Peak Oil: ExxonMobil CEO Rex Tillerson on Energy

Well, it would have a pretty dramatic effect on economies the world over, certainly our own, but also economies elsewhere. Thriving economies in China would feel the effects of that because energy is so much a part of all economies, and all economies are connected. I think it's one of the reasons when people make these projections that oil could go to those levels, I've never subscribed to a view that they would ever reach that level.

Only in the event that you take major supplying countries completely out of the market. If you take Saudi Arabia off the map, that's a problem.

Well, I wouldn't want to exactly characterize it that way, and if there was, I probably wouldn't tell you. But we do follow very closely all of the technology developments in the non-oil, natural gas space, because if there are improvements evident at rates faster than we expected, we want to know about that. We've always felt we have the financial wherewithal to enter that space any time we choose. So some of the things we have been doing that people are aware of is we have been researching biofuels from algae. We've been researching it from a little bit different perspective than others, working with a company called Synthetic Genomics Incorporated. These were the people who mapped the human genome, because we wanted to investigate with them what the possibilities around genetically modified algae might present. We've had a collaborative underway with them for some time. We've come to understand some limits of that technology, or limits as we understand it today, which doesn't mean it's limited forever. In fact, I think it has redirected them to go think about some things now because of the joint work we've done. But we've continued that work, moving now to more the fundamental biology around these.

Well, if I were to vision, here's where, if you could solve this problem, which we can't solve today, is if I could develop a strain of algae that I could modify biologically or genetically, and I could cause this algae to want to produce itself very rapidly, and I could cause it to want to take the oils that it produces and rather than retain it in the cellular structure, which is what they do today, and to get it you have to crush the algae and destroy it, rather the algae would expel the oil rapidly. And it would do this over a cycle, and then it would do it in a controlled environment called a reactor, in which I would control the environment. I'd build that reactor right in the middle of my refinery, and I'd have an algae fuel-making machine that's right into the spigot off this fuel that looks a lot like diesel, by the way, when it expels it.

With enough technology advancement, it is a possibility. And what we know is we know reactor design. That's what we're good at. This is what we build inside our refineries and our chemical plants. What we need is someone who can make algae for me that'll do what it'll do, the Tillerson vision of what I want an algae to do, to behave. And so that's pretty far out there. And once you perfect it, what, 25 years? Well, probably further than that. These are very challenging problems, because, and the reason we engage in them is because we want to understand how high is the hurdle, not necessarily from a threat standpoint, but from an opportunity standpoint. And with the work we've done to this point in this particular space, what we've come to understand is the hurdle's pretty high. And the hurdle seems to exist at the basic science level, which means it's even more difficult to solve. If it's operating at something that says, well, up here I understand the science and if I could just modify this a little bit then I can get a breakthrough, that's one level of difficulty. When you take things down to their most fundamental level and you say, you know, the reason this doesn't work is that God just didn't create it to do that, now how you want to deal with that, that's a lot tougher. Doesn't mean you, because of these interesting things that people are doing with genomics and hybrids, that you may not be able to fundamentally alter that. But the pathway by which you get there is not as certain. And so it means it's probably further out there. It's hard to bet against science, though.

Never. Because you see in anybody's lifetime, I mean, it's extraordinary what we've seen just in our lifetime. Genome, the brain, the way we work today. I would never have dreamed in my company that we would be doing the things we're doing. I stand in awe of my engineers and scientists and what they do today that I never would have dreamed possible when I was a young engineer working.

Well, I think we need to agree on our national priorities around energy, try and frame that in a way that informs us, the people that are in that business, but not just us that are in the fossil fuel business, but it informs others who are pursuing other forms of energy, and map a way forward that allows, in my view, allows the market forces to come to bear on how those options and alternatives are sorted through and advanced. Much of what's been done to this point has been an enormous amount of interference with that process of discovery and perfection and improvement. And it's been by well-intended people, and I appreciate that, it's been by well-intended people who want to promote the advancement of alternative energy sources. But in the kinds of programs that have been put in place that involve mandates and enormous incentives, in effect price controls on how the energy off-take occurs from wind power and solar power, I've always expressed to people that what you have really done is you have shackled the innovative process. Because what drives innovation in many respects is failure. That I'm that close, if I could just get it, if I could just overcome this, I've got the winner. And so when it is succeeding for false reasons, it's succeeding because it doesn't have a competitor, succeeding because it is so incentivized, what we've really done is slowed down the process of innovation and breakthrough. I think there are enormous challenges around these alternatives which need to be dealt with. And so I think it's more a question of how does the US government want to support and promote the research activities that are necessary to take these forms of energy to a different level of performance. And whether that's battery technology, or whether it's efficiencies of wind, or whether it's transmission systems that behave in different ways, how do you want to supply the underlying research, but then allow the commercial activities up here to move about in the free market.

And there are good models for this. There are good models in the National Labs. There are great models through DARPA. There are models out there that have served us well, gave us the internet. We just have so much intervention right now in these energy markets that, in my view, it's not been healthy for the advancement of those alternatives.

More fundamental research, less mandates. I mean, wind has received subsidies for more than 20 years now. Maybe if we took the subsidy off and it was challenged to perform, people would take it to a new level. They haven't had to. So I think a lot of this is how do you want to structure our pursuit of our future energy supplies. And the president has said he is a proponent of all of the above, and we are too. We are too. That's a very sensible strategy. And how do you want to use the things that are very sure and we know how to use them, use them better, use oil better, use gasoline, diesel, use all that stuff better. And there are things we yet can do while you're pursuing that next generation that is everyone's vision. How do you want to lay the road map out to do that and put the road map in place so that it survives you, Mr. President, because none of your predecessors have been successful in doing that.

I've had parts of that conversation with him, and I've had it with others.

He has a lot of people speaking into that ear.

My pleasure.