February 16, 2011
By Staff Reporter
Recently asked why Californians paid higher gas prices than most other parts of the U.S., O’Reilly pointed to extremely high gas taxes and not, as a reporter suggested, oil companies fixing the prices.
“It’s basically a competitive market,” O’Reilly said, pointing to numerous state investigations into gas prices in recent years.
O’Reilly, a native of Dublin, needs all his Irish gift of the gab in this industry, and is said to bring a uniquely Irish attitude to the business.
It was an experience as a child in school in Ireland that ultimately led him in the direction of his current career, in particular the impact of a former schoolteacher.
“I became a chemical engineer specifically because I wanted to get into this business,” O’Reilly told the San Francisco Chronicle recently. “I grew up in Dublin . . . and I had a teacher in school, Mr. Fleming. I will always remember him, because he took the class to see different businesses in action. We went to canneries. We went to fertilizer plants. We went to a brewery — a Guinness brewery.”
Though his Irishness is a strong part of his personality, these days O’Reilly has little time to reflect on the old country, with oil prices rising, a war in Iraq that will still afflict the Persian Gulf with instability until it is sorted out, increasing concern over the long-term prospects for a world economy that relies on fossil fuels for its energy and — perhaps most immediate for O’Reilly — the continuing shakedown of the $39 billion Chevron takeover of Texaco in 2002 that has seen the new company post hefty profits since then, but investors have let ChevronTexaco stock prices lag.
In response, O’Reilly maintains his nonchalance, pointing to further retrenchments in the years ahead that will make ChevronTexaco fighting fit.
In 2003 the company announced it would sell $6 billion in assets over the next several years, in a bid to boost profits by $500 million by 2005 — and deliver that promised return. “We are transforming to a leaner, more efficient business,” O’Reilly told the press at the time.
Asked how he viewed the argument that the war in Iraq was about securing oil supplies, O’Reilly dismisses the line of thinking as “very flawed.”
“If it was a war for oil, we wouldn’t have done it,” he said. “Because if you look at the consequences — Iraq is now producing less oil, it’s more unstable, it has led to disruptions in the market. Even today, nine months later, Iraq is producing — and I don’t have firsthand knowledge — less than two-thirds of what it was producing before the war. So it just doesn’t work for me. There has got to be another reason. I assume that the reason is global security.”
With increasingly dire predictions pointing to fossil fuels running out within some decades, executives such as O’Reilly have added their voice to the discussion. He points out for example, that while the U.S. imports 60 percent of its oil, there are untapped deposits within the country that oil companies cannot research because of environmental rules. People need to be realistic, he told reporters: “One of the messages I try to get out is the importance of energy to our lifestyle and our economy. It is absolutely critical.”
In the next 50 years O’Reilly says changes will have to happen, but he believes oil will retain its primacy.
“I hear a lot about the hydrogen economy,” he said. “The question is, where is the hydrogen going to come from? Hydrogen is going to come from hydrocarbons. It’s going to come from natural gas or coal or oil.”
Increasingly, energy giants like ChevronTexaco are seen to be addressing the discrepancy between the rich, energy-greedy West and the poorer rest of the world. It’s an as-yet subtle shift — witness British Petroleum’s recent morphing into “BP: Beyond Petroleum,” in its advertisements.
“There are about 1.5 billion people who don’t even have electricity in the world,” O’Reilly said. “We’ve got to provide them with that. There will be 3 billion more people on earth by the middle part of this century. Almost all of that growth comes in the developing world.”
Asked what historical period he would most like to have lived in, the 56-year-old O’Reilly replied “50 years from now” — to see just how those dire predictions and alternative energy sources shake out.