The shaky economic recovery could be threatened if US energy policies push up prices, ExxonMobil chairman and CEO Rex Tillerson said in Houston last month.
‘You can raise taxes, raise royalties – it's going to ultimately increase the cost of energy, because it lowers the amount of revenue left over for the investor to go invest. That means things that are at the margin don't get done,' said Tillerson.
US lawmakers and government agencies are considering a variety of measures that could raise costs for oil & gas companies, including taxes on carbon emissions and higher royalty fees for hydrocarbon production.
Much deepwater and onshore production operates ‘pretty close to the margin', Tillerson noted. Higher fees could cause operators to scuttle less profitable projects, which could in turn create energy shortages.
‘The thing that policy makers need to appreciate in this country is, there's an awful lot of the production capacity that pretty well operates at the margin,' Tillerson cautioned. ‘And when you move that price point, either through higher taxes or higher royalty . . . you will have a domestic supply effect.'
Speaking at a luncheon where he received a civic leadership award from the World Affairs Council of Houston, Tillerson cited evidence that energy price spikes had historically preceded economic recession in the US.
‘Most economists would agree there's a level at which those energy prices do have a detrimental effect,' he said. ‘We're not out of the last economic recession. It does concern me that energy prices not become an obstacle to the economic recovery, and that's why I'm concerned about some of the policy decisions that are made in this country that could lead to higher energy prices.'
Tillerson rated President Obama's energy policy ‘about as good as anybody else's has been', adding: ‘Our energy policy has been to go out and cause the rest of the world's energy resource owners to develop their energy and sell it to us for a really low price. That's been our energy policy over last 30 years and we don't like where it's led us now.'
But recent events have led to more ‘energy awareness' and a ‘real thirst around knowledge of energy' among both consumers and lawmakers to understand more, he said.
‘I think the country as a whole is moving in the right direction,' Tillerson concluded. ‘The president is trying to understand [energy], and he is trying to make some steps which, in his view, are very well intended. And I take him at his good intentions. They fall considerably short of what I think, personally, needs to be done in the way of energy policy. But I am encouraged that we at least are talking about some of the right things now.' OE
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