Exxon: Testing the International Tiger

American drivers could hardly believe what was happening to them. In and around some of the nation's most populous cities, they sweated and swore through long lines that backed up, sometimes for miles, from those gas stations that were still open. Confused and angry about the gas famine and the whole energy crisis, they groped around for someone to blame. Many politicians and other people had a target ready: the oil companies. Because it is a symbol of big oil, and its stations dot the country, one company stood to take more than its share of criticism. It is the company that once told drivers that it would put a tiger in their tanks: Exxon Corp., by far the world's biggest, richest oil giant.

Petroleum U.N. Exxon may draw fire because it is in the lead, but it draws strength from its position as the industry's tough and durable old tiger. If the ultimate test of any organization is ability to grow and prosper amid wrenching changes, no organization has been more successful than Exxon. For 111 years, the business that has been variously known as the Standard Oil Trust, Standard Oil Co. (New Jersey), Esso and now Exxon has survived wars, expropriations, brutalizing competition, muckraking attacks and even dismemberment by the U.S. Supreme Court (in 1911). It has not only survived but has also grown -from a refinery in Cleveland to a global behemoth that sells petroleum in more than 100 countries through some 300 subsidiaries and affiliates that make up a "United Nations of oil." Not only grown but also prospered-so much so that last month it reported the largest annual profit ever earned by any industrial company: $2.4 billion after taxes.

Now Exxon's adaptability is being put to its stiffest test by the swiftest and most drastic changes in the business and political climate that oilmen have ever experienced. The world's voracious energy demands have combined with Arab embargoes and production cutbacks to create a shortage the end of which no one can foresee. Politically, governments in the Middle East, Africa, Asia and Latin America are asserting ownership rights to more and more of the petroleum pumped out by the "seven sisters" of world oil: Exxon, Royal Dutch/Shell, Texaco, Mobil, Gulf, Standard of California and British Petroleum. By the 1980s, the international oil companies could become mere contractors in much of the world, pumping oil that host-country governments will own and selling exactly as much as those governments direct, to the customers and at the prices the governments select.

In the U.S., the oil companies have come in for heavy criticism from Congress, which resounds with cries to roll back surging oil and gasoline prices, repeal special tax benefits that the oil companies get and slap on an excess-profits tax. A few Senators and Representatives are even talking seriously about wholly or partly nationalizing Exxon and other U.S. oil companies.

The threats and challenges have developed almost overnight. All through the 1960s, oilmen worried constantly that a worldwide glut would lead to a catastrophic slump in prices; gas stations lured motorists with price wars, contests and giveaways of drinking glasses and steak knives; oil-bearing countries eagerly offered rich drilling concessions. And the late House Speaker Sam Rayburn made sure that no Congressman got on the tax-writing Ways and Means Committee unless he stood foursquare behind the oil-depletion allowance.

The sea change has not only afflicted all oilmen but has also left them open to new forms of criticism. All have been tarred with the same vague but pervasive public suspicion that they have conspired to create the shortage-a charge for which there is no evidence-or at minimum have taken advantage of it to enrich themselves by raising prices. Much of the attack focuses on Exxon's executives, ranging downward from Canadian-born Chairman John Kenneth Jamieson (see box following page). Such men are several light-years removed from the vulgar, wheeler-dealer, overnight Texas oil millionaires of popular myth and occasional reality. Still, as successors of Founder John D. Rockefeller, they must contend with memories of the evils of the old Standard Oil Trust. Moreover, Exxon executives are inviting scapegoats simply because their company has more wells, refineries. pipelines and tankers than any other.

For the same reasons, the Exxon chiefs stand the best chance of coping with the new environment of shortage. The company's size and diversity limit its vulnerability. In 1973 Exxon rolled up worldwide sales of $28.5 billion -about the same as the NATO defense budget. Rigs working for Exxon or companies that it partly owns bring up oil from the Arctic tundra, the Arabian deserts, the Gulf of Mexico and Venezuela's Lake Maracaibo. Gasoline, jet fuel and heating oil are distilled from the crude at refineries in Benicia, Calif., Rotterdam, Ras Tanura in Saudi Arabia, and Singapore. Pumps blazoning the names Exxon or Esso (still widely used outside the U.S.) dispense gasoline in Canadian fishing villages, Zaire jungle outposts and along war-torn roads in Viet Nam.

