>> rex tillerson was here, he is chairman & ceo of exxonmobil it is the world's largest refiner of petroleum products. he joined exxon in 1975 as a 24-year-old engineer and has held a variety of foreign and domestic leadership roles. today he is positioned its company to capture the promise of a natural gas revolution as the world transitions to cleaner fuels, natural gas and electricity are expected to account for more than 60% of the world's energy demands by 2040. in 2009 he orchestrated the acquisition of xto energy for over $30 billion. it remains exxon's largest deal since the megamerger with mob nil 1999. i am pleased to have rex tillerson on this program, welcome. >> thank you, charlie. it's a pleasure to be here. let me talk about news first quickly, hugo chavez. what impact will his death and whatever changes are met take place in venezuela mean for the oil industry? >> well, it's very early to

tell, obviously. he has just now passed away, and under their constitution the costs for them to hold elections within 30 days because he never stood for an-- and until we see the outcome of that election and in particular we see how organized the opposition parties may be able to get themselves together for the election. it's going to be hard to tell what the immediate affect will be. and whether his successor chooses to carry on his programs and in particular the focus of his programs and the alliances that he established, or whether they choose to broaden out their perspectives. and i think at this stage it is very difficult to tell what the successor may choose to do. >> he nationalized the oil industry in venezuela. >> well, he, they always had a national oil company. when he took over he did narrow the scope of the holdings of international

oil companies, changed the contracts. and invited us to either accept the new contracts or to leave the country. and i accepted his invitation to leave the country. >> and will you go back now if the government has a different policy? >> well, again, i think it's a little bit early to tell. certainly a number of things would need to change to make the investment climate there much more attractive for us and i think for others as well and to gain the security around those investments that we would want to return. we have been in and out of venezuela before. we were in venezuela. we left venezuela, we went back and we left again. so it's certainly something that we will keep our eye on as to what policy choices they may make. there is also the oil prices today, they have risen dramatically recently at the pump. what's causing it. >> well this run-up recently

of gasoline prices in stick is fairly predictable seasonably in the united states. the oil price has been pretty stable for the last 12 months. it's kind of hovering in the 100 to 110, 115 dollar barrel range. and so it has volatility but the gas prices really occurred for a couple of reasons. one, we always have refinery maintenance early in the year as we are preparing to change the gasoline blend from winter grade gasoline to summer grade glass lean to comply with environmental regulations. this year was an extraordinarily heavier year in refinery maintenance and there's no particular reason for that other than refineries have certain units that must be maintained. they have to take them completely out of service every two to three years to do that and a number of those just happened to line up on the schedule this year across the industry. so refinery utilization

rates dropped into the low 80s for a period while that was going on. and they are now gradually returning those units to service so we would expect that the gasoline prices have moderated. i think you are beginning to see a little bit of a drop. >> rose: so going into the summer it will be lower. >> depending what the oil price does. because the fact of the matter is a gallon of gasoline, 88% of that price is determined by the oil price, and state and federal taxes. so what's the oil price,-- watch the oil price because it will direct-line fluence where gasoline prices will go. >> rose: when you look at this administerin administering-- administration and energy policy, one of the key things is the keystone pipeline. you now have the state department saying that they think it should go ahead effectively. >> they're saying it again. >> rose: yeah. >> that it should go ahead. you know, this is a project that's been four years in the regulatory process, over a hundred public meetings, town hall meetings were conducted around the process for this pipeline permit.

>> a supplement environmental impact. a second has been prepared with now two findings by the state department that there will be no measurable harm to the environment by allowing the project to go forward. so it's an extremely important project, i think, to the united states of america, certainly an important project to canada. and we would hope that sufficient work has now been done that people would allow the project to proceed. i think it is an poornt important example of part of the regulatory struggles that we have in this country. the processes are extremely lengthy, they're subject to reopening. they're subject to challenge and oftentimes when one gets to what you believe you have followed all the steps of the process and satisfied, you still cannot get the permit that you're seeking. >> why do you think environmental groups made

