Private Empire: ExxonMobil and American Power (58 page)

By sneaking into court on December 27 to obtain orders under seal, Pizzurro went on, ExxonMobil had acted in bad faith. “To pretend that that wasn’t part of the plan and the scheme, to pretend that . . . it had nothing to do with why they needed to get this under seal, and to pretend that that has nothing to do with a breach . . . is simply not credible.”

If Judge Batts was concerned about the ethics of ExxonMobil’s executives or lawyers in this case, however, she gave no indication. Under the law, she said when Pizzurro had finished, a freeze order of this type was appropriate. All that was required, legally, to maintain the freeze on the account was “a probability or possibility” that Chavez’s government might not make good if it eventually lost out to ExxonMobil, Judge Batts said. Therefore, “I’m confirming the attachment. The matter is adjourned.” If Hugo Chavez wanted his money back, he would have to seek it in the court of ExxonMobil’s choosing.
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Twenty

“Moonshine”

O
n January 31, 2006, President George W. Bush delivered a State of the Union address in which he declared that the United States was, unfortunately, “addicted” to oil. A generation after President Jimmy Carter had declared America’s oil dependency to be the “moral equivalent of war,” and as casualties in Bush’s Iraq War accumulated, the president laid out a timetable for greater American energy independence, driven above all by his exhaustion with radical suppliers such as Venezuela and Iran:

Keeping America competitive requires affordable energy. And here we have a serious problem: America is addicted to oil, which is often imported from unstable parts of the world. The best way to break this addiction is through technology. . . . And we are on the threshold of incredible advances. So tonight I announce the Advanced Energy Initiative—a 22 percent increase in clean-energy research. . . .

We must also change how we power our automobiles. We will increase our research in better batteries for hybrid and electric cars and in pollution-free cars that run on hydrogen.

We will also fund additional research in cutting-edge methods of producing ethanol, not just from corn but from wood chips and stalks or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years.

Breakthroughs on this and other new technologies will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025. By applying the talent and technology of America, this country can dramatically improve our environment, move beyond a petroleum-based economy and make our dependence on Middle Eastern oil a thing of the past.
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For the president, a recovering alcohol abuser and the scion of a political family whose fortune came from the oil patch, to choose the metaphor of addiction for the country’s oil economy was a striking and even radical rhetorical decision. His announcement of a national goal to free the United States from Middle Eastern oil imports was more familiar, but striking nonetheless. As with most political speeches, however, the gap between word and practical policy was vast. Since 2001, the Bush administration had regularly advertised its willingness to invest federal funds in alternative energy technology research as a means to deflect calls for more immediate policies to combat climate change, such as a national limit on total carbon dioxide emissions or a carbon tax. In that sense, Bush’s new technology investment plans in 2006 were nothing new and were correctly seen by environmentalists as another effort to finesse the climate issue. Even so, there was no reason to doubt the sincerity of the president’s wish that capitalism and technological innovation might quickly produce breakthroughs that would make America’s oil dependency obsolete.