If Exxon were shorn of all its foreign operations, it would still be the ninth or tenth largest U.S. industrial company-even though it gets only 16% of its oil production and 32% of its sales from the U.S. Orphaned from their corporate parent, Exxon's petrochemical operations, which produce materials that go into fertilizers, records, pantyhose and myriad other products, would rank about fifth among U.S. chemical companies. If Exxon merely transported oil, it would be the world's biggest shipping firm, with 155 tankers of its own and varying numbers under charter at sea. In finance it is a substantial international banker, holding fortunes in marks, yen, francs, pounds and dollars.

When profits fall in one part of its empire, Exxon usually rolls with the punch because profits rise in another part. In 1972 profits fell sharply in Venezuela because of higher taxes, but they rose in the U.S. and Canada because of higher crude production. Last year, despite the criticism in Congress that oil companies earned extortionate profits, Exxon's net income in the U.S. climbed only 16%, hardly excessive in a rapidly surging economy; meanwhile, huge demand lifted its net income in the Eastern Hemisphere by 83%. If Exxon's foreign oil concessions are taken over in the future, the company will still profit by shipping, refining and marketing the oil. To prepare for the day when conventional wells can no longer meet the world's needs, Exxon is already experimentally squeezing oil out of Rocky Mountain shale and the tar sands of northern Alberta's Athabaska region. In addition, the company is mining coal in Illinois, digging uranium ore in Wyoming, and producing fuel rods in Seattle for nuclear power plants.

Tapping Tuktoyaktuk. Exxon's world intelligence network and penchant for long-range planning have given it a head start in coping with the oil shortage. A decade ago, Monroe J. Rathbone, then chairman, began to get more and more reports that oil use was running increasingly ahead of new discoveries-and that Arabs would one day demand greater control over their resources. He ordered a stepped-up search for oil-even though the world then had a crude glut. In the past decade, Exxon's worldwide reserves have increased more than 9 billion bbl., or 21%. Crews are now searching, with good prospects, on Canada's Tuktoyaktuk Peninsula not far from the Alaskan North Slope and off the coasts of Southeast Asia-among many other places.

Last September, just before the Arab embargo, when shortages were already cropping up, Ken Jamieson and other Exxon officials privately warned leaders of Britain, Germany, Italy and the European Common Market that they had better get an international allocation plan ready in case the Arabs turned off the spigot. They paid no attention, so it fell to Exxon and other oil companies to switch shipments around when the Arabs cut back and embargoed last October. Exxon, for example, has routed to Rotterdam Iranian oil that would normally go elsewhere, and switched away from Rotterdam the Arabian oil that King Faisal decreed could not go to The Netherlands. By all evidence, the oil shippers have done a deft job; people who two months ago feared disastrous oil scarcities now voice suspicion because the shortfalls have not really been so bad.

In politics and public relations, Exxon has been less adroit. Its top men, who are still largely geologists and engineers, are just learning that they are operating in a highly charged atmosphere in which all the company's moves have to be explained to a wary public. Jamieson complains that he is often approached by people asking about rumors of tankers riding at anchor offshore, waiting for prices to go up before unloading. Says Jamieson: "We took the trouble of going to the port captain of New York Harbor and asking if he could give us the facts. He said that the ships lined up offshore were container ships, not tankers, and that the problem arose because of bad weather."

Some politicians recently raised a furor because Exxon's refinery in Bay way, N.J., fueled a Polish fishing trawler while American fishermen were worrying about supplies. Nonplused Exxon men were late in explaining that they simply had been fulfilling a legal obligation under a long-term contract to sell products to a Polish state company.