such a priority of the keystone pipeline? >> well, i would not want to speak for all environmental groups. because there are a number of different interested parties out there. i think broadly speaking, there is a segment of the environmental groups who are very concerned about the burning of fossil fuels, they're very concerned about the development of fossil fuels and new sources. and i think in a sort of obtuse way they took a view that if they could prevent the transport of the crude oil from canada to the united states, then that would throw an obstacle in the way of future developments. i think they have probably misjudged canada's resolve to see its natural resources developed. >> when you look at gas, a carbon tax, you are in favor? >> well,. >> you're not opposed here is the way i would characterize it, at some

point when policymakers get around to wanting to deal with additional policies around a climate and in particular around ways in which policies can incentivized certain behavior in consumers and investors, there are a lot of different models that people have discussed. one of which is cap and trade which europe has been trying now for some time to not a lot of great success. partly because of the economic depression, recession that europe has been suffering now and finds themselves in. my view on it has been if you are's going to undertake a policy that has those characteristics, my view is, a carbon tax is much more straightforward. it's much simpler to administration and it does not leave itself open to add much-- az much gaming of the system as a trading platform does. a trading platform is going to impose a certain transactional cost. >> but you prefer that to more regulation.

>> well, it depends on the regulation, quite frankly. and how that regulation is structured. i would say this, i think as you look at the success the united states has already achieved in addressing co2 emissions, greenhouse gas emotions. >> those successes you are in favor of in terms of what they've done on emission standards within i think clearly they have been beneficial. >> to country. >> to the country. now climate change, imagine greenhouse-gas emissions is not a single country issue, we all know that the u.s. could cut its emissions to zero and perhaps still never influence the outcome. but if you look at where we find ourselves today compared to 1992, our greenhouse-gas emissions today are as low as they have been since 1992. that's why while we're assume-- consume being 15% more energy and we have an economy that is 60% larger. so clearly, a lot of policies around energy efficiency, some regulatory

driven, but some simply driven by businesses seeing this as an opportunity to capture products an services that the public wants because the public wants to lower their own emissions. and so it's a combination, i think, of a number of things. some regulatory driven. some education driven, some marketing driven to the public that has produced the result we're seeing today. and we see more of that ahead of us in the future. some facilitated and incentivized by regulation. regulation which we think is sensible. and some simply driven by the public's desire to continue to improve in this area. >> speak of global warming, how are you different than lee raymond, your pred seser who had outspoken views about global warming? >>. >> well, i think in terms of my view of where we find ourselves on our understanding of global warming, we have continued to study this issue for decades. i think we probably as a

corporation were one of the first companies to identify this as a potential issue because we are a fossil fuels based company. and lee and others before him had undertaken studies. they had funded studies at mit and other universities to inform our understanding of the issue. as time has gone by those studies have continued, more data has been gathered, more sophistication in our ability and scientist's ability to create models that are better, more competent in their analysis. with all of that, though, the facts remain there are uncertainties around the climate, climate change, why it's changing, what the principal drivers of climate change are. and i think the issue that i think is unfortunate in the public discourse is that the loudest voices are what we call the absolutest, the people who are absolutely

certain that it is entirely man-made and you can attribute all of the climate change to nothing but man-made's burning of fossil fuels. and on the other end of the debate i would say the absolutests who say there is no relationship. and the truth of the matter based on our investigation is it's somewhere in between. climate science is probably one of the most extraordinarily complex areas of scientific study that anyone can undertake. the variables are numerous. many of the variables are measurable and we can replicate models. many of the variables we cannot measure them. we cannot model them but we know they're part of the climate system. so the models are extra-- extraordinarily complicated. and so therefore how certain dow feel about the competent sense-- competency of the model and its ability to predict the future. and it's my view that the models have become increasingly more competent because of high speed computing capabilities and just more sophisticated mathematical modelling, and

more data to inform the model. but at the end of it there are still a range of uncertain outcomes around these models. and every scientist i know agrees there's a range of uncertainty. and if you read that pc-- they talk about these ranges of uncertainty. >> but there is no -- no great difference of opinion on the impact of co2 emission into the atmosphere? >> there is, in terms of the impact -- >> of co2 there is a difference i think, a range in that model as to what the impact of 600 ppm versus 400 pph or 300 ppm would be. there are some ranges around those numbers, even, because it's not clear when we introduce that into the climate model how some of the other elements we're not able to model so well may act to, in a different way. it's clear that there is an impact. >> right. >> was's not clear is our ability to measure with a

