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Exxon CEO: Oil Isn't Going Away, But...

Sept. 6-13 issue - ExxonMobil CEO Lee Raymond is known as an oil man's oil man, with little patience for fuzzy green alternatives. Who better to ask about the semisoft idea behind the hybrid economy—reducing rather than replacing fossil fuels in the energy system? NEWSWEEK's Tony Emerson spoke to Raymond in his Irving, Texas, office. Excerpts:

EMERSON: Do you think the hybrid idea has applications beyond cars—for homes, society?
RAYMOND: Well, the fundamental energy used in the home is electricity, and there's a legitimate debate about how you generate electricity. Is it going to be oil-fired, gas-fired, nuclear? The facts are [that] large-scale electricity generation is going to have to come from fossil fuels in the near term, and perhaps more nuclear in the long term.

So you foresee a fossil-fuel society.
Correct. For the next 20 years, growth in the world economy is going to raise demand by oil and oil equivalents from something on the order of 65 to 85 million barrels a day, to 330 million [barrels], which is a huge, huge number. It's like eight Saudi Arabias. It's hard for anyone to be able to grasp the immensity of the energy system, and what that leads to is, unfortunately, people who are well intentioned talking about items that are not significant.

Such as?
Wind and solar. I'm not against wind. I'm not against solar. But they are uneconomic. They don't compete on a stand-up basis with fossil fuels. They require huge subsidies. If you assume 20 percent growth in wind and solar for 20 years, it's still a half of 1 percent of the world's energy.

You've said the natural decline in oil supplies is misunderstood—how so?
It's the compounding of large numbers. Demand grows at something like 2 percent a year. Doesn't sound like much, but back in 1972, that came to 800,000 barrels a day; now it's 2 million barrels a day. At the same time, the base from which you produce is in decline at 3 to 4 percent a year, or about 1.5 million barrels a day in 1972, and 3 to 4 million barrels a day today. So the gap has grown from about 2 million to 6 million barrels a day. What needs to be done every year to fill the gap becomes an increasingly immense task.

And this leads where?
Well, if you get the philosophers into the room, they will tell you that ultimately oil is a finite resource and therefore there has to be a point at which you're not able to fill this gap, so to speak. That's a little bit simplistic, because the amount of any commodity is not independent of the price.

Do you agree with those who say the long-term price of oil is rising?
I'm a skeptic. In 40 years, I've heard at least five or six times that we are going through a new paradigm in the oil price. It has never happened.

Is there a "next oil"?
Thirty to 40 years from now, the combination of price and new technology is going to make unconventional oils—heavy oil, tar sands—conventional.

As a critic of the "myth of energy independence," what do you think of our current national policy?
What national policy? Would you articulate what the current policy is? [Laughing] Then I'll comment.

Well, your call for governments to focus on supply sounds like the Bush policy—is he on track?
Well, I'm not going to get into a political one-versus-the-other kind of thing, but the idea of "energy independence" is just a flawed notion. I've heard about it going back to Johnson. I'd make the same comment, doesn't matter who's in the White House. Independence just appeals to Americans. It's a national trait, but it's not realistic in energy.

What about conservation?
We should be better in how we consume energy. But contrary to our critics, we are probably the most efficient users of energy in the world. These people say, well, we have only 2 percent of the world's population and use 30 percent of the energy. Yeah, but we produce 35 percent of the world's products, too, so you need to keep this in perspective in terms of what we do here. Now, do we want to give up our way of life? If you ran a poll you'd get a pretty resounding—well, some people would say yes, but the vast majority would say no.

Your strategists say the non-OPEC supply is going to start falling around 2015. How does that affect your planning?
Well, I know what the planners say, but they come to me every 10 years saying the same thing, and the decline is always 10 years off. I just don't see it happening.

© 2004 Newsweek, Inc.

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