial breakup. ExxonMobil’s chairman and chief executive, Rex Tillerson, who is active in the Boy Scouts of America, told the magazine Scouting recently that his favorite book is “Atlas Shrugged,” Ayn Rand’s dystopian 1957 novel, a touchstone for libertarians. The company has a culture of secrecy—with nondisclosure agreements and internal security that can make it seem like an intelligence agency. Company executives deflect press coverage; they sometimes withhold coöperation from congressional investigators, if the letter of the law allows; and when they speak in public, they typically read out sanitized, carefully edited speeches, or PowerPoint slides.
On March 23, 1989, the Exxon Valdez, an oil tanker, ran aground on a reef in Alaska’s Prince William Sound. The captain had been drinking, and he left the bridge shortly before midnight, in violation of company policies. His crew members became confused, attempted to turn the ship, and lost track of their position altogether. At a few minutes past twelve, there was a terrible sound. “Vessel aground. We’re fucked,” the chief mate called out.
The Valdez dumped more than two hundred thousand barrels of oil into the water. Soon, the pleading black eyes of oil-soaked sea otters became the symbols of a broad wildlife massacre. The Valdez disaster became a catalyst for reforms at ExxonMobil that still influence every aspect of its operations, including its approach to politics and lobbying. Almost since its founding, the company has emphasized procedure and orthodoxy. But after the wreck Exxon’s executives placed extraordinary emphasis on uniform, scientific, idiot-proof, automated systems of safety, management, finance, and business analysis.
Some of the reforms made the company resemble a cult. ExxonMobil departments worldwide organized regular safety meetings and competitions. Workers were awarded prizes for insuring that office clerks did not leave file drawers open, lest someone bump into them. Failing to turn off a coffee pot might draw a written reprimand. Cars had to be backed into parking spaces, so that in case of an emergency the driver could see clearly while speeding away. Group safety confessionals covered conduct beyond the workplace and included discussions of the correct use of a ladder while cleaning gutters at home and the danger of getting too much sun on a beach vacation. Employees stood up and shared stories of “near-misses” with personal accidents, as in a twelve-step recovery program. One manager who had been at the company for twenty-eight years recalled listening to a colleague confess that while cutting the grass in his yard he had mishandled his lawnmower, causing an object to fly out of it and strike his leg.
The atmosphere within ExxonMobil’s offices is one of studied formality; the corporate aesthetic suggests a Four Seasons hotel without many guests. At industry meetings, the ExxonMobil participants can usually be identified easily: the women in charcoal pants suits and the men in dark suits and white shirts, with short and proper haircuts. “They encouraged you to get married,” a former employee recalled. Such values were “not just a lot of lip service,” another longtime executive said. “J. D. Rockefeller went to church every Sunday and his employees better by God go to church on Sunday or they were not good employees.”
According to interviews with current and former ExxonMobil managers and lobbyists, the corporation’s political spending largely reflects the free-market outlook of its senior executives; virtually all of them joined the company out of college or graduate school and stayed on for life. ExxonMobil has engineered its free-market creed into a ranking and evaluation process, the “key vote system,” for directing political-action-committee contributions. The corporation’s public-affairs analysts identify important votes in Congress that affect ExxonMobil’s business interests; politicians are then rated on the basis of these votes. The corporation’s heavy spending on Republicans is the outcome of objective analysis, an executive involved in political strategy said. “We are a business-oriented PAC,” he told me. “Now, when you apply that litmus, our PAC is rightly criticized—that we tend to give more money to Republicans than to Democrats—but it is a result of the approach we take, and not a desired result.”