great degree of accuracy or certainty exactly how large that impact will be. and that's why most of the impact studies you see have ranges around them. >> and we've had a series of weather incidents, and some people believes there's a link between those weather incidents, hurricane sandy and others, and what's happening in terms of global warming. do you believe there is some link there? >> i have seen no scientific studies to confirm. >> not a specific storm but -- >> nothing. >> in terms of those kinds of direct outcomes, you see no link? >> there has been nothing to confirm that there is a link. and we look at the studies, most of the-- most of the concerns people have that there is a link t is a hypothesis at this point. and so in science you have a high both-- hypothesis, now you must go and conclude and confirm the hypothesis. >> here is what i understand about your position on this.

that this world has been able to adapt to many things. and that it is a manageable problem. that we can deal with global warming if we focus on it, if we understand it, and if the models are accurate. >> well, i view global warming and climate change as a serious risk. and i'm in the risk management business. that's basically what our company does is manage all kinds of risk. and we're very comfortable managing risks that have a wide array of uncertainty around them. so as a look at climate change and global warming as a risk management challenge for policymakers, then i think you undertake it like we manage all risks. you take sensible steps that can mitigate the risk by controlling the rate of growth of greenhouse-gas emissions through a lot of the things we talked about. but you also have to contemplate the alternative outcomes that could say even if i do everything that i can possibly do, and even if

i hold greenhouse-gas emissions to some concentration level, what if, what if it turns out there's more to it than that, and we still have these consequences that everyone worries about, rising sea levels. storm activity. >> meaning coming from some other source? >> meaning that the climate system, that there are other elements of the climate system that may obviate this one single variable that we are concentrating on. because we're concentrating on a single variable and a climate system that has more than 30 variables. we're only working on one. and so that's that uncertainty issue, charlie, that i'm very comfortable dealing with the fact that i don't know. but what i do know is it's serious and i need to managed risks. so take mitigation steps. but i need to be thinking about so what i do want to do in the event that i can't control the outcome or the outcome occurs in spite of what i've done. and that's where my engineering thinking come into the equation.

because as i have been quoted as saying, there are engineering solutions to these events. i'm not talking about geo engineering to-- i'm talking about where we build, where we locate people, how we mitigate the effects of storms. and those are sensible things to me to do because even if the storms are unrelate food climate change, they still have the same devastating impact on individuals and property. why aren't we doing some things policy wise to deal with that, whether it has to do with climate change or not? >> do we have a national energy policy? >> no. >> and whose's failure is that? >> i've said many times, we've had a national energy policy for years and our policy has been to incentivize other countries to develop their oil and natural gas and sell it to us in a price we really like. >> rose: and incentivize it by what? >> by being a big consumer, by being a reliable consumer. and in return, there are trade relations established and other foreign relations

established. but i think you know the fault lies ultimately with our leaders and our policymakers. i understand-- . >> rose: republican or democrat. >> both. this is a nonpartisan issue. and i think it lies in large measure a result of our system of governing where we change our leaders. every sometimes four years, every two years, every eight years. an energy policy requires you to think in terms of very long time frames. it requires to you put steps in place and stay with those, stay with those steps through a lot of ups and downs but be consistent with it. there are just, it's energy is such a huge part of our question and life and world that there are a lot of people interested in it and there are always a lot of other people who have something they would like to say about what should be done. >> rose: as you know there are many people who suspect that oil companies, those like exxon have huge amounts of influence in washington.

and if you wanted a national energy policy you could get one. >> i wish that were true. we've-- you know, i've participated, others of my counterparts have participated in a wide array of discussions, directly through the national petroleum council which is produced some, i think, truly important reports and works. yet the results of those reports seem to never translate themselves into policy. i can't really explain why. because these are very thoughtful, very far reaching undertakings. >> you are a giant company, highest market cap in the world. a huge company even though a number of employees has declined a bit because of efficiencies or whatever the reason might be. there are those who ask this question about exxon. are you an american company or are you something else? >> we're an american company. there should be no mistake about that.

