Dear Customer,
Thank you for your recent communication expressing concern about higher
prices for gasoline and energy products.
We recognize that energy price increases have put a strain on many
household budgets. We also know that some hold the oil and gas
industry
directly responsible for these price increases and quite frankly, this
conclusion is not correct. There are several factors that are helpful
to
consider as we look at what is causing higher gasoline and energy
prices.
Crude Oil
Crude oil, the world’s foremost energy source – is a true global
commodity,
traded freely in markets worldwide. Prices for crude oil, which now
account for well over 60 percent of the price Americans pay at the
pump,
are set on competitive global markets. No single company sets the
price
for crude oil or even influences how these prices are set. Even as the
largest private energy company in the world, ExxonMobil only represents
3
percent of global oil production. We also buy nearly two times more
crude
oil than we produce, as we do not produce nearly enough crude oil to
keep
our ExxonMobil refineries and plants supplied. Also, our crude oil
supply
costs are higher partly due to the weaker value of the U.S. dollar.
Global Supply and Demand
The market forces of supply and demand are the fundamental factors that
influence crude oil prices. Growing demand for transportation fuels,
in
developing nations like China and India alone have driven demand
increases
at twice the historic average in several recent years. Americans drive
around 3 trillion miles per year, almost twice as much as we did in
1980
(1.5 trillion miles), now demanding about 400 million gallons of
gasoline a
day. On the supply side, geopolitical developments have curtailed
production and driven up prices at various points in time.
Industry Earnings in Context
In a high commodity demand/price environment, which currently exists,
industry earnings will generally rise. However, the oil and gas
industry
profits are comparable to other U.S. industries, 9.5 cents for every
dollar
of sales compared to an average of 8.2 cents for all U.S. manufacturers
in
2006. You also might find it interesting to know that 70 percent of
ExxonMobil revenues are generated outside the U.S. And, with respect
to
the price you pay at your local service station, independently owned
operators set those retail prices in competition with one another.
ExxonMobil owns and operates less than 900 of the 170,000 service
stations
in the United States; that is less than 1 percent.
Investing in Tomorrow’s Energy
In our view and probably your own as well, another important question
is
what are we doing with the money we earn? In the past twenty years, we
have invested about $280 billion worldwide on capital and exploration
expenditures to develop new energy supplies — a figure that exceeds
our
total earnings over that period.
Looking ahead, the International Energy Agency has estimated that the
oil
and gas industry will need to invest at least $20 trillion in new oil
and
gas production and infrastructure through 2030 to meet the future
growth in
global demand. Much of this projected growth in energy use is
attributable
to improving living standards for billions of people in the developing
world. Only profitable companies will be able to make the investments
needed to compete in global energy markets and to develop the energy
supplies we will need in the future.
Government Taxes
Stable and impartial tax and regulatory policies are critical to
companies
looking to invest on the scale noted above. You most likely are not
aware
that for every dollar of ExxonMobil’s revenue, on average around 25
cents
is paid to governments, while ExxonMobil earns just over a dime. In
2006,
ExxonMobil earned $39.5 billion, but paid over $100 billion in taxes
worldwide. Over the past five years (2002-2006), ExxonMobil’s U.S.
tax
bill was nearly $60 billion, exceeding our total U.S. earnings during
that
time by over $20 billion. Without question, we are one of the
world’s
biggest taxpayers and are therefore very concerned about the harmful
impacts of current proposals to impose even higher taxes on our
industry.
Our government can help meet America’s growing energy needs by
ensuring
reliable and impartial rules for all energy investments that will allow
American companies to compete internally.
Your email is important to us. We know price increases and our
company’s
earnings have raised questions and deserve explanation. While we hope
that
this response provides you with a better understanding of our company’s
challenges and of the global energy markets in which we participate, we
would encourage you to look at our web site www.exxonmobil.com as well
as
the web site of the American Petroleum Institute www.energytomorrow.org
for
more information.
At ExxonMobil, we’re committed to pricing responsibly and investing
for the
future. Please know that every day our 82,000 employees worldwide are
working extremely hard to provide energy supplies to consumers at
competitive prices.
Again, thank you for taking the time to contact us.
Not only that, but we could solve the problem of using foreign oil easily by drilling in Anwar and off the coast of the US. Reliance on petroleum to produce electricity could be virtually eliminated by building nuclear power plants. The real reason gas prices are so high??? Easy, it is due to the blackmail efforts of environmental terrorists in our country. This problem could have been solved decades ago.
February 6th, 2010 at 4:20 am
Not only that, but we could solve the problem of using foreign oil easily by drilling in Anwar and off the coast of the US. Reliance on petroleum to produce electricity could be virtually eliminated by building nuclear power plants. The real reason gas prices are so high??? Easy, it is due to the blackmail efforts of environmental terrorists in our country. This problem could have been solved decades ago.
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