Exxon’s annual revenues, of more than four hundred billion dollars, are about the same as the gross domestic product of Norway. Since the nineteen-fifties, Exxon has always been in the top five on the annual Fortune 500 list. (In 1999, Exxon merged with Mobil, reuniting two Standard Oil descendants and forming the largest non-state-owned oil corporation in the world.) During the past decade, as global oil prices have risen, ExxonMobil’s profits have smashed records. It functions as a corporate state within the American state—constructing its own foreign, economic, and human-rights policies—and its executives are self-conscious about their sovereignty. Its business model—drilling holes in the ground all over the world and maintaining oil and gas wells profitably for up to forty years at a stretch—means that the political and economic time horizons for its corporate strategies extend much farther than those of almost any government. Lee Raymond, Tillerson’s predecessor, once remarked, “We see governments come and go.”
ExxonMobil’s headquarters are in Irving, Texas, on a placid campus near the Dallas-Fort Worth airport. Its Washington office is in a pink granite-and-concrete office building on K Street. A turret, topped by an American flag, distinguishes the building from the bland, conforming architecture of the capital’s lobbying corridor. Inside ExxonMobil’s suite, the furniture is dark cherry. Oil paintings of American landscapes line the walls; antique Mobil oilcans and signs for Esso decorate the shelves of conference rooms.
In 2005, Dan Nelson, a six-foot-eight former Marine officer who served in Vietnam, took charge of the Washington office. ExxonMobil has long relied mainly on career employees, not outside lobbyists. Last year, of the thirteen million dollars it disclosed that it spent on lobbying in Washington, only about twenty per cent went to outside consultants or influence-peddling firms. “I think we did it in-house so we could get it done right,” Joseph A. Gillan, who worked on environmental issues in the ExxonMobil office early in the Bush Administration, said.
During the Bush years, the corporation’s Washington strategists informally divided the capital’s officeholders into four tiers, in descending order of sympathy for ExxonMobil’s agenda. There were those who represented the oil patch—senators and congressmen from Texas, Louisiana, Oklahoma, New Mexico, and Wyoming. This group included, after 2000, President George W. Bush and Vice-President Dick Cheney. The second tier consisted of free-market Republicans who didn’t particularly understand the oil-and-gas industry but who generally supported ExxonMobil’s positions. The third tier consisted of Democrats or liberal Republicans who regularly voted against ExxonMobil’s interests but who were open to discussion and might be persuaded to vote the industry’s way. From 2001 to 2009, when Hillary Clinton served in the Senate, she fell into this category. Tier four was “the enemy,” as some of the military veterans in the K Street office occasionally put it. These were Democrats and environmental activists who, ExxonMobil’s executives believed, wanted to disenfranchise the corporation and use its unpopularity to galvanize liberal constituents and funders—senators such as Charles Schumer, of New York, and Dick Durbin, of Illinois.
Kenneth P. Cohen, ExxonMobil’s vice-president for public and government affairs, has overseen the corporation’s political-action committee for more than a decade. Cohen, who has worked at ExxonMobil since 1977, is a mild-looking man of modest height with a thick head of graying hair. His operating manual for political strategy is a dark binder that is kept on a shelf in his second-floor office at the Irving headquarters. The first page carries the title “Public Policy Issues.” A list of about two dozen subjects follows, from climate change to government subsidies for gasoline alternatives such as ethanol. For each policy area, the notebook contains a summary of ExxonMobil’s lobbying position, which the corporation’s public-affairs teams support worldwide, often using common language and PowerPoint slides. The notebook also provides a guide for judging American politicians.
During both the Bush and the Obama Administrations, ExxonMobil has concentrated its efforts in Washington on preventing certain tax and regulatory bills from being enacted, such as Obama’s proposal, this winter, to strip away industry tax advantages. The corporation has invested mainly in a blocking strategy, focussing its PAC donations on Republicans who can try to assure that no damaging laws go through. “Whoever’s in power in the House has almost dictatorial power,” a Washington consultant who has worked on oil-industry issues says. “If you control what’s going on in the House, you have huge influence over the final” legislation, as well as over the budgets and spending mandates that shape regulation.