we have a long history and heritage of-- our roots are here in america. the fact that we are also a global, an international company, is a part of, you know, is also a part of who we are. and we have been as well internationally global for most of that more than 125 year history. if you look at the makeup of our employees, 60 plus percent of our employees are non-u.s. citizens. but that's just reflective of the fact that we operate, have significant operations in over 44 countries around the world. so as one might expect we're going to populate ourselves with people who work in those countries. >> does that mean when exxon makes a decision it is also a thing about what is in the national interests in terms of energy especially? >> i think anything that promotes global energy security is in u.s. national interest. and so any steps we take to develop new resources, to promote trading

relationships, to promote stability in countries from a socioeconomic and geo political perspective, that is all in u.s. national interest. we do not represent the u.s. government as we travel around the worldment we never pretend to do that. and we never ask the u.s. government to do anything on our behalf. we're perfectly willing and prefer to enter countries construct our contracts, and make our negotiations, e on mob toil the host country. >> you know that president bush 43 supposed that nobody tells those guys what to do. they live in your hometown. >> yes, he does. he is a wonderful man. they do see each other from time to time. >> have you heard that quote before. >> i have, i have from him and some others. >> i hope it's made it a positive way because i hope people do not see us as

being indifferent to national interest. i think our company, our employees were all very patriotic about our country. we're also supportive of our employees and other countries. and how they feel about their own national interest. at the end of it, you know, it's up to me and its leadership and the corporation to insurance that at all times though we are consistent with all of the laws, all of the rules, wherever we are operating anywhere in the world. >> as you know steve-- wrote a book about exxon. did you read it? >> i have not. >> why not. >> well, i have a limited discretionary amount of time to read. >> what is it about exxon, the company that you worked for all your life, the company as steve called it is a very good --. >> i have read some reviews of the book. and in all honesty i have taken the time to read it because when i do read it i tend to read things that are

more useful to my day-to-day decision-making and inform me or to just get a little bit of enjoyment from reading. >> rose: you think you might not have enjoyed this. >> i am sure i will get around to it. >> rose: it was about the power of exxon. it was almost like a state into itself, that is the central argument. >> uh-huh. >> rose: that he makes. and that it's almost has a mind-set that is unique because of its power. >> i have heard others make the comment to me that there is an illusion to, or a reference to exxonmobil having its own state department. >> yes, that's right. >> rose: i would tell you it's not quite that organized. but. >> dow wish it were? >> no, because i think we're very efficient on how we go about it. and you know when you're in the countries that we conduct business in, and the countries where we need to be because they are resource-rich countries,

we're in a lot of countries where the geo politics are complex and part of our risk management and my risk management responsibility is to understand that, to develop important relationships. and at the end of it, it's no surprise, all things come down to your personal relationships, and any country when you're going to make significant commitments you have to look the head of state of that country eyeball to eyeball and say to them i'm going to make this commitment. i'm counting on you to meet your commitments because i will be here a long time. and over the course of the time that i'm here, there will come a day when we'll have disagreements. and things won't be going the way you want them or the way i want them. >> you're asking them to do what. >> that i have their personal commitment that they will stand beside their part of the bargain. that is all i can ask. i know the deal i'm entering into. i have accepted it. you accepted it. the only thing we can ask of each other is that we will

always hon they are dealnd and our commitments to that. and when problems arise, we'll work it out. we'll find a way to work it out. >> rose: did exxon have deals with qaddafi and lib ya, hussein and iraq-- libya, hussein and-- none in iran, we had none in iraq with hussein. we were there pryer to hussein's term of power and we're back in iraq now. we had some exploration blocs in libya that we enteredded into in the post normallization of relations with libya. and colonel qaddafi. >> rose: when he gave up his nuclear ambitions. >> so i had a conversation very much like that with him. >> did you think pu were talking to a rational man. >> yes, believe it or not. he was pretty rational in the meeting i had with him. where we talked about what i was going to do, and the things. and we had some other things that we thought we could do and his interest in that. and that all coy expect is that he'll stand by his side of the deal and i promise i

