Tuesday, February 28, 2006

Inside Big Oil

I'm becoming a real fan of Ben Stein's periodic columns in the New York Times. Aside from being impressed by his diverse talents--how many Presidential speechwriters and attorneys go on to become game-show hosts?--his view of business and economics is realistic and practical. No energy "insider", he nevertheless has good insights on the industry's workings. His column in this Sunday's business section focused on the people at big oil companies, and whether they deserve the ire they currently receive. It resonated deeply with my own experiences.

As you know from my bio, I spent over 20 years at Texaco, at the time one of the world's top 10 publicly-traded oil companies, and periodically one of the top 10 publicly-traded companies, period. When oil prices were high, we needed thick skins, because we were about as unpopular as the phone company, back in the days of Ma Bell. When prices were low, as they often were, sympathy for our plight was usually in short supply.

Like most of its peers, the company rewarded experience and required youth to pay its dues. There was a "fast track", but it was glacially slow compared to Wall Street. The corner offices tended to be occupied by grizzled, experienced "company men and women," with a few mid-career outside hires filling out the ranks in the 1990s. Patience and hard work were eventually rewarded with increasing responsibility and pay, but there were long years when all my peers in other industries seemed to make more than I did, particularly in an expensive city like L.A. Although there were many great things about working there, getting rich quick definitely wasn't one.

Whenever I asked myself why I stayed so long--in spite of some pretty attractive offers to work elsewhere--it always came down to the people: the collegiality of relationships, the breadth of knowledge, and the sense of being part of something that was almost a family. Sure, there were politics, and a few bosses along the way who made life miserable for short stretches. But they were always outweighed by truly decent managers and executives from whom I learned a tremendous amount--not just about business--and by peers who were great fun to be around, both on the job and off.

Time has moved on, Texaco is now part of Chevron, and I'm a consultant. Life may be more competitive in these companies, as it is everywhere, but I don't see anything to suggest that the vast majority of folks in Big Oil are fundamentally different than when I was one of them. They work hard, travel exhaustively--often to places you might not care to go--and on the whole are paid well, but no better than many other occupations. When they stay up late, it's not thinking up ways to exploit consumers, but worrying about how to do their jobs more effectively.

While there may be lots of folks getting rich as a result of high oil prices, very few of them work for Big Oil. Fewer than one in a thousand of them make $1,000,000 per year, and if you doubt that, check out the proxy statements. As Mr. Stein rightly describes, most of the profits of these firms find their way back to shareholders, which means to the pension funds and 401k's of millions of Americans. If you're looking for the big bucks, you need to be looking at the investment bankers, commodity traders, fund managers, and equity analysts that service the industry. Meanwhile, the vast majority of oil company employees must be content with decent salaries and benefits and the satisfaction that comes from doing work that's essential to the global economy.

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