In the past decade, the leading recipient of ExxonMobil PAC contributions has been Representative Joe Barton, a Republican from Texas, who has held senior positions on the House Energy and Commerce Committee, where most legislation affecting the oil industry originates. Anne Northup, a former Republican congresswoman from Kentucky, who now serves on the Consumer Product Safety Commission, received the second-largest amount of campaign money. ExxonMobil’s ten leading campaign-contribution recipients in that decade were all House Republicans, according to research done by the journalist Ann O’Hanlon.
ExxonMobil’s political-action committee has not made contributions to recent Presidential campaigns, but its top executives have made it abundantly clear that they prefer Republicans in the White House. After President Bush won reëlection, the company donated a quarter of a million dollars to help fund the celebrations for his second inaugural.
“We need a conversation with Democrats,” Dan Nelson told his colleagues in the ExxonMobil office on K Street as the 2006 election neared. The company’s Washington analysts could see that the Democrats were gaining momentum, and the corporation’s unpopularity created a risk that Congress might enact a windfall tax or costly climate regulation. Leading Democratic election strategists were well aware of ExxonMobil’s investments in the Republican Party, and they openly criticized the corporation. “There is no question there is a new phase of scrutiny for Exxon,” Schumer, who was then chairing the Democratic Party’s Senate Campaign Committee, said.
Normally, one of the easiest ways to open a conversation with a member of Congress is to donate to his or her reëlection committee. The problem was that ExxonMobil made almost all of its contribution decisions on the mathematical analysis of the key vote system. Neither Obama (when he was in the Senate, after 2004) nor other leading Democrats heading for leadership positions in Congress or considering a Presidential run in 2008 scored very well. During the Bush Administration’s second term, not a single Democrat in Congress scored above fifty per cent. In the view of the system’s internal critics, it failed to distinguish adequately between truly key votes and routine party-line votes, and this skewed the numbers against Democrats. ExxonMobil lobbyists maintained strong ties with some Democrats from industrial states, like the Michigan congressman John Dingell, and with other Party members from Southern or conservative Western states who voted like Republicans on energy and tax issues. But the corporation’s Washington office was not well prepared for a House of Representatives ruled by Nancy Pelosi or influenced by the environmentalist Henry Waxman, both from California.
ExxonMobil’s most influential Democrat was Theresa Fariello, who had joined the corporation from the Clinton Administration’s Department of Energy, in 2001. According to Alan Jeffers, an ExxonMobil spokesman, she was valuable because of “her skills and experience gained from leading ExxonMobil’s global issues management process.” A committed supporter of Hillary Clinton, she helped arrange a few consultancies and retainer contracts with lobbyists in Washington who were closely connected to Democrats. One such lobbyist was David Leiter, who had worked as the chief of staff for Senator John Kerry during the nineties. (Starting in 2006, Leiter’s lobbying firm, ML Strategies, has received about twenty-five thousand dollars a month from ExxonMobil.) Dan Nelson also brought on Louis Finkel, who had worked for years for a Democratic congressman from Tennessee, Bart Gordon. Still, in the K Street office, Democrats were seen at times as a mysterious species requiring specialized anthropological insights.
On November 7, 2006, the Democratic Party took control of the House. A few weeks later, Ken Cohen flew to Washington. On a chilly afternoon in early December, he travelled west on Interstate 66 to Warrenton, Virginia, in the foothills of the Blue Ridge Mountains. He turned in to the secluded grounds of the Airlie Center, a retreat facility for government and business leaders. Cohen had scheduled a private, three-day Opinion Leader Dialogue between ExxonMobil executives and environmental and corporate-responsibility activists, with whom he planned to test out some of ExxonMobil’s strategies for dealing with an ascendant Democratic majority.
The ExxonMobil executives had invited fourteen guests, including two senior energy-policy analysts from the Brookings Institution, a human-rights activist at Freedom House, climate-policy specialists, a business-ethics professor, and a specialist in socially responsible investing. During the cocktail hour, one of the guests, who worked for an environmental nonprofit, mentioned to Cohen the brutal hours she spent at her job. “He was shocked,” she recalled. He seemed to think that “people who worked in environmental groups in Washington had cushy lives.”