will stand by my. >> rose: if you look at the future of fossil fuels. how long are those sources of energy going to be with us. >> it's interesting, charlie, if you look inside, i don't think we have it in our most recent energy outlook but in years past we had a foldout in our energy outlook that showed in the 120 year history of energy con sump in-- consumption and it began way back there with timber. timber was the principal energy source in the world then suddenly coal came not picture it took about 50, 60 years for coal to displace timber and suddenly crude oil was found and it took about 60, 70 years for crude oil and natural gas so it takes, 100 years or more for some new breakthrough in energy supply to penetrate the market sufficiently to become the dominant source. and i think as we all know there are a lot of efforts under way to find other

sources of energy that are not our traditional sources of oil, natural gas and coal. and there's been progress in that area. the k458 eng that most people i think have difficulty coming to grips with is the sheer enormity of energy consumption so if we look at our own energy outlook and we look at things like renewable wind, solar, biofuels. we have those sources of energy over the next 30 years growing 7 and 800%. but in the year 2040 they'll supply 1%. >> rose: even though they go. >> because they are growing from such a small base and the total demand for energy is growing on a much larger base dramatically. >> rose: because of the rise in asia. >> of the developing part of the world. >> rose: the economic development and a growing middle class population. >> yes. so what's important is that as we look out there, there will be sufficient traditional fuels, oil, natural gas, coal to still power economies, while these

new, newer sources are growing. and as they grow, technology will improve. next generation will be developed. and a lot of the challenges that we are unable to overcome today in those sources will eventually be overcome. and as they do, then they begin to grow just like coal replaced trees and oil replaced coal and i don't think it will happen in my lifetime. but it's not beyond my view that eventually things will evolve to that. >> rose: and exxon who wants to promote the idea of multiple sources of energy has no reason for the company not to want to see the fullest exploitation of all sources of energy because you have the resources to take advantage of getting on the cutting edge of those resources, by that i mean financial resources and development resources. >> we have always said that it is important that we pursue all forms of energy because we are a technology-based company. we believe in technology. but we also know that we have an enormous

responsibility. because as i said, if i can look out for the next 30 years, in the year 2040, oil, natural gas, coal are still going to supply 80% of the world's income need, whether we desire that to be the future or not, that's just going to be the facts. so we're in that business. and we do support developing alternative sources of energy and other suppliers because to supply each incremental growth in that demand we're constantly having to push our technology out to new frontiers. you remember all of the discussions of peek oil theorists. >> rose: what happened to that. >> i used to tell them the problem with that theory is you presuming you know the size of the container. and technology keeps enlarging the container and enlarging the size of the container. resources that we long knew were in deep water, 10,000 feet of water but that we said we had no way. >> rose: no technology to reach it. >> we had no way to know how

to get there. well now it's routine. arctic resources, don't know how we will do it. today we're producing them. unconventional shale oil, knew it was there, could 23409 extract it commercially. now it is on this enormous growth. so it's all technology enabled. and so that's why we believe technology will name these others supplies. >> rose: there is no bigger subject in the international field than natural gas that is everybody is talking about. as they talk about how it adds to american economic security because no longer dependent on gas. secondly, they look at it as somehow replacing comb ar or making less of a dependence on coal. give me your sense of why you saw this coming, and made a huge capital investment. >> well, we actually saw this shift coming more than a decade ago. and our first move in to recognizing and securing participation in the growing world of natural gas was-- natural gas was the establishment and creation of our huge liquified

natural gas platform in qatar with qatar petroleum. qatar is now the largest exporter of-- energy in the world from being almost a nonplayer in the early 90s. >> and with it has become a political player. >> all of that, yeah, enabled by technology advancements. so we secured that. and we were watching what was going on in this shale, unconventional resource in north america which was largely pioneered by the independents. >> why is that? why wouldn't exxon have pioneered that. you had better resources. >> well, the nature of that resource at that time was to develop a small amount of resource with one well and then another well and so as we looked at it, we said you know, the materiality of that resource has not been established for us. it's not that we couldn't go do that, but we were not convinced that the technology was going to enable the resources to become material, significant. well, that's been proven to