At Senate hearings into oil company profits last month, Exxon Vice President Roy Baze was publicly humiliated by Democratic Senator Henry Jackson of Washington. Baze, an expert on moving and storing oil, expected to be questioned about supplies, but Jackson asked him instead what Exxon's per-share dividends were. Baze did not know, and Jackson made a grandstand show of phoning a Washington stockbroker for the information. Last week an overwrought writer of a letter to the New York Times accused Exxon of "treason" for not supplying the U.S. Sixth Fleet in the Mediterranean during the Middle East war. The Saudi Arabian government did indeed order Aramco, in which Exxon holds a 22%% interest, not to sell any Arabian crude to U.S. forces, but Exxon and other U.S. oil companies found crude from other sources for the fleet.

The recent public attacks drive some oilmen to outbursts of spluttering fury -but not the chiefs of Exxon. Emulating Jamieson, who is hard to ruffle, they discuss the most scorching criticisms in tones of sweet, if strained reason, conceding a point here and there to their critics. Exxon's world production boss, Hugh Goerner, even finds a good word for the environmentalists, who long held up the building of the Alaskan pipeline and have stopped oil companies from detonating certain explosives underwater to find oil deposits beneath the ocean floor. Spurred in part by environmentalists, he says, oilmen redesigned the Arctic pipeline to provide better protection for the environment, and Exxon has found ways to explore for offshore oil without killing fish. Some environmentalists, he asserts, go too far, but overall they have been a beneficial force: "They have pushed us into doing things that we probably should have done anyway."

In response to critics of the industry's high earnings during the period of oil shortage, Ken Jamieson tirelessly argues that Exxon's 1973 profits will be needed to finance the giant investments that the company must make to find, produce and refine new oil. This year Exxon plans to invest $3.7 billion in capital projects-or $1.3 billion more than its 1973 earnings. Those earnings, he notes, amounted to 1.90 on each gal. of oil products sold, and 18.8% on invested capital-no greater than 20 years ago.

Soft Answer. Even so, Exxon executives hint at willingness to accept higher U.S. taxes so long as Congress does not interfere with letting prices rise high enough to provide incentives for exploration and production. Stephen Stamas, vice president for public affairs, muses heretically that the industry might be better off now if some years ago there had been a gradual rise in prices, accompanied by a phase-out of the depletion allowance-which permits an oil producer to deduct from taxable income up to 22% of the revenue from a well. Today, says Jamieson, "what you have to do is look at the total package. Now if it takes a combination of measures-depletion allowance, excess-profits tax or some other form of taxation on the industry-why all right, but let's not take it one piece at a time."

In part, these opinions represent a resort to the soft answer that proverbially turneth away wrath. They also reflect the kind of company that Exxon is and the way that it trains its managers. Exxon's executives are expected to have an accommodating manner and a willingness to listen to others' ideas. The company operates through a maze of committees-management, finance, salaries, production-that seek by discussion to form a consensus among their members. On questions that he could resolve by simply issuing orders, even Jamieson frequently asks for and abides by votes of the nine-member management committee or the 17-member board of directors. Direct orders, indeed, are rare at all levels of the company. The standard Exxonism for a command is: "You may want to consider this."

In this atmosphere, Exxon's managers have great difficulty describing how decisions are reached, or even identifying exactly who makes them. Production Vice President Goerner, for example, constantly talks with Exxon's exploration chiefs around the world about where to look for oil; he also reviews their budgets. But if the head of an Exxon subsidiary in, say, Australia differs with Goerner on where the company should spend millions in drilling, both present their views to the management committee, which meets as often as necessary to consider Exxon's largest problems. The committee then mediates a compromise.

Charles Peyton, vice president for international supply, currently spends part of almost every day before the management committee, telling which countries he is routing tanker shipments to and why, since that has become politically sensitive. Is the decision his or the committee's? It is impossible to say.

Sometimes committee members merely listen and go on to another topic with out explicitly approving Peyton's plans; sometimes they start a discussion, after which the destination of a tanker may or may not be changed.

