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The Strathcona Refinery, owned by Exxon subsidiary Imperial Oil, on the outskirts of Edmonton, Alberta, December 2008

Exxon’s executives, as anecdote after anecdote in Steve Coll’s book makes clear, enjoy easy access to every president. Its confident CEO is “a peer of the White House’s rotating occupants” who can usually count on the administration to see things as he does. In fact, the president is often more pliable than the CEO, who often goes his own way,

aligned…with America, but…not always in sync; he was more akin to the president of France, or the chancellor of Germany…. His was a private empire.

Coll makes clear in his magisterial account that Exxon is mighty almost beyond imagining, producing more profit than any American company in the history of profit, the ultimate corporation in “an era of corporate ascendancy.” This history of its last two decades is therefore a revealing history of our time, a chronicle of the intersection between energy and politics that explains much about our present and more about our (dismal) future.

And one of the key points that comes through in every chapter is that Exxon mostly earned its power the old-fashioned way: not by political influence, but by prowess, hard work, and discipline. Coll opens by describing the 1989 wreck of the Exxon Valdez and the fouling of Prince William Sound, the nadir of the company’s recent history—soon-to-be CEO Lee Raymond described himself as “chagrined…horrified and to an extent devastated.” He and the company responded to the tragedy by fighting every attempt to make it pay punitive damages—but also by embarking on a rigorous effort to change Exxon’s culture, unveiling to “its employees and executives a universal new management regime, the Operations Integrity Management System,” or OIMS, which one executive described as “more vinyl binders than you can possibly imagine,” covering every possible aspect of the company’s systems.

Exxon, far more than its competitors, did things “by the book,” and this was the book; its employees, if they wanted to remain, did not deviate. In fact, writes Coll, “those who stayed did not find OIMS ironic or extreme; they liked the culture of discipline and accountability.” And the results were inarguable: Exxon didn’t just make huge profits because of its huge size; its “return on capital employed” outstripped that of its peers year after year:

Its exceptional ability to complete massive, complex drilling and construction projects on time and under budget meant that, in comparison to industry peers, it remained exceptionally profitable in recessions and boom times alike, when oil prices were high and when prices were low.

Lee Raymond, CEO from 1993 to 2005, was intimidating, “Iron Ass” to his troops. He calculated, writes Coll, that given the size and sprawl of his global empire,

the only way a chief executive could hope to extract disciplined results was to overdo it—that is, unless Raymond used his bully pulpit…to pound hard…the natural drift and compromising tendencies of such a large workforce would produce mediocre results.

And the results were never mediocre. “What you’re hearing today may seem boring,” Raymond once told an audience of Wall Street analysts before announcing yet another quarter of record results. “You’ll just have to live with outstanding, consistent financial and operating performance.”

Of course, if that were the entire story, Coll’s account would be a management textbook. But as the millennium approached and then receded, Exxon faced two great challenges, and the way it handled them makes for fascinating and also depressing reading.

The first big weakness of its business model derived from the fact that more and more countries were taking full ownership of their oil fields. Exxon and its competitors had once legally controlled most of the world’s large oil fields, and these so-called “booked reserves”—whether in the Middle East or Alaska or South America, for example—were what underlay their share values:

The size of these booked reserves allowed shareholders to estimate future profits with relatively high confidence; equity oil [i.e., oil owned by Exxon] was fundamental to Exxon’s stock market valuation, just as the number of shopping malls or office buildings owned by a real estate company would be fundamental to its market value.

But after the oil embargoes by OPEC and others of the 1970s and the Iranian revolution, most Middle Eastern countries became “resource nationalists,” seizing back oil and gas fields. In 1973 Exxon had produced 6.5 million barrels of oil and gas a day from its own fields; by the late 1990s that figure had fallen by two thirds. Exxon could have become a contractor that simply pumped oil for someone else—Halliburton made a lot of money this way—but the profit margins weren’t as high, and Exxon’s business model was based on its having its own fields. The company increasingly relied on its holdings in free-market countries like the US, Norway, and Australia—but those seemed mostly mature or declining. As Coll documents, Exxon did its best to lock up fresh reserves in newly independent Russia—but those negotiations came to naught because Vladimir Putin understood the political value of controlling his oil fields from the Kremlin. (Coll tells the instructive story of oligarch Mikhail Khodorkovsky, who was jailed on bogus charges while he was trying to sell a stake in his Yukos energy company to Western oil giants.)


Soon Venezuela kicked Exxon out too. Because of its vast size the company needed to find almost a billion new barrels a year simply to make up for what it pumped annually; increasingly, “Wall Street analysts and investors focused down on the question of which oil companies were renewing their reserves healthily each year, and which were stalling and even in danger of spiraling smaller.”