be the case now. and so as we watched that be confirmed, and we continued to hold our views that natural gas will be the fastest growing source of international supply over the next 30 years, because of its a bundance now it's affordability, but very importantly, it's the desirable aspect of if environmentally, lower emissions, greater thermal efficiency, easily deployed -- >> is it in a word the solution to our energy problems? >> well, i would hate to hang the hat on that alone. but it is -- >> you believe it is historic. >> it is transfor mational. what has-- what has happened in north america because of the technologies of horizon fall, steerable drilling and the combining that with hydraulic track turing which the technology has pushed out that has been applied to shale oil, that is the

transformational piece of it is the combination of both the natural gas and the development of significant tight oil resources in the united states and canada that has really changing this dynamic globally. >> rose: when will america become energy independent? >> well-- . >> rose: i assume north america -- >> well, really we talk about it as north america because canada and the u.s. and even to a lesser extent mexico are very integrated in the infrastructure and transportation systems to move energy back and forth. and our own outlook we forecast in the year 2020 on a net imports basis we will be neutral to net exporting. and that includes crude oil and products. fuel products. so we'll be, we'll still be importing some gasoline but we'll be exporting a lot of gasoline. >> just for the record my understanding is in terms of oil o, saudi arabia is number one. >> russia number one, saudi arabia, number two, u.s. internationally.

>> rose: natural gas. >> well, we surpassed russia last year, so we're now number one, russia number two. >> rose: and so in the implications of that are histor anything terms of what it can do to the energy equation. >> well, i think what it does is it moves the united states, a substantial way down the path to energy security. and that has always been in my view what we should as fire for as a nation is energy security. energy yims carries so many different connotation force people. >> rose: essentially it means you have enough access to enough sources. >> yeah, energy security means that i can-- i can access the energy i need, reliability-- reliability and affordably to fuel my economy and the fact we have more domestic supplies gives us greater flexibility where we want to access those other supplies that may be available to us at actually a lower cost than what we can produce here domesticallyment but i have domestic supplies that are also available. so it increases our option

ability is what it does. >> and environmental activist clearly are concerned about fracking. >> well, there is a lot of concern. i think largely misplaced. perhaps people don't understand the way in which we construct these wells and carry out the operation to protect fresh water zones. and most of the concern is concerns that we're going to contaminate fresh water. we've been high drawallically fracturing wells since the 1960s, over a million wells have been high draw-- high drawallically fractured in the united states there has not been a documented case of substantial or even i would argue-- contamination of fresh water as a result of hydraulic fracturing. what i say that with a million data points, over 50 years, if it was a problem don't you think we would have figured that out by now it would have manifested itself somewhere?

yet no one can actually find an incident where that has been the case. so i think the fears are misplaced. some has been through a lot of less than perfect information that has been provided. >> rose: you blame the media in part too. >> well, i try-- . >> rose: and fears. >> i chided the media for not doing their homework. you know, go do your homework. a million wells, you can find where most of them are, go out and talk to people. if there was a problem, state regulators would have already been all over this. >> rose: so what coup set this idea? is it something that could be an impediment in the road that we can't foresee, for all the potential of natural gas. >> well, probably -- >> price could be. but that will correct itself. >> right,. >> if the markets are left alone, eventually the markets always will send the right signal to cause the

supply to be developed. so it's largely, i think, regulatory policy is what could up set the realization of this tremendous potential for our economy and our energy. >> rose: some people make the point, while you may be in favor of regulations some of the smaller companies can't, they don't have the resources to live within the same regulations. >> well, most of the small companies, all the small companies and these independents that really are the folks that are responsible for confirming the viability of this have long operated under state regulations. if they don't operate and comply with those state regulations, they're not in business very long. because you just can't, you can't go out and just ignore the regulatory oversight in the state of texas or oklahoma or louisiana or north dakotah, or anywhere else.

