Succeeding in the oil biz: just a matter of luck

Who said this? Lucio Noto, the CEO of Mobil, commenting on his company's decision to sell itself to Exxon in late 1998. The acquisition remains one of the great mergers of all time, with Exxon picking up Mobil's reserves for what now amounts to pennies relative to today's prices.

And then there was this Noto quote: "I'm convinced that not just today, but five years from now, (Mobil shareholders) will be better off. I hope Exxon shareholders will feel the same way."

You can bet that Exxon shareholders, at least, were better off. There were a lot of theories then as to why Mobil would sell at the bottom, but the one that makes the most sense is that in a year when prices had plunged to their lowest inflation-adjusted levels ever, in a year when The Economist featured a front cover talking about a world drowning in oil, Mobil executives thought prices were going to stay in the tank. Exxon executives didn't. The result? A deal that can fairly be called the steal of the century.

I thought of that difference earlier today when Jason Furman, the Barack Obama campaign's director of economic policy, remarked that oil companies are making "excess" profits "because of the high price of oil and not because of their investments, ingenuity or skill."

There's no other word to describe this other than "insulting." It's insulting to the men and women of ExxonMobil and all the other oil companies who have found ways to get what looks like a gusher of natural gas out of shale that was supposedly too expensive to ever drill; to the Exxon executives who calculated the long-term supply/demand picture correctly 10 years ago, while Mobil got it wrong; who have found ways to drill in thousands of feet of water; who get oil and natural gas out of the ground and to market from God-forsaken places like Sakhalin Island; who recently have found a way, every week, to get a little more diesel out of refineries that supposedly were incapable of doing so, since that's what prices are saying the world market wants; who rose to the challenge of clean fuel rules and have given us gasoline emissions that are 99% cleaner than what they were before; and who negotiate complex production deals in parts of the globe that the average American, or anyone for that matter, wouldn't get caught dead in, spending weeks if not months away from their families.

There is more than that, but I'll stop here.

When Jason Furman has a record of accomplishment like this, maybe he can get back to all of us and let us know whether he still thinks none of this took investment, ingenuity or skill.