The system might appear designed to make Exxon a slow-moving debating society -a kind of centipede with ar thritis. In fact, Exxon has an enviable reputation for being nimble. The main reason is that the New York headquarters still grants considerable autonomy to subsidiaries and affiliates in the field.

Independent Texas oilmen, for instance, often ask to lease wells that major oil companies are not operating. Some companies refer all bids to corporate directors, who may take years to answer; Exxon's local executives can usually return a yes or no answer within two weeks. Independent oilmen, indeed, almost unanimously give Exxon credit for not only swift but fair dealing. Many say that Exxon will not sign a sale, purchase or lease contract unless its officials are convinced that the transaction is good for both parties.

John D.'s Legacy. The company certainly did not always enjoy such a sound reputation. In fact, in its early days under John D. 'Rockefeller, it was a ruthless monopoly. Rockefeller opened a refinery in Cleveland in 1863, combined it with several others under the name Standard Oil in 1870, and set up the Standard Oil Trust in 1882. Standard Oil bribed many politicians and cut prices to the marrow in order to drive out competitors. One of John D.'s favorite techniques was to negotiate secret rebates from railroads, which were eager to carry Standard's petroleum; he handed them so much business that they frequently gave him kickbacks on the shipments of rival firms as well. He then slashed prices still further, and bought up ruined rivals. By 1884, Standard Oil was selling more than 80% of the oil that flowed out of U.S. wells. Though no body today defends his tactics, historians still debate whether Rockefeller did more harm or good. He organized a chaotic industry into a coordinated and efficient network of wells, pipelines, refineries, tankers and marketing facilities, establishing vertical integration, which is the' dominant form of the industry to this day.

Rockefeller's influence is still felt in Exxon. He began selling overseas when the industry was still a handful of wells in Pennsylvania turning out a product that was refined mostly into kerosene burned in lamps (gasoline was then an unwanted byproduct). Early on, Stan dard Oil boasted that its kerosene was carried any place "that wheels could roll or a camel could put its hoof." It was Rockefeller, too, who insisted that able executives were the company's greatest strength and should be sought out wher ever they could be found. "Don't buy properties, buy brains," he urged.

Soon after the Sherman Antitrust Act became law in 1 890, Rockefeller dis solved the Standard Oil Trust and formed Standard Oil Co. (New Jersey), a name that was used until 1972. Jersey Standard eventually owned the shares of all the other companies in the old trust. But its stranglehold on the indus try was broken at the century's turn by one of the worst pieces of "expert" advice ever given. Anthony F. Lucas, a wildcatter drilling near Beaumont, Texas, appealed to Jersey Standard for financial backing, and Jersey sent a pro duction specialist to look at the area; he found "no indication whatever to war rant the expectation of an oilfield on the prairies of southeastern Texas." Lucas got his backing elsewhere and a few months later blew in a titanic gusher, opening the Spindletop field, which doubled world crude production overnight. Two of the companies organized to market that oil, Gulf and Texaco, gave Standard its first effective competition.

In 1911, the Supreme Court split the combine up into 34 companies. Among them: Standard of California, Standard of Indiana, Standard of Ohio, and Standard of New York (now known as Mobil). Jersey Standard kept the biggest piece of the business-three huge U.S. refineries and most of the foreign operations-but was left with very little crude production. Its wealth enabled it to buy its way over the next few decades into many of the big oilfields that were discovered around the world. Jersey began buying into Humble in 1919, purchased a big interest in Venezuela's Creole Petroleum in 1928, bought a share of Arabian-American Oil Co. (Aramco) from the original partners, California Standard and Texaco, for a bargain-basement $74 million in 1948.

Growing in that fashion, Jersey Standard for many years operated as a loose federation of companies. Jamieson recently has tightened up the operation. He still preserves local autonomy, but provides somewhat more frequent consultation and guidance to the company's many units. Indeed, after Houston operating headquarters dispatched the luckless Roy Baze to testify before Senator Jackson, Jamieson decided that New York headquarters would henceforth choose all Exxon witnesses to present testimony to Congress. Says one close associate: "It was the clearest signal I ever heard Ken give."

