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Responding-to-World-Energy-Needs-and-Fostering-Economic-Recovery

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					Responding to World Energy Needs and Fostering Economic Recovery
Section 1: Global Energy Demand....................................................... 2 Section 2: Global Oil Market ................................................................ 3 Section 3: U.S. Energy Policy .............................................................. 4 Section 4: U.S. Factors in Fuel Pricing ............................................... 6 Section 5: Capital Investments ............................................................ 7 Section 6: Industry Earnings ............................................................... 8 Section 7: Industry Taxes..................................................................... 9

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Responding to World Energy Needs and Fostering Economic Recovery
Section 1: Global Energy Demand While the current global economic downturn has dampened world energy demand, ExxonMobil's long-term projection is for demand to increase by 35 percent (2005 to 2030), driven by growing population and economic output, particularly in developing countries, even with substantial efficiency gains in all regions.
Oil, natural gas and coal will continue to provide the vast majority of the world's energy needs — meeting close to 80 percent of global demand through 2030. Oil and natural gas alone will still comprise almost 60 percent of global energy supplies in 2030.

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Section 2: Global Oil Market As global commodities, oil and petroleum products (including gasoline and diesel) are subject to the price swings in free markets and can be dramatically influenced by perceptions about future supply and demand.
Per the U.S. Department of Energy, global demand for liquid fuels declined to approximately 83 million barrels per day in the second quarter of 2009 — from an average of 86 million barrels per day in the second quarter of 2008. ExxonMobil is the largest non-government owned company in the energy industry — yet we produce only about three percent of the world's oil and less than two percent of the world's energy. Per the U.S. Department of Energy, crude oil prices (WTI) averaged about $59.50 a barrel from April June 2009, around 40 percent lower than the full-year 2008 average price of nearly $100 per barrel (and over 50 percent lower than the 2008 second quarter $124 a barrel average). The second quarter of 2009 saw an annual 3.9 percent decline in real U.S. GDP from the second quarter of 2008.

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Section 3: U.S. Energy Policy Given the critical need to foster economic recovery in the United States, and the goal of increasing energy security, policymakers should support measures to expand domestic energy development. Many of the best opportunities for developing additional domestic oil and gas supplies have been placed "off limits" by government policies. Although a longstanding ban on portions of Outer Continental Shelf oil and gas leasing was recently lifted by Congress, there is no approved plan to advance toward developing these resources.
According to the American Petroleum Institute (API), federal lands, including those on the Outer Continental Shelf (OCS), hold an estimated 116 billion barrels of recoverable oil and 650 trillion cubic feet of recoverable natural gas — enough to fuel over 65 million cars for 60 years and meet the natural gas needs of 60 million households for 160 years. However, there could be much more oil and natural gas than has been estimated in areas where industry has not been permitted to explore, and where new technologies allow enhanced recovery of energy resources while protecting the environment.

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According to the Energy Information Administration, United States' supplies accounted for just around 40 percent of the oil it consumed in 2008. In every year of the past decade, U.S. crude oil production has declined.

Opportunity for Economic and Jobs Growth: A recent study by ICF International estimates that the development of oil and natural gas on federal lands (including OCS) previously or currently closed could increase domestic oil production by as much as two million barrels per day, and natural gas production by over five billion cubic feet per day. Over the next 20 years, such activity could create as many as 160,000 new jobs. The study also estimated that domestic oil and natural gas development would generate approximately $1.7 trillion in federal, state and local government revenues to fund critical governmental priorities.

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Section 4: U.S. Factors in Fuel Pricing Global supply and demand for crude oil and petroleum products has the biggest influence on the price of gasoline at the pump in the U.S.
The economic downturn has resulted in declining energy demand in the U.S. and other developed economies. Total U.S. consumption of liquid fuels in the first half of 2009 declined by approximately 1.1 million barrels per day from the first half of 2008, or 5.7 percent, to 19 million barrels per day. U.S. regular-grade retail gasoline prices averaged $2.32 in the second quarter of 2009, down sharply from the 2008 average price of $3.25 per gallon (and a second quarter 2008 average price of $3.76 per gallon).