Another participant recalled thinking of her hosts, “These were clearly thoughtful, smart, articulate people—they just lived in a totally different world than we live in.” ExxonMobil had recently awarded its retiring chief executive, Lee Raymond, a compensation package worth four hundred million dollars. At the retreat, in an effort to suggest that the package was not as rich as that number might suggest, some of the ExxonMobil executives tried to explain the differences between pension benefits, stock options, and restricted stock. “You know you can’t win on that message, right?” the participant says she remembers thinking as she listened. “You’re talking to people who can’t even take the Acela train to New York.”
The next morning, the group assembled in a conference room around tables arranged in a hollow square. The agenda included two “dialogue sessions” on climate change and a third on corporate transparency and human rights. Cohen shared some of his internal surveys about ExxonMobil’s reputation. In one, forty-seven per cent approved of its over-all corporate citizenship, but only twenty-four per cent approved of its environmental stewardship.
The corporation’s notoriously bad reputation on climate issues was almost certainly a factor in its lagging environmental marks. In the nineteen-nineties and through the first Bush term, ExxonMobil funded free-market research and communications groups that attacked the emerging science documenting global warming. The Union of Concerned Scientists, Greenpeace, and other environmental and public advocacy groups exposed the corporation’s investments in climate-change skeptics and accused executives of adapting science-smearing strategies similar to those employed by the tobacco industry, which long tried to downplay the dangers of smoking. Cohen had been involved in some of the controversial funding decisions, but after Tillerson became chairman, early in 2006, ExxonMobil reviewed and eventually halted its support for the more polarizing groups. It also experimented with new language and lobbying positions about the causes of, and risks posed by, global warming.
During the dialogue, according to Leslie H. Lowe, one of the participants, who was at that time the director of the energy-and-environment program at the Interfaith Center on Corporate Responsibility, “They were really dancing around the question of certainty” about the risks of global warming and the evidence that man-made activity such as oil and gas use contributed. The group talked about setting a new tax on gasoline as a way to contain greenhouse-gas emissions.
“If you tax gasoline, people will be hurt,” Cohen said. He argued that, even if the tax’s proceeds were rebated to needy drivers, they would be forced to take the rebates and go out and buy gas with them.
The participants on both sides were trying “to be ever so polite,” Lowe recalled. That night at dinner, she found herself sitting with an ExxonMobil executive. In what she hoped was an unthreatening tone, she asked, referring to climate policy, “Look, you’re a science-based organization. How can you not accept the science that is basically confirmed by most mainstream thinkers?”
In response, the executive talked about the inherent uncertainties in weather modelling and forecasting.
Lowe listened, and then asked, “What are you going to say to your grandkids when they say, ‘Grandpa, why did you fuck up the planet?’?”
The executive, Lowe recalls, just chuckled good-naturedly.
Of all the candidates who started running for President in 2007, none spoke more often or more pointedly about ExxonMobil than Barack Obama. He criticized the corporation’s profits and contrasted its wealth with the struggles of middle-class families. His campaign sought to link Senator John McCain to the pro-oil policies of Vice-President Cheney, a former chief executive of the oil-services corporation Halliburton. By the summer of 2008, sixty-two per cent of Americans surveyed had an unfavorable view of Cheney. “President Bush, he had an energy policy,” Obama declared. “He turned to Dick Cheney and he said, ‘Cheney, go take care of this.’. . . McCain has taken a page out of the Cheney playbook.”
Off the campaign trail, Obama’s views about energy and climate policy were subtle. He studied the issues and learned the nuances of automobile mileage standards, international oil markets, and clean-coal technologies, and how different forms of energy production contribute to global warming. But his strategists knew that to many independent voters and disillusioned Republicans the idea of an ExxonMobil-Cheney complex represented all that had gone wrong in the Bush years: the Iraq war and the rise in American economic insecurity. And so Obama salted his campaign speeches with ExxonMobil references even when they were gratuitous. “It’s not going to be easy to have a sensible energy policy in this country,” he said at one primary debate. “ExxonMobil made eleven billion dollars last quarter. They’re not going to give up those profits easily.”