Like many Americans, Bush seemed to receive the September 11 attacks as a message that reliance on unstable oil-producing Muslim regimes such as those in Saudi Arabia, Iran, and Iraq was in some generalized or intuitive sense debilitating and unsustainable for the United States. America consumed roughly 20 million barrels of oil each day, of which up to 12 million were imported. Of the total, more than two thirds was used to fuel cars, trucks, and airplanes. To change oil import dependency would almost certainly require changing transport fuels. Bush called one of his first alternative energy technology research programs—an effort at the Department of Energy to develop hydrogen fuel cell technology as an alternative to the gasoline combustion engine—the FreedomCAR and Fuel Partnership. The implication of the “freedom” mantra seemed to be that if Americans could find a way to drive their open highways and shop in their sprawling suburbs without purchasing oil from the Middle East or Venezuela, the nation’s liberties would be strengthened. Yet it was the policy of the United States not to ask American households to make sacrifices to achieve this outcome. Much of America’s need to import oil resulted from the country’s gas-guzzling habits—per capita and per highway mile driven, Americans in their S.U.V.s and six-cylinder sedans consumed much more gasoline than any other people on earth. This relative overconsumption was, for many conservatives, including ExxonMobil’s Lee Raymond and Rex Tillerson, simply another manifestation of American freedom. A European or Asian authoritarian government might have attacked the problem of overconsumption of gasoline by taxing, planning, regulating, or otherwise mandating change. Yet Bush and Republican leaders in Congress made no serious effort to require Americans to drive more fuel-efficient cars. The president’s only initiative was to pursue a technological leap away from oil dependency by investing in basic research. This placed his thinking firmly in the tradition of emotionally declared, inadequately engineered American energy policies dating back to Richard Nixon.
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ExxonMobil’s executives regarded the president’s romanticism about energy “independence” and alternative technologies as misguided. Describing the United States as addicted to oil was “an unfortunate choice of words, quite frankly,” Tillerson said. “To say that you’re addicted to oil and natural gas seems to me to say you’re addicted to economic growth.”
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ExxonMobil executives privately traded theories of psychological analysis about Bush—perhaps the president felt compelled to distance himself from his family’s history in the oil business or he feared his legacy as president would be “oiled” if he did not forcefully endorse alternative energy investments. On the big policy issues that mattered most to ExxonMobil—taxation, climate, domestic drilling—Bush had delivered, or had made a valiant effort in Congress. Yet the president also returned again and again to what senior ExxonMobil executives in Irving and Washington believed were fantasies about alternative energy breakthroughs that might lead to some Valhalla of energy independence.

“Cheney didn’t have that problem,” an ExxonMobil executive recalled. “Cheney was well-grounded. . . . ‘Don’t screw with the facts and let’s deal with it’ kind of thing. And Bush just was always afraid he was being associated with the oil industry.” That analysis of the president was perhaps too easy. Bush genuinely wished to remake the world that had led to the September 11 attacks—radicalism stoked by Saudi clerics, generations of young Arab men coming of age in stultifying societies. It was obvious even to a free-market traditionalist like Bush that America did its share to enable such dysfunction by importing so much oil and assuring the wealth of anti-American exporters. There was no reason to doubt that Bush would be pleased if research investments in alternative energy that he directed were one day remembered as the catalyst that ended the oil age. Like presidents of both parties before him, however, he lacked the depth of conviction, the political coalitions, and the scientific vision to do more than toss relative pennies into a wishing fountain.

At the ExxonMobil K Street office, Dan Nelson and his colleagues worked the phones to track what might emerge in the energy policy sections of the annual State of the Union, but in the case of the “addicted to oil” speech in 2006, they failed to intervene successfully. Drafts of the president’s address were very closely held. They learned that a push toward ethanol would receive heavy play, but they received no preview of the language repudiating oil and gas. Inside the White House that winter, economists and National Security Council senior directors who believed that global oil markets were liquid and interdependent—and who believed that “independence” from oil imports was an unnecessary and illusory goal—failed, too, to persuade the Bush speechwriters to remove the talk’s reference to ending Middle East dependency. They argued about the liquidity of the oil market and whether a particular importing nation could determine which barrel of oil was “foreign” versus “domestic.” But if one of the White House economists raised a question challenging the call for energy independence, the president’s politically attuned speechwriters would respond, “The president has seen this language in ten previous drafts and obviously likes it—do you really want to get in his way?”

After the speech was delivered, Saudi officials and diplomats from other oil producers aligned with the United States, who felt they had been insulted, protested formally to the White House. “It upset the Saudis,” the senior official recalled. “Démarches followed that speech.”
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In Irving, Rex Tillerson sided with the Saudis. He believed, as did ExxonMobil’s Management Committee, that “energy independence is not attainable, not any time in the foreseeable future,” and that its pursuit was not desirable because it would set the United States on “misguided courses” that might raise the cost of energy in the American economy, destroy jobs, and disrupt trade alliances around the world.
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As for Middle Eastern oil, in particular, it represented less than a quarter of American oil imports, and the percentage seemed likely to decline in the future, as African, Canadian, and other sources of supply grew. Most Middle Eastern oil went to Asia, and more would head east in the future.

