Ladies and gentlemen …
It is a pleasure to address the 36th Annual Oil & Money Conference.
This gathering has long been an important event for our industry – bringing together a broad array of leaders from the world over, representing both governments and business, to discuss the challenges faced by the energy sector.
And because of the scientific and engineering culture that pervades our industry, this discussion of challenges soon becomes an exploration for solutions – for how we can find ways to produce and use energy in ways that are increasingly safe, secure, and environmentally responsible.
Last night I had the honor of accepting the Petroleum Executive of the Year Award – for which I am deeply grateful.
It gave me an opportunity to reflect in a personal way on my four decades in the energy sector – and the extraordinary changes and transformation I have seen over time.
It is impossible to look at our industry’s achievements on so many frontiers and not be humbled. Humbled by the scale of the challenges we have faced. Humbled by the technological solutions we have found.
It is an essential truth that our industry’s technological marvels and greatest achievements are never the work of a single man or woman.
They are the product of countless scientists, engineers, and entrepreneurs – past and present – who have invested and worked together to create innovations that transform our world for the better.
From its first days, our industry has pioneered technologies that have unlocked new supplies of energy – energy that has brought advancement and opportunity to billions of people.
Even now, in the midst of markets undergoing far-reaching transformation and change, we continue to invest and innovate – not just to expand supplies of energy for developed economies, but for the billions of people who still live in “energy poverty” around the world.
The story of our industry is a story of innovation and cooperation – across companies, cultures, and continents.
And these hallmarks of our work together will also be the key to meeting our shared aspirations to further expand supplies, increase energy efficiency, and protect the environment.
This meeting of Oil & Money takes place just two months before the United Nations Climate Change Conference in Paris.
At this time our industry is rightly engaged in discussions with the public and policymakers to identify policies that would best position society to reduce emissions through new efficiencies and new technologies.
This morning, I will discuss the elements and principles that should guide our broader public discourse about energy: first, why we must recognize the role of investment and innovation in helping unlock new supplies of energy; second, how our industry innovations are already helping bring about new efficiencies and environmental benefits; and, finally, I will discuss the policy actions we can take now to enable innovation and cooperation to continue in the decades to come.
Innovation Transforms the World
As this audience knows – and the world has come to recognize, we are living through a period of extraordinary transformation in the energy sector.
Global energy markets have begun to reflect a fundamental and far-reaching realignment of energy supply and demand.
Decades of sustained investment, innovation, and collaboration across the industry have opened up resources from offshore deepwater and ultra-deepwater. Constantly advancing technologies have made it possible to develop oil sands safely and responsibly. And most recently, new technologies and techniques pioneered by our industry made it possible to unlock vast new supplies of oil and natural gas from North American shale.
The result of these innovations has been a growth in energy supplies that few would have imagined even a few years ago.
However, this growth in new supplies from stable areas comes just as economic growth in both developed and developing economies has been sluggish. And this is moderating energy demand.
The convergence of these two market trends has led to a significant downturn in the commodity cycle.
None of us can know how long it will last, but we know what it means for our businesses: We must operate more effectively and efficiently than ever before.
For those companies that do find increased efficiencies through better project management, advanced technologies, and path-breaking innovations, there will be tremendous business opportunities ahead.
We know this because the need for energy is universal. In the decades ahead, the world will need us to develop new technologies and new supplies of energy because the global demand for energy is on a trajectory to grow – and grow significantly.
At ExxonMobil, we foresee future energy demand being shaped by three major forces: population growth, trade and economic development, and energy efficiency.
Taken together, we project global economic output will more than double by the year 2040.
In addition, the world’s population will grow, adding about 2 billion new consumers of energy and 3 billion people will join the ranks of the middle class. Even after factoring in continuing increases in energy efficiency, we expect global energy demand will still grow by about 30 percent by 2040.
This fundamental fact, that energy demand and economic growth are inextricably related, guides our view about the importance of our industry meeting its responsibilities.
There is also a humanitarian dimension and a moral imperative to what we do. Expanding energy supplies safely and responsibly will be critical to securing the future for billions of people.
Without such ingenuity and innovation, the world will lack the reliable and affordable energy needed to end “energy poverty.”
Of course, it can be hard for those living in advanced economies to understand the magnitude and seriousness of energy poverty. But the leaders and workers in the energy sector have a broad, global perspective. We have seen how energy poverty robs families and communities – and even whole nations – of the opportunity to achieve their full potential.
According to the latest data, about one in five human beings still has no access to electricity. And about two out of five people around the world must rely on biomass such as wood, charcoal, or animal waste for basic cooking and heating needs.
The costs of this energy poverty are steep. The World Health Organization estimated that in 2012 alone more than 4 million people around the world died from household air pollution.
For billions of people living around the world, simply gaining access to reliable, affordable energy is the means to a healthier and better life. For their communities, energy is the key to cleaner water; better sanitation; safer, more nutritious food; storage of medicines; and even light for education, study, and personal advancement.
The Benefits of Integrated Technologies
Energy is essential for life, and the oil and natural gas industry will be instrumental to meeting this fundamental and universal human need. This means that our investments and innovations will be vital in the decades ahead.
In fact, the world will need to pursue all energy sources, wherever they are economically competitive.
The world will need wind, solar, and other renewables. We will need increased use of nuclear power. And, importantly, we will need coal, oil, and natural gas.
