Although current retail gasoline prices are well below the levels of almost two years ago in the summer of 2008, gasoline prices have been increasing over the past few weeks, along with possible early signs of economic recovery in the U.S. and abroad.
As the summer driving season begins, economic concerns continue to weigh on consumer spending decisions and high unemployment is expected to moderate driving and fuel demand. However, gasoline demand in the U.S. is strengthening and the Energy Information Agency does expect a modest increase in driving and gasoline consumption this year (up less than one percent versus 2009).
As people make vacation and driving plans, the following facts should help improve understanding of what’s behind U.S. gasoline price movements:
So, looking at the components of the price for gasoline, on average, about 80 percent to 85 percent of the cost of a gallon of gasoline is based on the price of crude oil and taxes. The remaining portion of the price, about 15 percent to 20 percent, covers the cost of refining, transportation and marketing. The chart below depicts the components of retail gasoline prices based on latest available data from the Department of Energy.
ExxonMobil’s U.S. tax burden is already very large.
Additional taxes would raise prices and reduce supplies.
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With increased global energy demand, energy-related carbon dioxide emissions are expected to rise by an average of 1 percent per year through the year 2030. As was recently summarized in the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), the risks to society and ecosystems from increasing greenhouse gas (GHG) emissions are significant. Meeting the enormous energy demand growth and managing the risk of GHG emissions are the twin challenges of our time.
We all must engage in the search for solutions if we are to succeed at mitigating these risks. Progress can be achieved through climate change policy frameworks that enable countries to pursue economic progress while promoting the development of technologies necessary to generate and use energy more efficiently. As the largest publicly traded international energy company, the energy ExxonMobil produces meets 2 percent of the world’s needs. We share the responsibility to take action with scientists, citizens, and governments around the world and are doing so in several substantive ways. Over the years, we have supported major climate research projects, and we contribute to an array of public policy organizations that research and promote discussion on climate change and other domestic and international issues.
Priority issues
Reducing Greenhouse Gas Emissions. Improve energy efficiency and reduce greenhouse gas emissions from our own operations as well as from energy use by consumers.
Policy Engagement. Help shape energy policies that support long-range thinking, encourage long-term investment, and allow for an integrated set of solutions.
Flare Reduction. Employ a combination of technology, processes, and engagement with host governments to address operational and regional barriers to natural gas flaring reduction.
Our strategy to achieve reductions in GHG emissions is focused on increasing our own energy efficiency in the short term; advancing current proven emissions-reducing technologies in the medium term; and developing breakthrough, game-changing technologies for the long term. These initiatives will reduce emissions generated both internally by our own operations and externally by consumers.
Internally, new energy efficiency technologies and day-to-day operational efficiency activities generate significant energy savings and reduce GHG emissions. Since the launch of our Global Energy Management System in 2000, we have identified opportunities to improve energy efficiency by 15 to 20 percent at our refineries and chemical plants and have already implemented about 60 percent of these.
| Near-term solutions | Longer-term solutions beyond 2030 | ||
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| Reducing GHG emissions from energy production |
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| Improving consumer use of energy |
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Assessing risks associated with climate change policy
We regularly consider risks to operations and investments from a wide variety of perspectives: technological, physical, political, and regulatory. A number of organizations have attempted to quantify the potential implications of climate-related policies for oil and gas industry shareholders. However, these efforts are based on regulatory assumptions that are only speculative given the current status of negotiations on climate-related policies.
Contributing to research and the public policy discussion on climate change
Over the past thirty years, we have supported major climate research projects at a number of major institutions. Currently we are supporting the scientific, economic, and technology research at Battelle Pacific Northwest Laboratory, Charles River Associates, the International Energy Agency’s Greenhouse Gas Research & Development Programme, the Georgia Institute of Technology, the Massachusetts Institute of Technology, Stanford University, and the University of Texas, among others.
We contribute to an array of public policy organizations that research and promote discussion on climate change and other domestic and international issues, including the Brookings Institution, the American Enterprise Institute, the Council on Foreign Relations, Resources for the Future, The Center for Clean Air Policy, and the Center for Strategic and International Studies. We regularly review the groups we fund to ensure they are consistently and constructively contributing to advancing meaningful understanding and solutions to issues of concern, including climate change. In recent years, we have discontinued contributions to several public policy research groups whose position on climate change diverted attention from the important discussion on how the world will secure the energy required for economic growth in an environmentally responsible manner.
Remarks by Rex W. Tillerson, Chairman and CEO
“With a new U.S. Congress and Administration, we have an opportunity to expand the dialogue about how America can best make an impact on this important global issue — reducing greenhouse gas emissions. As this dialogue goes forward, we must be mindful that sound public policy must not impede innovation, inhibit competition, or add market uncertainties by picking winners and losers. Good policy sets aspirational goals that represent the needs of the people and then provides the broad framework for entrepreneurs and innovative thinkers to achieve these goals.
One policy option that is intended to reduce emissions — and which has received much attention — is a cap-and-trade system. Before we rush to enact such a system, we must ask whether it can best achieve our shared goal of actually reducing greenhouse gas emissions. Cap-and-trade systems inevitably introduce unnecessary cost and complexity that undercut their effectiveness. It is important to remember that a cap-and-trade system requires a new market infrastructure for traders to trade emissions allowances. This new “Wall Street” of emissions brokers will take the emphasis away from the goal of reducing carbon emissions and focus on trading on price volatility instead.
There is another policy option that should be considered, and that is a carbon tax. A carbon tax avoids the costs and complexity of having to build a new market for securities traders or the necessity of adding a new layer of regulators and administrators to police companies and consumers. And a carbon tax can be more easily implemented. It could be levied under the current tax code without requiring significant new infrastructure or enforcement bureaucracies. A carbon tax is also the most efficient means of reflecting the cost of carbon in all economic decisions — from investments made by companies to meet their fuel needs to the product choices made by consumers. In addition, such a tax should be made revenue neutral. There should be reductions or changes to other taxes — such as income or excise taxes — to offset the impacts of the carbon tax on the economy.
Finally, there is another potential advantage to the direct-tax, market-cost approach. A carbon tax may be better suited for setting a uniform standard to hold all nations accountable. Given the global nature of the challenge, and the fact that economic growth in developing economies will account for a significant portion of future greenhouse gas emissions increases, policy options must encourage and support global engagement.”
IPCC wins the 2007 Nobel Peace Prize with contributions from external experts
The Intergovernmental Panel on Climate Change (IPCC) prepares periodic climate assessments on science, impacts and adaptation, and mitigation based on the contributions of several hundred expert authors nominated by governments. The majority of experts work in academia and government labs, but a handful work in business, including Haroon Kheshgi and Brian Flannery from ExxonMobil. Over the years, they have contributed to three IPCC assessments and two special reports and have served as review editors for IPCC publications. The valuable contributions of these experts were recognized, when the IPCC received the 2007 Nobel Peace Prize.
Many of the best opportunities for developing additional domestic oil and gas supplies have been placed “off limits” by government policies. Although a longstanding ban on portions of Outer Continental Shelf oil and gas leasing was lifted by Congress in 2008, a new five-year leasing plan for potentially developing over a third of these resources—from 2012 to 2017—was only recently proposed by the Administration.
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