The highest average retail price for a gallon of gasoline in American history—just over four dollars—was recorded in July, 2008. Obama seized upon ExxonMobil’s unprecedented profits at the time, about ten billion dollars per quarter. When McCain announced a plan to reform corporate taxes, Obama’s researchers figured out how much of the benefits would go to ExxonMobil. “At a time when we’re fighting two wars, when millions of Americans can’t afford their medical bills or their tuition bills, when we’re paying more than four dollars a gallon for gas, the man who rails against government spending wants to spend $1.2 billion on a tax break for ExxonMobil,” Obama declared. “That isn’t just irresponsible. It’s outrageous!”
That summer, the Bush Administration and the McCain campaign studied polls showing that many Americans favored new offshore oil drilling as a strategy to reduce high gasoline prices. The White House and McCain’s strategists coördinated announcements to promote more domestic exploration in ocean waters; this inspired chants of “Drill, baby, drill!” at Republican campaign rallies. Obama promptly linked McCain’s offshore-drilling plan to ExxonMobil’s profits and denounced it as merely an “oil-company wish list.”
More than his profit-bashing, however, Obama’s climate and alternative-energy policies on the campaign trail got the attention of ExxonMobil’s public-affairs executives and the K Street lobbyists. Obama pledged to impose a price on carbon-based fuels such as gasoline, and to make large new investments in wind power and solar power. “We must end the age of oil,” Obama declared. By the fall, the ExxonMobil executive involved in political strategy recalled, the corporation had been scolded by name so many times that “we felt like a candidate.” He added, “We clearly knew that we were not electable.”
ExxonMobil’s initial response to Obama’s ascendancy was to engage with Democrats and search for common ground on climate policy. Shortly before Election Day, Ken Cohen organized a meeting in Connecticut with about a hundred of ExxonMobil’s public-affairs and media-relations specialists. He invited Bennett Freeman, a former Clinton Administration official who had worked as a consultant on corporate-responsibility issues. Freeman had periodically addressed ExxonMobil’s political team over the years, offering the perspective of a respectful Democratic critic.
Freeman praised the ExxonMobil managers for progress that he felt they had made in protecting human rights in violence-prone areas overseas where the company drilled for oil, such as Nigeria, and also for working to combat corruption in oil-producing countries. Then he turned to climate change.
“Look,” he said. “You were in the late nineteenth century. With Tillerson, you’ve come a long way, but you’re still in the late twentieth century. This is the twenty-first century, and on climate change you need to change your tone and change your substance.”
He urged ExxonMobil to support legislation designed to control greenhouse-gas emissions, which would be introduced in Congress in 2009, no matter who was elected. “You need to get behind” some legislative approach aimed at “meeting carbon-reduction goals,” he said. “On alternative energy—whatever technological capability you have, whatever is most viable, you have to get on it and do it. This is a carbon-constrained future you’re looking at.” Cohen and other executives took notes.
Around the time of Obama’s Inauguration, Tillerson replaced Dan Nelson, the retired marine, with Theresa Fariello, the former Clinton Administration official, as head of the Washington office. ExxonMobil bought billboard space in the Washington Nationals’ new baseball stadium, on the Anacostia River, and in the nearby metro, and put up ads depicting ethnically diverse ExxonMobil scientists and engineers surrounded by photographs of molecules and other visual images associated with scientific research. As the deep recession of 2009 descended, ExxonMobil also began to emphasize publicly the oil industry’s role in job creation.