For the second quarter of 2009, crude oil costs made up 61 percent of the cost of gasoline; manufacturing and marketing costs were 24 percent; and taxes comprised 15 percent of the average U.S. retail price for regular gasoline of $2.32 per gallon, according to the Energy Information Administration.

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Section 5: Capital Investments Meeting growing global energy demand requires sustained investments, through periods of both low and high commodity prices. ExxonMobil plans to invest at record levels — between $25 to 30 billion annually — over the next five years.

The International Energy Agency estimates that $11.7 trillion in new investments in oil and gas supplies will be needed in the 2007 to 2030 timeframe — close to $500 billion annually. ExxonMobil plans to invest at record levels through the current business cycle. We are committed to sustaining investments in our current portfolio of 120 development projects around the world, in order to meet growing energy needs. Nine major projects are expected to commence production in 2009, and at their peak are expected to add the net equivalent of an additional 485,000 barrels per day to production. We plan to invest more than $1 billion in low-sulfur diesel projects at three refineries in the U.S. and Europe, which when complete in 2010 will allow additional low-sulfur diesel production of about 6 million gallons per day. From 1983 through 2008, ExxonMobil's capital and exploration expenditures were over $381 billion and exceeded our earnings over the period. In the first quarter of this year, our capital and exploration expenditures were $5.8 billion, up 5 percent from 2008's first quarter — and exceeded our earnings of $4.6 billion. In 2008, ExxonMobil’s total expenditures were more than $1 billion per day to produce energy and deliver energy and chemical products around the world. We depend on high earnings during the "up" cycle of our commodities-based business to sustain investment levels over the long-term, including the "down" cycles.
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Section 6: Industry Earnings ExxonMobil's earnings need to be viewed in the context of the scale of our industry, as well as the huge investment requirements.
In the first quarter of 2009, the oil and gas industry earned, on average, about 5.4 cents per dollar of sales — above the average of 3.3 cents per dollar revenue for "All Manufacturing", but only slightly more than the average of 5.0 cents per dollar revenue for "All Manufacturing less Autos. In a commodities business, earnings rise and fall in cycles. Over 80 percent of ExxonMobil’s earnings in 2008 came from outside the U.S. Over the past three years, oil and gas production has generated more than two-thirds of ExxonMobil's earnings.

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Section 7: Industry Taxes ExxonMobil’s U.S. tax burden is already very large.
From 2004 – 2008, our U.S. tax bill ($67.6 billion), including all forms of taxation, exceeded our U.S. earnings ($49.0 billion) by $18.6 billion.

In 2008, ExxonMobil's worldwide tax expenses amounted to over $120 billion, equating to nearly $4,000 per second, and significantly more than twice our earnings in the same period. ExxonMobil's worldwide effective income tax rate for 2008 was 47 percent. While our worldwide profits have grown, our worldwide income taxes have grown even more. From 2004 to 2008, our earnings grew by 79 percent, but our income taxes grew by 130 percent.

Additional taxes would raise prices and reduce supplies.
In the past, windfall profit taxes have undermined capital investments in the oil and gas industry and reduced domestic energy supplies. "Backdoor" windfall profit taxes would be no less damaging. Imposing punitive taxes on American energy companies, which already pay record taxes, would discourage the sustained investments needed to safeguard U.S. energy security. According to a Report of the Congressional Research Service, the windfall profit tax of the 1980’s reduced domestic oil production as much as six percent, and increased imports as much as 16 percent. Industry projects span decades, require massive investments, and utilize cutting-edge technologies that evolve throughout project lifecycles. Under these circumstances, long-term planning — which relies on stable legal, fiscal and regulatory frameworks — is critical.

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