by Steve Coll
“ExxonMobil is committed to being a good corporate citizen wherever we operate worldwide,” Swiger read out to the Senate committee. “We maintain the highest ethical standards, comply with all applicable laws and regulations and respect local and national cultures. These principles and practices apply to our operations in Equatorial Guinea. . . .
“The practical realities of doing business in developing countries are challenging. Equatorial Guinea, like many developing nations, has a limited number of local businesses and a small population of educated citizens. . . . In such countries it is sometimes necessary to do business with a government official or a close relative of a government official. But it is still expected that we do business ethically and comply with all U.S. and local laws.”
Carl Levin, the committee’s ranking Democrat, took up the questioning. He criticized ExxonMobil for failing to cooperate with the committee’s investigators. Amerada Hess and Marathon had been fully cooperative with the Senate committee’s probe, but ExxonMobil had stonewalled, he said.
Levin then asked Swiger whether improving the social and governance conditions in Equatorial Guinea was a condition of ExxonMobil’s decision to do business there.
“It is not, Senator,” Swiger said.
“Does it trouble you that you have a business partner like this dictator?”
“Business arrangements we have entered into have been entirely commercial, have been at market-based rates, arm’s length transactions, fully recorded on our books,” Swiger answered robotically. Then he seemed to improvise a little: “They are a function of completing the work that we’re there to do, which is to develop the country’s petroleum resources, and through that and our work in the community, make Equatorial Guinea a better place.”
“Make it what?”
“A better place.”26
Fourteen
“Informed Influentials”
James Rouse, the U.S. Army veteran who ran ExxonMobil’s Washington office, retired in 2004. Lee Raymond appointed Dan Nelson, previously the lead country manager in Saudi Arabia, as his successor. Nelson stood six feet eight inches tall. With his silver hair, broad shoulders, and Naval Academy–bred deportment, he seemed to embody the popular image of an oil industry lobbyist; among other things, he looked like someone who might be coming or going from a steakhouse. In fact, The Prime Rib on K Street, downstairs from the ExxonMobil office, was one of his favorite haunts. Through his background as a U.S. Marine infantry officer, Nelson had credibility with the war-saturated Bush administration, although in private, he could be skeptical about Bush’s military activism abroad.
One of Nelson’s closest friends was Chuck Hagel, the Republican senator from Nebraska, Nelson’s home state, and a fellow military veteran. Hagel was a leading opponent in Congress of the Kyoto Protocol and other prescriptions to control greenhouse gas emissions; he also was an increasingly outspoken critic of President Bush’s foreign policy. Hagel’s outlook was not easy to categorize, but in general, he saw himself as a skeptical realist about the ability of the United States to coerce and transform other nations, and he was put off by the belligerence of the Bush administration. Nelson increasingly shared Hagel’s views. The ExxonMobil chief lobbyist characterized himself to colleagues in Washington as fiscally and economically conservative, but a realist in foreign policy and a libertarian on social issues such as gay marriage. Increasingly, Hagel, Nelson, and other Republican realists in town worked on Lee Raymond to rethink his associations with the more outspoken, militarily activist sections of the Republican Party, those shorthanded as the “neoconservatives,” such as some of the scholars and advocates at the American Enterprise Institute, a free-market think tank. Raymond was in the running to become A.E.I.’s outside chairman, but Nelson warned him that while the institute had plenty of economists with whom Raymond would agree, its foreign policy thinkers had become doctrinaire and were too activist to be aligned with ExxonMobil’s worldview.
Nelson built connections to Democrats as well. He and his wife bought a $2 million town house on Leroy Place in Washington’s historic Kalorama area. Their neighbors happened to include Phillip and Melanne Verveer; the latter was a longtime confidante of Hillary Clinton’s. The Verveers got to know Nelson and persuaded him to encourage ExxonMobil to support a program called Vital Voices, designed to empower women in developing countries.
Nelson had no particular experience in lobbying. He had what ExxonMobil valued more: an insider’s knowledge of the oil industry, as well as business and political credibility, particularly in the eyes of Republicans.
“It’s time to do things differently,” Raymond told his K Street lobbyists around the time that Nelson arrived in Washington. He didn’t specify what he meant. Raymond had no complaints about the departing James Rouse, but the change in leadership offered a chance to become more active, more visible—not so much to lobby on specific legislation, but to try to educate Washington more successfully about ExxonMobil. Nelson expanded the number of outside lobbyists under contract with the corporation, building a network of about twenty former senators, congressmen, Capitol Hill chiefs of staff, and regulatory specialists to support the in-house K Street team.
Energy policy debate in Washington tended toward all-or-nothing pronouncements that were divorced from technical and economic reality—hydrogen would be the next big energy source, or ethanol, or wind. Raymond retained his long-held biases against federal subsidies for alternative energy, but he had learned through bitter experience that it was easiest to make his case by talking about the energy industry’s global structure and the embedded place of oil, coal, and gas. One of Raymond’s goals as Bush’s second term began was to launch an education campaign about fossil fuels in Washington.