Ken Cohen told ExxonMobil’s Management Committee that the strategy was working. In ExxonMobil’s own public-opinion polling, its approval ratings soared during 2009, from about thirty per cent the year before to about fifty per cent. The polls showed that the reputations of all the big oil companies—ExxonMobil, BP, Chevron, and Shell—were starting to recover. Some of the improved ratings surely derived from retail gasoline prices, which plunged during 2009, because of the shrinking economy, but the advertising also seemed to be having an impact.
ExxonMobil’s executives concluded that Democrats in Obama’s Washington “don’t want B.S. They don’t want greenwashing. . . . We are prepared to disagree and hopefully we can think about it in a way that’s mutually respectful.” But ExxonMobil was constrained by the fact that most of its Democratic Party connections were tied to the failed Presidential campaign of Hillary Clinton. Its principal Democratic lobbyist, David Leiter, was married to Tamera Luzzatto, who had been Hillary Clinton’s Senate chief of staff during the campaign. The Clinton universe was in general more corporate-friendly and closer to Fortune 500 executive suites than the Obama campaign. ExxonMobil’s executives said that they had felt as welcome in the Clinton White House as they did later in the Bush White House. Obama’s campaign had received support from Hollywood and Wall Street, and he attracted allies at large technology companies such as Google, but he did not have broad connections to the largest industrial corporations.
After Obama named Clinton his Secretary of State, ExxonMobil decided to invest in the Clinton Global Initiative, an enterprise conceived by Bill Clinton that channels corporate donations to humanitarian causes in the world’s poorest countries. ExxonMobil owns oil fields and produces oil in a number of countries in Africa, and it has been involved in charitable and development work there. Yet even the relationship with the Clinton organization proved awkward at times.
On the morning of September 23, 2009, Rex Tillerson arrived at the Sheraton on Seventh Avenue in New York, to participate in a plenary session at the Global Initiative’s annual conference. The session was entitled “Investing in Girls and Women.” It took place in a ballroom decorated in purple and red, with large television screens to help the audience see celebrities like Matt Damon and Bono; delegates sat with name tags dangling around their necks. Diane Sawyer came onstage to moderate. Next to her were Edna Adan, the founder of a maternity hospital in Somaliland; Melanne Verveer, the U.S. Ambassador-at-Large for Global Women’s Issues (and a neighbor of Dan Nelson’s); and Zainab Salbi, an Iraqi-born activist who had started a network called Women for Women International. Also on the panel were Tillerson and Lloyd Blankfein, the C.E.O. of Goldman Sachs. The atmosphere suggested the laying on of liberal hands to cleanse two sinful multinational corporations.
Tillerson, who has a rich Texas accent, talked about initiatives to support girls and women in some of the poor countries where the corporation extracted oil. ExxonMobil, he said, was interested in exploring, on behalf of impoverished women: “What are the technologies . . . that will provide them capabilities to undertake their activities in a more effective and efficient way?”
Sawyer, Adan, Verveer, and Salbi fell into an intense discussion of female genital cutting. Adan said it was essential to “educate the men and the fathers to take a decision and stand and not just pass it off, and say ‘This is a woman’s problem.’ ” Salbi leaned across Tillerson to make another point; he shifted uncomfortably. He was not asked to offer an opinion.
Sawyer then asked him, “What is the responsibility of a multinational corporation to make the world better through charitable activity? Is it a tithe of ten per cent? How much?”
“Ultimately, this is our shareholders’ money we’re spending,” Tillerson said. “So it’s not my money to tithe. It’s not the corporation’s. It’s our shareholders’.”
ExxonMobil’s initial efforts to reach out to the Obama Administration gave way, during 2009 and 2010, to a succession of legislative and policy battles in which the corporation and the new President found themselves on opposite sides. Tillerson sought meetings with Treasury and White House officials, to explain ExxonMobil’s views on energy markets, domestic drilling, climate legislation, and the recession. On one occasion, Tillerson joined a group of chief executives at dinner with Obama. In general, however, wary Administration officials saw no reason to favor ExxonMobil with access. There was little basis for trust on either side. ExxonMobil lobbying sessions with Obama’s team at the Treasury Department or the Department of Energy could be stiff, with Fariello and other lobbyists enunciating ExxonMobil’s advocacy positions, sometimes just by reading from notes and prepared materials. During the first three years of Obama’s Presidency, the corporation spent more than fifty-two million dollars on lobbying in Washington, about fifty per cent more per year than during the Bush Presidency.
