Lee Raymond on Gasoline Prices

It's not a good time to be a conspiracy theorist. Bill O'Reilly and other conspiracy-mongers, take note.

Lee Raymond, Chairman and CEO of ExxonMobil, was interviewed on CNBC's program "Closing Bell" on 11/08/05. This was the day before the Congressional hearings on oil and gasoline prices, and oil company profits.

This excerpt is a straight-from-the-horse's-mouth refutation of the O'Reilly's ludicrous notion that there's a person somewhere who sets the retail price of gasoline. (Emphasis added:)

Maria Bartiromo:

Why do you think people get so angry when they see a company like yours making $10 billion in a three month period? Why do you think Americans get so upset?

Lee Raymond:

Well, that's a hard question to answer, of course. The fact is that it's profits that make the economy run and make the companies run. What a lot of Americans don't understand is 75% of our profits don't even come from this country, they come from overseas. And they don't understand the size of the industry and the size of our company. I think most people have the view, unfortunately, that we make an enormous amount of money per gallon of gasoline when we sell it, and what they don't realize is the profits come from the enormous volume we sell, not from the profit per gallon.

Maria:

How do you feel when you drive by an ExxonMobil station and you see $3.50/gallon gasoline?

Lee:

Well in all likelihood that's not one of our company-operated retail stores. That's probably a dealer if the price is that high, and dealers have the right to set the price wherever they want to. In the broader sense, I'm not really very enthusiastic about it. As you know, you and I have talked about this for the last couple of years several times, and that is the biggest component of gasoline prices of course crude oil. And I've held the view for now two years that there's more than enough crude oil in the world and that the fundamentals of supply and demand really don't support the crude oil price. It's other issues, largely geopolitical, that support that kind of price. And so in that extent, I'm not real comfortable with those kinds of prices. On the other hand, to have sufficient prices so that companies like ours can be profitable and continue to invest is absolutely critical to managing the energy business longer-range.

If you're inclined to believe the word of a man who's professionally obligated to know this stuff, and his account is consistent with economically-informed expectations of retail gasoline prices under conditions of reduced supply, and if we've just observed such conditions in the real world, you should be satisfied.

If you're a conspiracy theorist or have an irrational hatred of oil companies, you won't be satisfied. But nothing will satisfy you anyway. You would only be satisfied by being proven correct, but that's simply not possible when you're wrong.