On April 13, 2005, Raymond arrived at the White House with Dan Nelson. They passed through security at the entrance to the West Wing and crossed the carpeted hallways lined with photographs of the president to meet Allan Hubbard, the National Economic Council’s director and a close friend of Bush’s. Hubbard had attended graduate school at Harvard with the president, during Bush’s carefree period.
The president increasingly harbored doubts about America’s dependency on oil imports. Global oil prices had been rising steadily since 2004, from about $25 per barrel to above $40 per barrel. Rising demand from China and India, the Iraq War, and instability in Nigeria were among the reasons. Higher oil prices had sent retail gasoline prices in the United States soaring, touching off a wave of popular anger and threatening the pace of the country’s recovery from the 2001 recession. At the White House and the National Security Council, midlevel aides met continually to discuss policies and diplomatic strategies that might ease oil prices. The president seemed restless about the subject. He remained skeptical to agnostic about climate change. Bush also understood that global oil markets were liquid and interdependent and that “energy independence” was at best a complicated goal for the United States, if it was realistic at all. Nonetheless, he seemed increasingly focused on the costs the United States paid in security and in its economy for its reliance on volatile, expensive imported oil.
Bush thought out loud with his advisers about ways the United States might change the pattern of its relationship with the Middle East. He displayed excitement and curiosity about nascent hydrogen technologies that might revolutionize automobiles and eliminate oil as a source of transportation fuels. The president had hardly turned against the oil industry—he remained an ardent supporter of expanded domestic drilling, for example—but he was asking questions in private about whether and how it might be possible to find a technological breakthrough that would end America’s dependency on oil imports within a single generation.1
Bush’s friend and adviser Al Hubbard became the vessel of the president’s ambivalence. He was a principal liaison for ExxonMobil and other oil lobbyists, and they had trouble figuring out where Hubbard was coming from on their issues. It almost seemed as if George W. Bush “felt like he needed to
do something that disassociated him with the traditional oil and gas” corporations and yet, simultaneously, the president “was always very supportive” of ExxonMobil and the industry, recalled one executive involved.
In the face of the creeping White House doubts, ExxonMobil applied its standard medicine: PowerPoint education, laden with forecasting data. The meeting with the president’s leading economic adviser would be just one in a series, part of a sustained campaign to impress ExxonMobil’s energy policy analysis on decision makers.
With Dan Nelson seated beside him, Lee Raymond told Hubbard that ExxonMobil had recently completed a detailed analysis of the world’s energy economy, looking out at the next twenty-five years. The forecast made clear, Raymond said, that much of the popular debate about transformational alternative energy sources was misinformed—it was laced with unrealistic fantasies about the pace at which the world’s energy economy would or could change. Oil and gas were here to stay, ExxonMobil’s economists and planners had concluded; fossil fuels would be central to global economics and security until 2030 and beyond. Raymond sought to brief this forecast to as many staff in the Bush administration and Congress who would listen. Raymond and Nelson offered to bring one of the ExxonMobil forecast’s authors, Scott Nauman, to Washington to present the findings in detail to White House policymakers. Hubbard agreed; he asked Vice President Cheney’s energy aide F. Chase Hutto III to make the arrangements. The next day, Hutto fired off e-mails to schedule ExxonMobil briefings for White House aides, environmental policymakers, and officials at the National Security Council.2
In Washington and elsewhere that spring, ExxonMobil advanced a carefully designed, research-tested campaign to persuade political and media elites that while the oil industry should not necessarily be loved, it should be understood as inevitable. The “Conceptual Target” for this education and communications campaign, according to a 2005 ExxonMobil public affairs document, would be “Informed Influentials.”
These were people who “seek to be informed and pride themselves on being able to handle complex issues.” They would come from “all walks of life,” such as business, government, and the media, and they would be “aware of, and concerned about, the current debate and issues surrounding the world energy resources/use as well as climate change.” The ideal audience would be “open-minded,” as well as “information hungry” and “socially responsible.” The characteristics of the elites ExxonMobil sought to educate were derived in part from statistical modeling that Ken Cohen’s public affairs department had commissioned in the United States and Europe, to understand in greater depth the corporation’s reputation among opinion leaders. That model had allowed Cohen and his colleagues to forecast how elites would react to particular statements that ExxonMobil might make or actions it might take. The research found, among other things, that it would be beneficial for the corporation to brief elites about the findings of its in-house analysts’ long-term forecasts about the global energy economy.
The purpose of the campaign would be to “grow understanding and respect for [ExxonMobil’s] position [about] the tough energy challenges the world faces.”3
The archives of ExxonMobil’s Corporate Strategic Planning department contained twenty-year forecasts of energy demand and oil prices from as long ago as the 1940s. Economists, analysts, and executives presented the projections to the Management Committee each year. In 2000, as he oversaw the first forecasts generated by the combined planning departments of Exxon and Mobil, Lee Raymond had asked the analysts, “What did you say about 2000 in 1980?”
Raymond’s subordinates “immediately thought that what I was trying to do was criticize them,” he recalled. That was, in fact, the typical impression he made.