The most important challenge that ExxonMobil faced was the climate bill, known as “cap-and-trade,” which Obama and congressional Democrats introduced early in 2009. The House of Representatives passed a version of the law in June and moved it to the Senate, where the most difficult negotiations were expected. The proposed law would have established a new regulatory system under which polluting corporations could buy and sell permits to emit greenhouse gases, under an over-all “cap” that would seek to reduce the rate of global warming.
ExxonMobil denounced the cap-and-trade system as unwieldy and bureaucratic. It did, however, announce that it would support a straight “carbon tax,” which would create incentives for reductions in coal and oil use.
The proposal was a major policy shift for the corporation, which had come to it after years of isolated, deliberative policy analysis. But there was little support for the idea among Democrats. They knew that Republicans—many of whom had signed pledges never to raise taxes—wouldn’t go for it. And they had determined that cap-and-trade was the climate-change policy they would try to pass. Exxon’s support for a carbon tax would have been welcome in, say, the early nineties, when Al Gore was pushing the idea. But the debate had moved on.
Tillerson’s support for a carbon tax marked the first time that any ExxonMobil chief executive had advocated responding to the threat of global warming by raising the cost of oil and gas production. But, because ExxonMobil ardently opposed Obama’s cap-and-trade bill from the start, it managed to leave the impression, as a senior Obama adviser put it, that it sought to “follow a track that was quite different from the other majors—being firmly fixed in the ‘Fuck you, no apologies, oil-is-here-to-stay’ mode.”
The story of how Obama’s climate bill died in the Senate, during 2010, involves many politicians, industry interest groups, and corporations. Ultimately, it was probably hurt most by the high unemployment rate, which made moderate Democrats and Republicans fret more about imposing new costs on the economy.
Throughout the lobbying scrum, ExxonMobil persisted with its lonely argument for a carbon tax. Its lobbyists left behind in congressional offices PowerPoint presentations documenting a private Hart Research Associates poll, “Energy and Climate Change Policy,” showing that Americans preferred Tillerson’s straight carbon-tax idea to cap-and-trade, especially when the differences between the two approaches were explained. But Tillerson had tied the corporation’s lobbyists to a proposal that was irrelevant to the practical discussions then taking place on climate policy.
ExxonMobil’s strategy in Washington was vindicated during Obama’s first term: not only did cap-and-trade die but the windfall taxes on oil companies proposed by Obama during the campaign failed, too. When Republicans took back the House in the 2010 midterm elections, ExxonMobil’s lobbyists no longer had reason to fear that Obama or congressional Democrats could upend their industry with climate or tax laws.
All of ExxonMobil’s business strategies remain oriented toward the very long run. With little sign that climate legislation can be revived successfully, the most important issue during the next Presidential term likely will be the regulation of hydraulic fracturing, or “fracking,” drilling for unconventional gas trapped in shale rocks and other formations, an issue that will shape the corporation’s business prospects in the United States for a generation or more. Obama and Mitt Romney, the most likely Republican nominee, disagree over oil-and-gas regulations, and this has reinforced ExxonMobil’s alignment with the Republican Party. Exxon’s interest in the matter increased substantially in 2010, when it bought America’s leading unconventional-gas producer, XTO Energy.
Obama and his advisers have announced support for expanded domestic production of natural gas, including from unconventional gas beds, but environmentalists have raised concerns that fracking techniques might damage water supplies or cause other environmental problems, such as inducing earthquakes, particularly if regulation is left to the states, which often don’t have sufficient expertise. The E.P.A. has been investigating the practice. ExxonMobil strongly argues that regulation is better left to states and local communities. Mitt Romney, meanwhile, has pledged to deregulate the oil-and-gas industry—and to get the E.P.A. out of the industry’s way. He has complained that Obama’s approach has unnecessarily limited domestic oil and gas production. “I want regulators to see businesses and enterprises of all kinds as their friends, and to encourage them, and move them along,” Romney said while campaigning in Mississippi.