>> in terms of drilling, whether it's alaska or offshore or wherever it might be, is your philosophy drill, baby, drill. >> no, my philosophy is to make money. and so if i can drill, and make money, then that's what i want to do. but if really is for us it's about making quality investments for our shareholders. and it's not a quality investment if you cannot manage the risk around it. and so part of that decision to undertake whether it's a drilling program or an investment program in some other country, we have to have a very good understanding of what risk are we dealing with, how are we going to manage those. because you may have a fabulous opportunity but if you manage the risk poorly, you've cost yourself not only that opportunity but you've probably cost yourself a lot of others. >> rose: how do you evaluate what happened to bp in the gulf? >> well,-- not good risk management? >> well there were a number

of practices. and i did comment before congress and before a couple of the commissions that the, a number of operating practices around the drilling of that well were not what i would have called industry standard. and i made the comment we would never drill the well the way that well was drilled. and that is true. >> rose: would you have drilled in those waters but not drilled that wayness we have drilled in those waters and we've drilled a lot of wells. and bp had drilled a lot of wells successfully in those waters too. >> rose: isn't that what scares people that some human error will fail, even though you and a lot of other people believe it's safe. >> well, this was a-- this wasn't just one human error. this was a series of events in which certain technical judgements were made and in error for reasons that i really wouldn't want to speculate on. and it was the accumulation of these decisions that lead to the ultimate failure of

the system and the tragedy. there are always multiple, multi pet-- multiple opportunities to manage these risks. and there were multiple opportunities in this incident to have managed the risk. and they were not managed. now that's what a lot of this trial is about that's under way right now. so you know, i would be -- >> but there are lessons to be learned even though you're not bp. >> well, we all learned lessons from it. we stated it very carefully. and there have been a lot of document a-- documentation around just the technical aspects of what happened. what is it that people were saying that you could have made a different choice. why they made the choice they made is not clear to many. but it's clear that this was avoidable. there was nothing in this well that was particularly unusual to the kinds of wells, exploration wildcats

we drill all the time. and most technical people and my own experience in drilling a lot of wells when i read the technical reports, this was avoidable. >> rose: and exxon valdez, what were the lessons there. >> well, i think there were many lessons out of exxon valdez. obviously there was a breakdown in leadership on the ship itself. there was a breakdown of oversight, again by the regulator, the coast guard in some respects. the actual incident itself, you know, was an operating error on the part of someone in charge of the ship. the response to the incident, there were errors in the response made, delays that could have mitigated the impact. i think what, what it said

to exxonmobil or exxon at the time, exxon corporation were a couple of things. one that that incident as remote as it was, because of the way in which that incident would be perceived, by people everywhere, that had a huge impact then on the company, its reputation, and a huge impact on its employees elsewhere. so how we dealt with that was extremely important to first and foremost our own integrity, the integrity of our employees, the integrity of our company. and the take away from it was, something this simple should not have happened. and so why did it happen. and some of it has to do with people's mind-sets. and some of it has to do with comprehensive systems and operating processes. and all of that was dealt with when the people running

the company 20 years ago created what today is known as the operations integrity management system 59 exxonmobil. and that was put in place 20 years ago. it's been continuously improved and today it serves as a template for most of the other people in the industry. >> i think warren buffett said you can spend a lifetime building a reputation and you can lose it in a day. >> and that certainly happened for exxon corporation with the valdez. and all of our people, are mindful of that today. >> what does it do to the global economy if oil should go to 150, 175, 200 dollars a barrel? >> well, it would have a pretty dramatic affect on economies of the world over. certainly our own but also economies elsewhere, thriving economies in china would feel the affects of that. because energy is so much a part of all economic -- >> and all economies are