Civil Service. The foreign units operate largely as national companies. In Canada, Exxon owns 75% of Imperial Oil, which posts sales of more than $2 billion a year. Imperial Chairman William O. Twaits says that Exxon chiefs in New York merely "want to know what we are planning and if we can finance it. We have the same relationship with them that we would have with a bank to which we owed a lot of money -except our relationship with Exxon is much more amicable."

To tie its global empire together, Exxon has built a top management that resembles a world government. Citizens of Germany, Italy and Venezuela sit on the parent Exxon's 17-man board of directors. Jamieson always chooses a non-American from one of the overseas operations to be his personal assistant for a year or so, then sends him back home to a top job. In 1972-73 his executive assistant was Masamoto Yashiro, now vice president of an Exxon subsidiary in Japan. As a staff for the world government, Exxon has created what amounts to a global civil service that concentrates on identifying potential managers early and promoting them fast. The company recruits promising geologists, engineers and business-school graduates from colleges in the U.S. and abroad. From their first day on the job, they are constantly watched and rated by their immediate bosses and, if they do well, moved-into a new job, or perhaps even a new country -roughly every three years. The company insists on giving its future leaders rounded experience. It regularly sends accountants to help run refineries, switches lawyers into marketing.

Each year, chiefs of every Exxon division, subsidiary and affiliate have to compile lists of their executive jobs and identify people who have the potential to fill them in the future. (Exxon defines an executive as anyone earning $25,000 a year or more; some 2,900 of its 150,000 employees around the world fit that category.) Similar lists are kept all the way up to the top of the empire. In New York, each Exxon director compiles a brief list of executives who are potential future members of the board.

Rising Exxonians are never quite sure where they rank on any list; superiors discuss with them only their performance, not their potential. That system reaches one rung short of the top. Clifton Garvin Jr. insists that when directors named him Exxon's president in July 1972, he was surprised. Though Garvin was one of two executive vice presidents, no one had ever told him that he was at the top of Jamieson's list of possible future presidents.

Long Reign. Garvin can expect to become chairman when Jamieson reaches mandatory retirement at 65 in August 1975. Since Garvin will be only 53 then, he will presumably preside for a dozen years, about twice as long as usual. Garvin, a Virginia Polytechnic Institute engineer and a graduate of the Baton Rouge, La., refinery, which is a prolific breeding ground of Exxon leaders, once ran Exxon's chemical operations. He confesses to "a feeling of frustration" in trying to explain the complexities of the energy problem.

By the time they reach the top, Exxon men have had any crudities refined by long exposure to varied jobs, people, countries and governments. Author and Oil Consultant Ruth Sheldon Knowles, who has traveled widely around the Ex xon empire, says that most of the Exxonians working overseas seem to be better informed about foreign politics and society than the U.S. diplomats stationed in their countries.

Their bosses caution Exxon men to treat all governments alike: maintain friendly and correct relations, but never get too close or become too hostile.

Since Exxon intends to stay in a country long after both the present government and its successor are gone, it must get along with any kind of regime, from right-wing dictatorship to left-wing populist to outright Communist (witness its Polish contract). Jamieson keeps on his office coffee table a handsome cigarette box presented to him by the late President Sukarno of Indonesia, a vehement foe of both the U.S. and capitalism. Jamieson notes that he has negotiated directly with the Shah of Iran, adding casually that in the way of presents, "all I ever got from the Shah was caviar."

To some extent, Exxon seems to have followed the same arm's length pol icy in the U.S., a fact for which executives can be grateful in the current cli mate of deep suspicion. Three oil companies -Gulf, Ashland and Phillips Petroleum -have admitted making illegal contributions of corporate funds to the 1972 Nixon re-election campaign. Exxon was asked for a similar contribution and refused. An aide says that Jamieson abruptly dismissed G.O.P. Fund Raiser Maurice Stans from his office.

