speech

Statement to the U.S. Senate Judiciary Committee

By David J. O'Reilly, Chairman and CEO
Chevron Corporation

Washington, D.C., March 14, 2006

Good morning and thank you, Chairman Specter, Senator Leahy and members of the Committee. I'm pleased to have this opportunity to discuss some of the important energy issues facing our country.

I'd like to make two points today.

First, mergers in our industry over the past two decades have made U.S. companies more competitive and efficient in the production, refining and marketing of energy supplies.

For example, refining has seen remarkable productivity gains.

Two decades ago, there were about 220 refineries in the United States, with a capacity of roughly 14.5 million barrels per day. Today, there are one-third fewer refineries producing about 20 percent more.

Despite mergers, the top five U.S. refiners today have less market share than the top five competitors in many other major business sectors, including airlines, long-distance carriers, department stores and automakers.

Gasoline marketing is also highly competitive. During Chevron's mergers with Gulf and Texaco, we divested significant marketing assets. Today, Chevron is the No. 1 marketer in only three states - Nevada, Mississippi and Oregon.

All of these factors have helped moderate gasoline prices. Over the last several decades, gasoline prices have increased at a lower rate than many other staples like food, housing, and health care.

My second point is that scale matters.

To illustrate this, I'd like to show a chart that puts the size of our industry into perspective. This chart shows who controls the world's oil and gas reserves.

You will find it difficult to locate companies such as ours on this chart. We are dwarfed in size by national oil companies such as Saudi Aramco and Russia's Gazprom. ExxonMobil is the small red bar in the middle. Moving to the right, the next red bars are BP, Chevron and Shell.

Today's energy projects - like the kind we are developing in the Gulf of Mexico deep water - are big and complex. They require large, highly skilled, technologically advanced and well-capitalized companies to manage them.

U.S. companies must develop the economies of scale to compete in the global marketplace. This helps us gain access to additional and diverse supplies that will find their way into U.S. markets.

Investments by U.S. companies have helped increase oil production in areas outside of OPEC. Since 1975, non-OPEC production has nearly doubled.

With over 60 percent of oil and over 15 percent of our natural gas supplies coming from imports, the United States is now more energy interdependent than it has ever been. As the world's largest consuming nation, the United States bears a unique responsibility in addressing global energy issues.

There are steps that policy-makers can and should take to ensure more reliable and affordable energy supplies for American consumers. These include:

  1. improving the climate for investment in energy infrastructure;
  2. rationalizing the U.S. gasoline supply to make it more fungible;
  3. increasing access to domestic oil and gas supplies;
  4. recognizing that the United States and the rest of the world are interdependent in U.S. trade and foreign policy;
  5. promoting further improvements in energy efficiency and diversification of U.S. supplies.

We stand ready to continue a productive dialogue on how we can work together to create these policies.

Thank you.

Updated: March 2006