connected. >> and all economies are connected. i think it's one of the reasons i, when people make these projections that oil could go to those levels, i have never subscribed to a view that they would ever reach that level. >> you have no hypothesis that you think might become reality. >> only in the event that you take major supplying countries completely out of out of the market. if you take saudi arabia off the map, that's a problem. >> what has potential for you. i mean beyond natural gas which you have expressed yourself both in terms of your resources and your brainpower, beyond that where is something that we might not know about that you are keeping your eye on because you think it might be something here there maybe something here. >> i wouldn't want to exactly characterize it that way. and if there was i probably wouldn't tell you. >> i was worried about the latter but not the former. >> 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 because we do have-- 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 are not the that people are aware of, is we have been researching biofuels from algaes. and we've been researching it from a little bit different perspective than others working with a company called synthetics genomics incorporated. these were the people who mapped the human genome. >> rose: right. >> because we wanted to investigate with them what the possibilities around genetically modified algaes might present. and so we've had a could la lab-- collaborative under way 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 buy only. >> and was's the potential? >> well, if i were to envision, 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 commod few biologically or genetically and i could cause this algae to want to produce itself very rapidly and cause it to want to take the toil produces and retain in the cellular structure which is what they do today and to get you you have to crush the algae and destroy it, rather the algae would expel the oil and do in a controlled environment called a reacter in which i would control the environment. i would build that react

never the middle of my refinery and i would have analogy fuel making machine, spitting out this fuel that looks a lot like diesel, by the way when it expels it. >> rose: do you have scientists telling you that say reality that could happen? >> with enough technology investment it is a possibility. and what we know is we know reactor design. that's what we are good at. this is what we build inside our refineries and chemical plants. what we need is someone who can make analogy for me that will do what-- it will do the tillerson vision of what i want analogy to do to behave. and so that's pretty far out there. and once you perfect that. >> as what, 25 years. >> 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, 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 is pretty high and the hurdle seems to exist at the basic science level which means it's even more difficult to solve. if it is operating at something that says well, up here i understand the science and i if i could just modify this a little bit then i could get a breakthrough, that's one level of difficulty. when you take things down to their most fundamental level and say you know the reason this doesn't work is that god just didn't create us to do thal. now how do you want to deal with that. that's a lot tougher. doesn't mean you-- because of these interesting things that people are doling with genomics and hybrids, that you may not be able to fundamentally alter that. but how you-- 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. and. >> never bet against science, never. >> because you've scene in

the lifetime it's extraordinary what we've seen. >> it just n our lifetime, you know. >> 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 am-- 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. >> imagine this for a moment. president of the united states calls you and he says, rex, i would like you to come down to the white house and let's have a conversation. these are tough times, and i'm trying to do the best i can. you know energy as well as anybody knows energy. in beginning a new administration here, i have a new energy secretary, it is a tough place. neighborhoods in this world are really tough and i need to you help me tell me in terms of energy which is vital, bill gates says it's the number one concern he has. and he's involved in lots of

things. what do we need to do, would you say to him what? >> well, i think we need to add agree on our national priorities around energy. try and frame that in a way that it informed 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 in advance and advanced. much of what has been done to this point has been an enormous amount of interference with that process discovery. 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-- enormous incentives, in effect price controls on how the energy offtake occurs from wind, power and solar power, that i have always expressed to people that what you have really done is you have shackled the innovative process. because what drives invasion 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 or 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 u.s. government want to support and promote the research, the research activities that are necessary to take these forms of energy to a different level of performance. and whether that's, you know, 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. >> so you are saying you want to see the government plant more seed money in terms of an investment, of the alternative possibilities. >> and there are good models for this. good models in the national labs. great models through darfa there are models out there that have served us well. >> gave us the internet. >> we just-- we have-- we 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. >> you're saying less regulation and more research. >> 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 and had to perform, people would take it to a new level. they haven't had to. 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 that-- 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. 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 of that stuff better and there are things we can do, while you're pursuing though that

next generation that is every one's vision. how do you want to lay the road map out to do that and put the road map in plates so that it survives you, mr. president. because none of your predecessors have been successful at doing that. >> have you had this conversation with him. >> i've had parts of that conversation with him. and i've had it with others. >> so you think he has a lessening ear that he wants to hear what you have to say. >> he has a lot of people speaking if into that ear. >> thank you, thank you for joining us. >> my pleasure, dharlie. >> rex tillerson, the c.e.o. of exxonmobil, largest company in the world. in terms of market capitalization. thank you for injoing us. see you next time captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

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