Proposals by congressional Democrats to eliminate oil industry tax breaks and subsidies would set a bad example overseas and discourage new industry investments, Exxon Mobil’s top executive said Thursday.
Rex W. Tillerson said moves suggested by leaders of the incoming Democratic congressional majority would encourage similar steps by governments abroad, where Exxon Mobil Corp. generates the bulk of its profit.
“I think the bigger concern I have is not so much the economic direct effect of the fact that they want to take a tax break off here or there. But it’s the message it sends the rest of the world that you don’t have to provide stable (regulatory) frameworks,” Tillerson told reporters after a speech to the Boston College Chief Executives’ Club.
“And if that happens, none of us are going to be able to take the risk in this business.”
Irving, Texas-based Exxon Mobil, the world’s largest publicly traded oil company, earns about two-thirds of its profit from oil and natural-gas production outside the United States, and production is rising in Africa, the Middle East and Russia.
U.S. tax breaks intended to encourage steps such as refinery expansion and oil exploration “are not that material” to Exxon Mobil’s profit, said Tillerson, who spent years leading Exxon ventures overseas before being named chairman and CEO in January.
House Democrats have said they plan to target billions of dollars in oil company tax breaks for a quick repeal next year _ moves that come partly in response to high summer fuel prices and recent huge industry profit. For example, Exxon Mobil recently reported the second-largest quarterly profit ever for a publicly traded company: $10.49 billion in this year’s third quarter, second only to the $10.71 billion Exxon Mobil posted in last year’s fourth quarter.
Some Democrats also have suggested seeking a windfall profit tax on the industry _ a proposal Tillerson called “a terrible idea.”
Asked by an audience member whether oil profit were excessive, Tillerson noted the industry’s fortunes are tied closely to fluctuating oil prices that remain at historically high levels despite recent declines. He also said expensive ventures to find new oil reserves often fizzle out.
“If you don’t have the prospect from time to time do quite well, nobody’s going to take that risk,” he said. “We won’t make this kind of money forever.”
In his speech, Tillerson acknowledged a pressing global need for a greater mix of energy sources, and he said wind and solar energy can play a role. But he cautioned against expecting those sources to yield significant supplies of energy, given the globe’s increasing energy demand.
Absent any technological breakthroughs, “Fossil fuels will remain the predominant energy source for the foreseeable future,” he said.
Tillerson said government subsidies to encourage wind and solar power likely will yield double-digit annual percentage gains in energy produced from those sources.
However, he said, “People need to step back and keep that in perspective, and not mislead the public into thinking that’s how we’re going to get off oil if we do all these other things.
“Because it isn’t going to happen. They’re just not ever going to be big enough.”
The Associated Press