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Why did ExxonMobil's CEO go on The Today Show this morning?
5/15/2008 6:03:56 PM

Source:

http://www.bloggingstocks.com/2008/05/15/why-did-exxonmobils-ceo-go-on-the-today-show-this-morning/


Why did ExxonMobil's CEO go on The Today Show this morning?

Reuters reports that ExxonMobil (NYSE: XOM) CEO Rex Tillerson went on The Today Show this morning to discuss the price of gasoline. Why? I think it's because he wants to diffuse political pressure to raise taxes on oil companies. Tillerson said that the price of gas is so high that people are using less of it.

But the subtext, in my opinion, was to put a face on the industry in the mind of the public so that it would be harder for politicians to harness public anger into higher taxes. Some big oil companies now have "too much" money coming in, with oil prices as high as they are. One of them has recently been in low-level debates with investors over what to do with all their cash as in "they can't spend it fast enough," an irony when gas prices are so high.

But as I posted yesterday, not all oil companies think that they have too much money coming in. Many such as Exxon and Valero Energy (NYSE: VLO) have reported disappointing earnings in the first quarter because the price of a barrel of oil has doubled while the wholesale price of gasoline has risen only 39%.

With demand in the U.S. down and too much refining capacity, these U.S. refiners are shutting down production so they can justify raising consumer prices at the pump even more. I figure that if they can cut back on refining capacity and the price of a barrel of oil goes up to $200, the refiners will be able to charge $8.53 a gallon and then they'll restore their margins to where they believe they rightfully belong.

Many oil companies could care less about the social angles of high gas prices. The industry may be happy if Tillerson can succeed in diffusing public anger against the oil companies by answering questions and getting its position across to the public. While I doubt the public will sympathize with its economic problems, Exxon is clearly gambling that putting a face to the company is part of a multi-pronged PR battle to keep the industry's taxes low.

As far as the financial angle – the oil companies have at least six options for the excess money including:

  • pay it out as dividends,
  • invest it in exploration for more energy,
  • create alternative energy products,
  • acquire other energy companies or get into a completely different industry – to diversify earnings,
  • buy back their stock,
  • buy stocks and bonds for short-term investment purposes.

The oil companies perceive that they have an obligation to shareholders, but not to the public and they could care less about irony. They are in business to make a profit and they only care about how much that profit-making squeezes the public if citizens' frustration translates into higher taxes for their business.

If they can appear to care, they may be able to diffuse that threat to their net income.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Joe
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Re: Why did ExxonMobil's CEO go on The Today Show this morning?
5/15/2008 6:25:11 PM
Ken,

Thanks for sharing this article.  I'm sure everyone is wondering why the price keeps jumping when usage has gone down. 

I have another take if anyone has the knowledge about this.  I was told that the price of oil went up because of the Speculators.  If so, are the oil companies obligated to sell at the speculated price?  Couldn't they simply choose to sell at a lower price to keep things flowing better? 

I don't really understand the commondity markets like oil and gas.

Joe

***ADLAND BULLETIN BOARD*** What is Xtreme X2O? ###Get some X2O and Jerky RADICAL for the TRUTH! Laus Deo! ** HUG DEPARTMENT: Always OPE
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Re: Why did ExxonMobil's CEO go on The Today Show this morning?
5/15/2008 6:45:37 PM
Hi Joe,

No one is obligated to sell at any price including speculated. Adjusting prices on speculations is really considered price gouging and should be reported.

I have written to Senate and Congress about this but seems to fall on deaf ears. Time for a new government. Another topic, another day. LOL.

Thanks for posting.

Kenneth
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Jim
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Re: Why did ExxonMobil's CEO go on The Today Show this morning?
5/15/2008 6:59:30 PM

Hello Ken,

Thanks for the article and opportunity to weigh in.  First the writer f the article is full of himself and his facts are somewhat skewed.

With demand in the U.S. down and too much refining capacity, these U.S. refiners are shutting down production so they can justify raising consumer prices at the pump even more. I figure that if they can cut back on refining capacity and the price of a barrel of oil goes up to $200, the refiners will be able to charge $8.53 a gallon and then they'll restore their margins to where they believe they rightfully belong.

Fact is there is plenty of oil, and limited refining capacity because the big shot oil companies didn't or haven't invested in refining capacity in the US for 30 YEARS now the issue becomes supply bs demand.  With more demand for gas refineries are running near maximum.  Unfortunately the machinery (Infrastructure for refining is in as bad a shape as our nations bridges) is not able to run at full capacity.  Even with RECORD PROFITS they have chosen not to invest in refinery in the US. 

Now they have built refineries in Mexico and Canada, hmmm looks to me like we are being forced/herded to form the North American Union, by the Oil Companies and the Oilmen in the White House.

May Wisdom and the knowledge you gained go with you,



Jim Allen III
Skype: JAllen3D
Everything You Need For Online Success


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Re: Why did ExxonMobil's CEO go on The Today Show this morning?
5/15/2008 7:49:16 PM

Yes, I watched this in the morning.  They do not care.  They are very happy to be getting all the $$$'s they are getting for the high price of oil.  The CEO's of these companies receive very high salaries.  Where is all this going to end?  Are we back to horse and buggy days?  How do we cope?  We have no leadership that cares.  Where are they, those leaders than can and should help us?

Stay at home and enjoy,

God bless,

Sara

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