Some companies simply cheated—Shell was caught in a terrific scandal in 2004. Exxon wasn’t that blatant, but as Coll documents, it walked a very fine line, telling Wall Street that it had replaced its reserves each year but admitting to the SEC that by its standards its reserves were declining. It managed this by counting in their entirety, for Wall Street, its new fields of Canadian tar sands oil—a source of oil so dirty and expensive to produce that the SEC refused to recognize it as oil. But the need for filthy tar sands oil to replace the sweet Saudi crude with which the company had been built was revelatory—life was getting tougher for Exxon. (And indeed many in the oil industry questioned whether the Saudis themselves weren’t beginning to run into “peak oil” and faced declining production.)

Exxon solved some of its reserve problem by exploring for oil in countries too marginal to control their own production. Places like Chad or Equatorial Guinea were clearly not sophisticated enough to take charge of their own reserves—they were happy to sign contracts with the highest bidder, which in one sense made them ideal for Exxon. But they came with other problems.

For one, they were dangerous. Working in, say, Nigeria, required that you predict not just the price of oil, but the price of ransoming workers routinely kidnapped by rebels or criminal gangs. “The oil majors tracked actual ransom settlements—Shell’s matrix showed that the most recent ransoms were running at about $120,000” in the early years after the millennium, Coll reports. But more and more gangs kept getting involved, using speedboats, for example, to raid offshore platforms. “Once-orderly ransom markets yielded to price uncertainty,” he says—and no CEO likes uncertainty. In Nigeria, the company not only had its own police force, but also “hired and supervised an eight-hundred-man unarmed unit of the ‘supernumerary’ or ‘spy’ police.” Technically they worked for the government, but eventually the members of the force sued Exxon for benefits—they were, they said, in essence corporate employees.

The chaos was everything Exxon didn’t believe in, the opposite of the orderly world envisioned in its vinyl OIMS binders. “Periodically, after kidnappings and speedboat raids of particular virulence, the corporation evaluated whether the…violence had crossed a threshold that might argue for total withdrawal,” Coll writes. But they didn’t leave. “‘Where are they going to go?’ asked an American official who worked with the company’s managers. ‘They don’t want these reserves off their balance sheets…. They need the reserves.’”

With the oil, though, came scrutiny from African and other human rights organizations, which kept asserting that, in essence, Exxon was buttressing some of the planet’s most unsavory rulers. As Dick Cheney once pointed out while running Halliburton, “The good Lord didn’t see fit to put oil and gas only where there are democratically elected regimes…. We go where the business is.” Occasionally Exxon executives would try to argue that their operations made these regimes somewhat more civilized, but a growing body of evidence showed that, in fact, oil production made them even more unstable than they otherwise would have been. Oil wealth flowed mostly to the ruler and his clique. The descriptions here of Equatorial Guinea’s rulers bringing suitcases to the Riggs Bank in Washington are priceless—they were soon the bank’s biggest depositors.

But the very richness of the prize made these governments attractive targets for coups and invasions—thanks to Exxon, there were very lucrative reasons to want to be the prime minister of, say, Chad. In order to ward off the attacks, these despots invested much of the money that didn’t go for mansions and Lamborghinis in armies and weapons, which in turn made life miserable for many of their citizens, especially those who dared to mount democratic opposition. That explains, for instance, how Equatorial Guinea managed to see its rates of enrollment in primary school decline between 1994 and 2009, precisely the years when the country’s nominal per capita wealth soared to $19,000.


Coll’s great example of Exxon’s bland venality concerns its relationship with Chadian strongman Idriss Déby. Exxon made a contract that paid the company a remarkably generous share of the revenues from the oil fields, but Chad was such a mess that to make the deal palatable to the world, “Exxon enlisted the World Bank” in a scheme that would pay most of the royalties into special accounts controlled by the bank that would ensure that some of it was spent on the health and welfare of the country’s poor. This was necessary, because to get at the oil Exxon would need to acquire land, cut down trees, resettle populations—all the sort of things that “were sure to attract local and international scrutiny.” By recruiting the World Bank as a partner, then, “Exxon’s leaders shrewdly insulated themselves from many of the project’s most daunting reputational risks.” As Déby watched the money flow in, however, he got restless, not to mention scared—he figured, correctly, that there were plenty of coups being plotted, and he wanted guns and planes. He wanted, in other words, to break into the World Bank strongbox and use the money for his own ends.

In this story, the unlikely hero (or would-be hero) was Paul Wolfowitz, reviled by American liberals for his role in promulgating the Iraq war. But when George Bush named him president of the World Bank (and before a complicated scandal involving a woman employee ended his tenure) he “seemed eager to demonstrate his commitment to poverty alleviation.” In the case of Chad, this meant threatening to freeze Chad’s bank accounts if Déby didn’t keep his deal with the World Bank. The dictator went into a rage, and told Exxon he’d simply shut down its oil fields if it didn’t get the World Bank off his back. Exxon tried, but Wolfowitz stuck to his guns.