What, specifically, would be the benefits of American energy independence? For each argument put forth by alternative energy and import-independence advocates, ExxonMobil’s executives and lobbyists developed a response, which they delivered, particularly in the period that followed the “addicted to oil” declaration, in their own speeches at universities and economic forums, and on PowerPoint slides that ExxonMobil lobbyists handed out on Capitol Hill. These arguments addressed the main tenets of the “import-independence” advocates.

Energy independence would strengthen the American economy by reducing costly oil imports and thereby dramatically improving the country’s trade and balance-of-payment deficits, about half of which were due to oil imports
. But there was no proven or obvious correlation between a nation’s trade balances and its per capita income or gross domestic product growth, ExxonMobil’s economists argued. Japan, Singapore, Thailand, and other Asian economies relied more, proportionately, on imported energy than the United States, and yet their economies had thrived overall and had produced trade surpluses. Yes, reducing oil imports could meaningfully and helpfully reduce America’s trade deficit, and thereby its total debts, but to blame oil for America’s unbalanced economy and its struggles in global economic competition was specious.

Energy independence would reduce or eliminate the need for American military intervention and defense spending in the unstable Middle East.
America’s Middle East policies were constructed to defend Israel, check radical regimes such as Iran’s and Saddam Hussein’s Iraq, and keep global sea-lanes open for all commerce, to strengthen the world economy; in any event, U.S. defense spending as a percentage of national wealth was not badly out of line, by historical standards.

Energy independence would break the resource curse cycle by which American dollars financed hostile regimes in Venezuela, Iran, and elsewhere, and by which it encouraged the formation of corrupt authoritarian regimes in poor countries such as Chad, Nigeria, and Equatorial Guinea.
The future of the world’s energy economy lies in rising consumption in China, India, and other developing economies; their purchases would only replace America’s. A technological revolution in which all oil consumption was rapidly displaced worldwide was unrealistic, given the pace of economic growth taking place in poorer countries and their thirst for energy.

Energy independence would free the United States from the threat of coercive supply disruption by hostile countries, such as occurred twice during the 1970s.
ExxonMobil’s own private war-gaming scenarios showed that such threats were not realistic, particularly given the security of supply to the United States from Canada, Mexico, and Africa; in any event, the strategic petroleum reserve had been constructed to manage any short-term dislocations, to buy time for more decisive military interventions, if needed.

Rapid adoption of clean energy would reduce the threat of climate change.
Even if global warming threatened the United States—and ExxonMobil remained unconvinced about the certainty and magnitude of the threat—it did not warrant costly government intervention, which would impede economic growth and threaten jobs, particularly if the policy response did not include rising economies such as China and India, whose emissions were greater than those of the United States.

To Tillerson and other ExxonMobil executives, Bush’s speech signaled how flawed and politicized American energy policy had become. If Tillerson and his Management Committee could write their own foreign and energy policy for the United States, it would involve, first, an acceptance of the interconnectedness of global oil markets—and an end to fantasies about national “independence” from those markets; and second, a recognition that carbon-based fuels would be central to the energy economy for decades, even if a significant tax on carbon was imposed eventually to address the risks of global warming. From those premises, ExxonMobil’s executives would construct a deliberate, country-by-country strategy to maximize oil and gas supply through free-market competition and to enforce the sanctity of commercial contracts to support that effort. Such a strategy, if carried out with discipline and pragmatism, might ultimately provide the United States with adequate “energy security,” as Tillerson put it, as opposed to “energy independence.”
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This was ExxonMobil’s corporate foreign policy; it frustrated Tillerson that he could not persuade even the relatively oil-educated Bush administration to adopt it wholeheartedly, and worse, that the president, during his second term, worn down by Iraq, seemed to be drifting away from ExxonMobil’s policy vision altogether.