“No, no, no,” he assured them. “What I’m trying to understand is, what did we miss? What things didn’t we see right?”4
It turned out that in 1980, Exxon’s forecasters had been half right and half wrong about the future. They had correctly predicted, within 1 percent, the total amount of energy the world would consume in 2000—a remarkable feat. They had been wildly off, however, in forecasting oil prices; the price trends they had predicted, following the spikes and upheavals of the 1970s, had been much too high. Analyzing this failure, Raymond and his colleagues reached two conclusions. One was that they had badly underestimated the pace at which technological improvements within their industry would make it easier over time to find new deposits of oil, increasing global supply and tamping down prices. The second was that geopolitical disruptions played such an important role in the price of oil that normal forecasting based on supply and demand equilibrium was not realistic to pursue.
Raymond decided to stop asking for price forecasts as part of ExxonMobil’s long-term planning process. For one thing, the forecasts were so chronically inaccurate that they provided a built-in excuse for any manager whose project failed to meet financial expectations; the manager could just blame the economists for their inaccurate price predictions. “We cannot forecast the price of oil in the short term—so how do you run the business?” Raymond asked his colleagues. The answer, he said, was to manage on a “steady-as-you-go basis and try to make sure the fundamentals are right.” Rather than forecasting price, Raymond decided to concentrate instead on predicting volumes—the amount of oil and other energy sources global consumers would demand over time, and also the amount of available supply.5
The internal forecasts typically looked out two decades, although some went longer. They complemented the extended cycles of ExxonMobil’s capital investments—up to fifty years, in the case of some oil and gas extraction projects, and up to a century, in the case of the longevity of its American refineries. Around 2004, the corporation’s forecasters began to shift their baseline target date to 2030. The work they completed seemed compelling enough to form the basis for the education campaign aimed at Informed Influentials. By the time of Raymond’s visit to the White House, the corporation had ordered up a glossy book filled with colorful charts entitled, “The Outlook for Energy: A View to 2030.”
The forecast opened with a comprehensive picture of the present. In 2005, the world’s 6.4 billion people consumed about 245 million barrels per day of “oil equivalent” energy—that is, actual barrels of oil and other liquids (84 million of those) and the equivalent of 150 million barrels per day of other sources of energy, such as natural gas, coal, hydropower, nuclear power, biomass, wind, and solar power. To calculate how this portrait might change by 2030, the corporation’s analysts first adopted the World Bank’s prediction that the world’s population would grow to 8 billion. They then examined, one by one, the economic growth prospects for about one hundred different countries and regions worldwide. Historically, ExxonMobil’s analysts believed, the pace of a country’s economic growth typically explained about two thirds of its changes in energy consumption; population changes explained only about one third. Economic activity, in other words, not the number of people, would be the most important factor in future energy demand. When they added up all of their individual country predictions, ExxonMobil’s analysts concluded that the world’s economy would grow on average by about 3 percent per year until 2030.6
In each country they also examined what types of energy were likely to be consumed—how much transportation fuel for cars and trucks, and how much energy for generating electric power. They assumed, based on the historical experiences of the United States and Europe, that as poor people around the world grew richer, they would buy more and more cars. They calculated that national populations would feel sated in their automobile consumption only when they reached about eight hundred cars per one thousand people, a rate of ownership that America and the European Union were approaching. The ExxonMobil forecasters made additional assumptions about the rate at which hybrid cars were likely to be adopted, the rate at which office buildings and refrigerators would become more energy efficient, the rate at which wind farms and nuclear power plants would be built, and the rate at which g
overnments around the world would impose taxes on carbon-based fuels or caps on greenhouse gas emissions.
They concluded that worldwide energy demand would grow by about 35 percent overall by 2030 and that demand for oil and gas liquids would rise by about 22 percent, to 108 million barrels per day. Far from a green or clean energy future, they foresaw that energy-poor countries would burn fossil fuels increasingly as they industrialized. Flat or declining oil consumption in the United States and Europe, due in part to more efficient hybrid cars, would be more than offset by gasoline consumption in Asia’s fast-growing economies, particularly in China, where ExxonMobil’s forecasters expected that the number of cars and light trucks in service would grow from about 12 million in 2005 to about 110 million in 2030. (By comparison, there were about 220 million vehicles in the European Union in 2005, and about 240 million in the United States.)7
The transportation sector—cars, pickup trucks, heavy trucks, airplanes, ships, and trains—was the most important factor in the global market for liquid oil. Three quarters of the roughly 20 million barrels of oil the United States consumed each day was as transportation fuel; the rest went to industrial uses, such as the manufacture of plastics. Virtually no oil went to generate electricity—coal, natural gas, hydroelectric, and nuclear energy provided the main sources of electric power generation. It drove the analysts and forecasters in ExxonMobil’s Strategic Planning department in Irving crazy when they heard radio talk-show hosts and politicians advocate that the United States should quickly build more windmills to free itself from dependency on oil imports from the Middle East; unless all-electric cars and vehicles spread very rapidly in the United States, windmill construction, whatever its pace, would have little impact on the amount of foreign oil the United States consumed.