Kuni Takahashi/Bloomberg/Getty Images

A billboard advertising Exxon’s Esso and Mobil brands at a gas station in Kathmandu, Nepal, January 2012

At this point Exxon managers conveniently discovered that they owed Chad enough tax money that the country could simply afford to pay off its obligations to the World Bank and resume full sovereignty, i.e., kleptocracy. Their effort at “defying and undermining Wolfowitz’s freeze” was successful, and eventually Déby wiggled out from under effective international supervision. During the company’s involvement, Chad fell from 167th to 171st on the planet’s table of quality of life indicators, and its average life expectancy dropped from forty-seven to forty-four. But Exxon’s oil flow never stopped, and of course the company’s fortunes went in exactly the opposite direction.

Despite its record profits, the vexing problem of replacing reserves still troubles Exxon. In recent years it has supplemented filthy tar sands crude and oil by spending some of its cash hoard to acquire holdings in the American gas fields newly opened by fracking technology. Whether this technology’s benefits outweigh its curses is a question I have discussed in these pages,* but for company watchers it signals a long-term shift in Exxon’s business—increasingly, it’s a gas company as much as an oil giant, a development driven by the relentless need to replace reserves. Wall Street offers rich rewards, but as Coll shows, she is a stern mistress; if Exxon ever failed to refill its tank, the punishment would be swift and sure. Hence, the company’s willingness to override social and environmental concerns, and to subtly shift its business model in response to geological and geopolitical change.

But even if Exxon can keep its reserves growing, it faces a different challenge to its business model. If it and its competitors continue to sell their product, they may well bring the world as we know it to an end.

Climate change first emerged as a public issue at about the same time as the Exxon Valdez spill. Exxon responded to the tanker crash rigorously, by making its company safer and more tightly controlled. It responded to global warming by minimizing, distorting, and lying. Coll describes a key moment, in October 1997, when Lee Raymond flew to China to address the fifteenth World Petroleum Congress. At this point the world’s scientists had already proclaimed that humans were indeed warming the planet, and the world’s nations were in the process of negotiations heading toward the Kyoto climate treaty.

Raymond—who, remember, represented what was by size the world’s twenty-first-largest economy—could have been statesmanlike; instead, he spent thirty-three of the seventy-eight paragraphs in his speech laying out some of the more recent claims of the climate deniers: “In the 1970s, some of today’s prophets of doom from global warming were predicting the coming of a new ice age,” for instance. He urged China to block the treaty, even though as a developing country it wasn’t covered by its terms, on the grounds that its “exports will suffer as the economies of industrialized nations slow.” In fact, he said, Chinese leaders had an obligation to ignore the fears of comfortable environmentalists:

The most pressing environmental problems of the developing nations are related to poverty, not global climate change. Addressing these problems will require economic growth, and that will necessitate increasing, not curtailing, the use of fossil fuels.

Given the lessons of Chad and Equatorial Guinea, one may doubt Exxon’s commitment to reducing poverty, but not the bravura nature of this performance—as Coll points out,

it was extraordinary for the chief executive of a US-headquartered multinational to lobby against a treaty he disliked by appealing to a Chinese Communist government, among others, to adopt a negotiating position opposed to a sitting American president.

Exxon was also hard at work behind the scenes, providing “emphatic support” as the industry trade group the American Petroleum Institute took on climate change as its “really, really big issue—bigger than anything else.” Its action plan, uncovered by the National Environmental Trust, showed that its strategy was a replay of the tobacco industry’s successful twenty-year campaign to stall regulation by insisting the science was somehow “in doubt.” The Petroleum Institute’s goal was to make sure that “recognition of uncertainties becomes part of the ‘conventional wisdom,’” and that media coverage recognizes the “validity of viewpoints challenging the current ‘conventional wisdom,’” so that those “promoting the Kyoto treaty on the basis of extant science appear to be out of touch with reality.”

This strategy relied on the emergence of a noisy fringe of climate deniers, which Exxon helped create by funding groups like the Heartland Institute or the Annapolis Center for Science-Based Public Policy, a group that honored (Exxon-funded) Oklahoma Senator James Inhofe after his declaration that global warming was “the greatest hoax ever perpetrated on the American people.” Though Exxon tried to keep its fingerprints at least a little smudged, the company’s fear of the science and its implications kept breaking through. At the 2000 shareholder’s meeting, Raymond dressed down one environmentalist who managed to get to the microphone. Global warming was far from proven, he insisted, showing a slide of a petition signed by “seventeen thousand scientists” denying that climate change was real. This most notorious of frauds (an open Internet petition, it bore the signatures of, among others, the Spice Girls and Dr. Hawkeye Pierce of the MASH 4077th) was followed by another slide purporting to show the planet’s temperature record for the last three millennia. “If you just eyeball that, you could make a case statistically that, in fact, the temperature is going down,” he said. “I reject the assertion that it’s going up.”

