INVESTING: Exxon Mobil executive wields incredible power

Power is typically understood by those who wield it and those who operate under it. If I took a survey that asked who the most powerful person in the world is today, there would be two or three common answers.

But there is a person who is just as powerful, and perhaps more so, than the few names that immediately come to mind.

I am talking about Rex Tillerson, chairman and CEO of Exxon Mobil. Up until Nov. 5 (more on this later), Exxon was the world’s most valuable firm. It still has the highest revenue and generates the biggest profits.

Exxon is a money-making machine, with almost $50 billion in net cash every year. President Bush nailed it when he said we are addicted to oil. Phillip Morris has been one of the best-returning stocks over the last 50 years because it sells a product people are addicted to. Exxon’s reach is like that, but on a far greater scale. Rex’s power has as much to do with the American capitalist system as it does with the resources Exxon controls (it holds the largest reserves of any non-government-controlled entity).

The company realizes that for the next 50 years it is all about capturing cash flow. Press releases claim Exxon is going to spend $20 billion this year looking for more oil. But I don’t believe it. Company officials know there are no more large reserves to be found. Oh, the company will add to what it has, but it will be marginal at best, and very expensive to bring to market.

Don’t pay attention to the stream of earnings report from major oil firms in America saying annual production is down. We hit peak production on a global basis earlier this year, and every one that produces oil now will be in decline except for Russia. The reason you should ignore it is that the price of oil is so high and is heading higher. With prices at $150 a barrel and then $200 a barrel, production can be in decline for 50 years and the companies still will make piles of cash.

The product Tillerson’s company produces has insatiable demand from every corner of the Earth, and he can make completely autonomous decisions that potentially affect billons of people. The amount of money at his disposal is hard to imagine, and he can move that capital faster than almost any other firm. All this, and the average American has no idea who he is.

In the wake of the Nov. 5 announcement that Petro China’s completed share offering gives it a $1 trillion market value, you might think I would change my mind about Rex’s power.

Petro China serves the Chinese government, which greatly hinders the power of the company’s management. Besides, that valuation is ridiculous. It is worth twice as much as Exxon, yet has the same in reserves, does only one-fourth the revenue, and trades at five times the price-to-earnings ratio.

I know the China story is great, but you have to be nuts to pay that kind of price for a company. But it is interesting that the first $1 trillion company is not American. Not something we should be proud of.