In recent weeks, Tillerson has been speaking out, too, against greater regulation. “You can be afraid of a lot of things that you don’t understand,” Tillerson told an industry conference in Houston in March. He pledged to bring forward “facts” and to encourage a “science-based discussion.” In an interview with the Wall Street Journal, he expressed his impatience with the layers of regulation his company faces. “There are a thousand ways you can be told ‘no’ in this country.” In January, Tillerson and Ken Cohen gave twenty-five hundred dollars each, the maximum for individual contributions, to Romney’s Presidential campaign.
Tillerson and Obama appear to share at least one understanding about energy policy and the 2012 campaign: they are both aware that the partisan and media-amplified war over where to place the blame for rising gasoline prices is largely a phony one.
Global oil prices, and therefore gasoline prices, have been increasing this year for geopolitical reasons: for example, the economic sanctions imposed on Iran, accompanied by threats of war, which have caused speculators to bet on a possible oil-supply disruption. Obama may have spooked the oil markets by suggesting that, if necessary, he might wage war on Iran to prevent that country from acquiring nuclear weapons. But Israel has been the main source of such threats, and Obama has chided those engaged in “loose talk” about war. Over all, short of trying to avoid war in the Middle East, there is not much that any President of the United States can do to determine the price of gasoline. In theory, he could seek temporary tax rebates for drivers or attempt to flood world oil markets by selling off the country’s Strategic Petroleum Reserve, which is intended to protect the American economy from oil-supply disruptions caused by war or natural disaster. But these would be temporary and expensive measures that would not alter the global factors that drive oil prices, or the price volatility exacerbated by waves of speculative money flowing onto electronic oil-futures exchanges. In late March, Fatih Birol, the chief economist of the International Energy Agency, an intergovernmental forum, warned that high oil prices now posed a greater risk to the world economy than even Europe’s sovereign-debt crisis.
ExxonMobil and other large oil corporations do not have much influence over the changing retail price of gasoline, either. Big oil companies make the vast majority of their profits by finding oil and gas, pumping it out, and selling it wholesale. ExxonMobil can neither control prices at the pump nor make high profits there.
This year, Obama has been saying that, during his time in the White House, American oil imports have fallen to their lowest level in years. The United States reduced oil imports by a million barrels a day, or about ten per cent, in 2011. “Last year, we relied less on foreign oil than in any of the last sixteen years,” Obama said in his State of the Union speech, in January. This is in some respects a perverse boast: oil imports have dropped primarily because of the recession and the weak recovery. However, rising domestic production of unconventional oil in places such as North Dakota, along with energy-efficiency drives supported by the Administration, are also factors, and they could lead to a further decline in imports even as the economy picks up.
The President has acknowledged that there is no cheap or quick way to change America’s gasoline economy or to relieve drivers from their vulnerability to price spikes. Producing and using alternative transportation fuels on a large scale across the United States, Obama has noted, is a “problem that may not be solved in one year or one term or even one decade.”
That happens to be ExxonMobil’s view as well. Earlier this year, the corporation published an annual forecast of global energy demand, to the year 2040. Its latest analytical models, developed with the same rigor as the key vote system, take into account all of the electric-car dreams of the Obama Administration, as well as the promotion of solar power and wind power in the United States, Europe, and elsewhere. The models forecast that worldwide gasoline consumption for use in cars may well decline in the next three decades. Truck, airplane, and ship fuel consumption, however, will increase by sixty per cent, mainly in fast-growing poor countries. Decades from now, oil, gas, and coal, ExxonMobil’s analysts predicted, “will continue to be the most widely used fuels.” ♦