The IEA and other credible energy analyses all agree that carbon-based fuels will continue to meet about three-quarters of global energy needs through 2040.
But with this increased energy demand comes a second challenge: reducing the greenhouse gas emissions associated with energy use.
From the very beginning of concern on this issue, ExxonMobil scientists and engineers have been involved in discussions and analysis of climate change. These efforts started internally as early as the 1970s. They led to work with the U.N.’s Intergovernmental Panel on Climate Change and collaboration with academic institutions and to reaching out to policymakers and others, who sought to advance scientific understanding and policy dialogue.
We believe the risks of climate change are serious and warrant thoughtful action. We also believe that by taking sound and wise actions now we can better mitigate and manage those risks.
But as we work together to reduce emissions, it is critical we do so in a way that recognizes the importance of reliable and affordable energy in supporting human progress across society and the economy.
Throughout our history, the energy industry has continuously proven that technological advances can bring far-reaching and positive change.
Our innovations have brought new supplies to the market and improved energy security and international trade. Technology has also advanced efficiency and contributed to environmental gains.
Just consider the success of the U.S. shale revolution on all these fronts. Technological advances have created a new era of energy abundance in North America – spurring job growth, fueling economic opportunity, and unleashing a manufacturing renaissance.
Moreover, because natural gas emits up to 60 percent less carbon dioxide than coal when used for power generation, natural gas from shale has been instrumental in reducing U.S. carbon dioxide emissions to levels not seen since the 1990s.
Remarkably, these reductions have come even as the U.S. economy has grown about 60 percent and added 50 million more energy consumers.
It is worth noting that these impressive gains have come from the actions of innovative companies operating in free markets – and they have come in the absence of a comprehensive cost-of-carbon policy in the United States.
Fulfilling our Roles to Advance Technology
To build on these types of successes and make progress around the globe, it is important for leaders from every sector of society to reflect on the specific roles and strengths that government and industry can bring to this cooperative effort.
Industry must build and maintain public trust by continuing to operate with safety and integrity and a commitment to responsible environmental stewardship.
We have proven that with the right policies in place, the competition and cooperation that are inherent to free markets will spur us to invest and innovate, creating integrated solutions that improve the production and use of energy at every step in the value chain.
At ExxonMobil, we are working to do our part to reduce emissions and increase our own energy efficiency, reduce flaring volumes, and deploy proven technologies like cogeneration of steam and electric power.
We are also a global leader in carbon capture and sequestration. ExxonMobil now has a working interest in more than one-third of the world’s current CCS capacity, and we captured more than 6 million metric tons of carbon dioxide for sequestration last year alone. This is the equivalent of eliminating the annual greenhouse gas emissions of more than 1 million passenger vehicles.
In addition, we are collaborating in research and development into revolutionary ways to make carbon capture and sequestration more affordable and commercially viable.
ExxonMobil is also actively involved in research and development of next-generation technologies in advanced biofuels, and we continue to invest in breakthrough research across a broad spectrum of other energy technologies – both directly and in partnerships with leading institutions such as MIT, Stanford, and Princeton.
Advancing innovation in the energy sector – and across society – will require companies to make long-term investments in research and to develop cost-efficient solutions that are capable of broad commercial application.
As we consider the best policies for the future, it is clear government has a special role to play in this effort, too.
Governments around the world must put in place sound tax, legal, and regulatory frameworks. With sound policies enacted, investment, innovation, and cooperation can flourish.
Government works best when it maintains a level playing field; opens the doors for competition; and refrains from picking winners and losers.
When considering policy options to address the risks of climate change, policymakers should draw from the best insights from economics, science, and engineering.
As I mentioned earlier, the U.S. has achieved remarkable reductions in not just greenhouse gas intensity measures, but in absolute levels of carbon dioxide emissions through thoughtful regulation aimed at both energy efficiency, such as CAFE standards, building efficiency standards, and continued improvements in emissions levels related to industrial processes.
If, policymakers conclude that more action is required, such as putting a more direct cost to carbon to incentivize different choices, we suggest that these policies ensure a uniform and predictable cost of carbon across the economy; that this lets markets drive solutions; that maximize transparency, reduce complexity, and promote global participation.
For some years now, ExxonMobil has held the view that a “revenue-neutral carbon tax” is the best option to fulfill these key principles.
Instead of subsidies and mandates that distort markets, stifle innovation, and raise energy costs, such a carbon tax could help create the conditions to reduce greenhouse gas emissions in a way that spurs new efficiencies and new technologies.
The revenue-neutral carbon tax could be a workable policy framework for countries around the world – and the policy most likely to preserve the ability of every sector of society to seek out new efficiencies and new technologies.
Sustaining Innovation into the Future
As we look to the energy challenges of the future, the energy policies we establish today will affect the investment and innovations of tomorrow. And those technologies will help determine the economic growth and individual opportunities for future generations.
In the months and years ahead, energy policy will be at the center of public discussions and debate..
It will be up to industry and business leaders, innovators, and investors – the people in this room – to communicate the policy principles that can be the foundation for international understanding, cooperation, and meaningful action.
By appreciating the universal need for energy in advancement of economies and the human condition, we can help lift up every nation.
By valuing the role of sustained innovation, we can learn from our industry’s history about how free markets drive us to invest, develop, and deploy promising new technologies.
And by seeking wise and cooperative solutions, we can address the risks of climate change together and build a better future for all.
I thank you for your kind attention.