Quantum Leap by ExxonMobil on Climate Change

RelevanceRex Tillerson’s speech at the CERA conference this week signals ExxonMobil’s changing stance on climate change. The company is moving from denial to grudging acceptance that there is an issue. We can expect to see a further softening of ExxonMobil’s stance in the coming months, starting with better presentation of ExxonMobil’s environmental credential’s (which are actually pretty good) and culminating in participation in internationally sponsored initiatives to address climate change.

AnalysisReaders of Daniel Yergin’s “The Prize” will recall that Yergin highlights hydrocarbon man, politics and big corporations as the defining characteristics of the oil and gas industry. We saw all 3 present in Rex Tillerson’s speech earlier this week at a conference organized, appropriately enough, by CERA, where Daniel Yergin is Chairman. 

Tillerson was quite right to point out that products from oil and gas will dominate energy supplies for transportation for the foreseeable future. The demand for oil and gas shows no sign of abating, with large developing countries such as China, India, Brazil and Russia increasing demand just as the developed world (or at least a large part of it) tries to reign its in. Mankind seems happy to carry the tag “hydrocarbon man” for a little longer.

Tillerson heads up one of the world’s largest publicly traded companies, so it’s no surprise either he put up such a robust defense of his firm’s and his industry’s products. Despite the size of ExxonMobil, readers may be surprised to know that the firm has only a small share of the world’s oil production (just a few percent), such is the dominance of the large national oil companies. Nevertheless, ExxonMobil is an industry leader and there’s no doubt Tillerson’s comments will attract attention.

That brings us to the third, and most relevant of Yergin’s defining characteristics: politics. The fact that Tillerson should choose to speak on the subject of climate change at all, and at such a high profile conference, is an indicator that ExxonMobil is preparing to change its view. Another signal was Tillerson’s remarks that….“The risks to society and ecosystems from climate change could prove to be significant. So, despite the uncertainties, it is prudent to develop and implement sensible strategies that address these risks.” His position here mirrors those taken by the likes of BP and Shell 5 to 10 years ago, as they prepared to move the climate change debate from one of denial to one of acceptance. It is surely no coincidence either that ExxonMobil is softening its position on climate change just as President Bush is doing the same. No doubt these efforts were coordinated. The timing of this speech is also noteworthy for another reason: Tillerson has just taken over as CEO of ExxonMobil from Lee Raymond, making a change of policy more likely and easier to implement. And finally, how astute of Tillerson to recognize that ExxonMobil needs to react to the environmental concerns of its customers! Tillerson is a very fine businessman, but with this latest speech he has shown himself to be the consummate politician.

16 February 2007

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