As Coll says, what distinguished the corporation’s position was “the way it crossed into disinformation.” Exxon “ran some aspects of its campaign clandestinely; that is, it did not initially disclose the full scope and purpose of contributions it made.” The strategy was highly effective. In the first weeks of the Bush administration, at the direction of Raymond’s old friend Cheney, the White House reneged on a promise to treat carbon dioxide as a pollutant. Cheney arranged for the president to send a letter to Congress repudiating his campaign pledge “without so much as informing Christine Whitman, the new Environmental Protection Agency chief, in advance.” Whitman called Treasury Secretary Paul O’Neill to break the news. “Energy production is all that matters,” she said. “[Cheney] couldn’t have been clearer.” Replied O’Neill: “We just gave away the environment.”

What makes all this not just tragic but galling is that Exxon employed some of the planet’s best earth scientists—they, and the company, knew full well that the earth was warming. Exxon, after all, was moving to acquire drilling rights in the Arctic precisely because, with more than a third of its summer ice now melted, it was becoming possible to imagine widespread oil operations there. “Don’t believe for a minute that ExxonMobil doesn’t think climate change is real,” a former manager involved with the internal scientific review told Coll. “They were using climate change as a source of insight into exploration.”

At a certain point—somewhere around the retirement of Raymond in 2005 and the release in 2006 of Al Gore’s An Inconvenient Truth—Exxon decided it was a little overexposed as a climate denier, and began walking its position slowly back. Now the new CEO, Rex Tillerson, instead of saying “the scientists on the other side are wrong,” would say, “It’s more complicated than most people understand.” To atone for its past sins, Exxon did the corporate equivalent of checking into the Betty Ford clinic by joining the Clinton Global Initiative, which engages big corporations in various good works, including on both environmental and poverty issues. It ceased its most outlandish statements, and adopted an air of gravitas.

Indeed, the new Exxon mantra became that, whatever the science said about climate change, the growth in the use of fossil fuel was “inevitable” for the “foreseeable future” and that heavy reliance on renewable energy was “unrealistic.” The “inevitability” of fossil fuel was the watchword, repeated endlessly. Company research showed that “Informed Influentials” would respond to a message about complexity, and the perusal of any newspaper Op-Ed page will show how well they did their work. Alternatives will take decades to develop, the party line goes; for now, adults know we need to concentrate on oil.

The company, as Coll discovered, did keep a close eye on renewable and alternative energy, but only to make sure they did not become a “meaningful threat to its business.” On the theory that “only technology—not Washington policymakers—was likely to ambush” Exxon, the company studied possibilities like hydrogen, battery technology, and biofuel. The use of hybrid cars could grow, they conceded, maybe cutting oil use for transportation by 20 percent in the US within two decades, but happily that would be “more than offset by growth in car and truck consumption in China and other developing countries.” As a result, an internal review found that “ExxonMobil could rest easy.”

The irony here is obvious. As Coll has made clear, Exxon was a fabulously well-run and innovative company, able to overcome amazing engineering challenges. If it had decided that it wanted to be an energy company, not an oil and gas company, and if it had spent the $100 million a day it now spends searching for more hydrocarbons on pursuing renewable breakthroughs, it might have been one of the great catalysts for solving climate change. Instead, it decided to “rest easy.” Its attitude toward clean power was demonstrated clearly in the spring of 2010, when CEO Tillerson, at a roundtable with students, was asked about solar and wind power. “ExxonMobil is not really against renewables,” Tillerson replied mirthfully. “We sell a lot of lubricant oil to the windmill operators…. The more windmills are built, the more oil we sell.” The crowd of young people who heard this will grow up in the increasingly dangerous climate Exxon did so much to create.

Coll predicts that Exxon will continue its defensive tactics, eventually agreeing to some minimal carbon tax but only after many years of hemming and hawing. Such steps will, he concludes, “inevitably come later than they might have due to the resistance campaigns funded by oil and coal corporations—particularly ExxonMobil’s uniquely aggressive influence campaign to undermine legitimate climate science.” One can see everywhere the lingering effects of those lies. Barack Obama, for instance, has rarely made a full-throated effort to even address climate change; that the issue had become so confused by Exxon and other petroleum interests was doubtless one of the reasons he chose to concentrate on health care instead of energy in his first term. During his reelection campaign, he’s posed next to solar panels, but also in a yard filled with oil pipe, proclaiming defensively that his administration will “drill anywhere,” that the responsible energy policy is somehow “all of the above.” Exxon, above all others, has poisoned the well from which it will continue to profitably drill.