These policies have kept Exxon remarkably free of scandal during the present shortages. Italian newspapers are rilled with allegations that oil companies have held back supplies and bribed government officials to get price increases. No such charges have been hurled against Exxon's Esso Italiana. In New York the regional Federal Energy Office said last week that five oil companies-but not Exxon-in January had cut off or reduced gasoline deliveries to some stations in an effort to eliminate marginal operations; it ordered the companics to restore deliveries. The worst that may be said about Exxon is that it raised wholesale gasoline prices 3%0 a gal., while Amoco cut them 20-but then, Amoco's price had earlier been one of the highest in the region, and Exxon's price, about 7%0 less, had been the lowest among the majors.

Nasty Surprise. Certainly Exxon has made mistakes. Though its officials saw the oil shortage coming and tried to raise the alarm, Jamieson concedes that the speed and severity with which the scarcity hit last year took them by surprise. His explanation: Exxon planners underestimated how rapidly world demand for energy would grow, and made too optimistic forecasts of how quickly coal production would increase and nuclear power develop to take the pressure off oil.

Once the crisis did burst, some oilmen began talking black gloom. German government officials, for example, say that after the Arab oil cutbacks started, Exxon and other companies warned them that imports might fall as much as 25% short of demand. European governments then took a more pro-Arab political stance than they might have if they had been less frightened. But Exxon Vice President Peyton reminds critics that the Arab countries initially reduced production by 25% below September 1973 levels, and vowed to cut a further 5% each month until Israel withdrew from territories occupied during the 1967 war. Exxon, he says, had to assume that the Arabs meant it and prepare for the worst.

The Arabs have canceled some of the early cutbacks, so that their production is running 15% below last September's pace. Iran, Indonesia, Nigeria and other countries have increased output, and world demand has been held down by surprisingly effective conservation and a relatively mild U.S. winter. Peyton estimates that world oil output is running 7% below the level of demand that existed before the crisis-a manageable shortfall, but one that still requires strict conservation.

Farther back, Exxon can be faulted for its support of oil import quotas, which kept a wall around the U.S. market between 1959 and early 1973. Indeed, when a Cabinet-level task force in 1969 was readying a proposal to dump the quotas, Michael Haider, then Exxon's recently retired chairman, arranged a private meeting with President Nixon, who eventually decided to keep the quotas. In retrospect, that was a grievous error. The quotas helped prompt U.S. oil companies to build their new refineries overseas, where they had access to then plentiful and cheap foreign crude. U.S. refineries have about 3 million to 4 million bbl. less daily capacity than they would need to meet "normal" domestic demand of close to 20 million bbl. That lack will contribute to keeping supplies tight for years after the Arab embargo ends. Now Exxon, which accounts for about 10% of the nation's refinery runs, is almost doubling the 300,000 bbl.-a-day capacity of its refinery at Baytown, Texas, and adding 100,000 daily bbl. to the capacities of other U.S. refineries.

No amount of new building, however, will head off the political onslaught that the oil industry faces in the U.S. At minimum, Exxon will have to put up indefinitely with much tighter federal regulation. For instance, under a Government allocation program, it must sell 140,000 bbl. of crude a day to American competitors whose refineries are less well supplied than Exxon's are.

Senator Jackson is drafting a bill that would require major oil companies to add to their boards a "public" director appointed by the President and confirmed by the Senate. He would act as a watchdog, scrutinizing every aspect of the company's operations. Republican Senator James Buckley of New York, who opposes the idea, says: "Any bill with 'Scoop' Jackson's name on it must be given a good chance."

Flak From Friends. Even the industry's former best friends in Washington now find it politic to make anti-oil noises. House Ways and Means Chairman Wilbur Mills, who opened hearings on oil taxes last week, says he has told oilmen that they receive unwarranted special preferences. The Nixon Administration has proposed a "windfall-profits tax" (actually an excise tax on sales), and will also seek to limit the amount of foreign tax payments that oil companies can deduct from their U.S. taxes. Treasury Secretary George Shultz calculates that if the limit were in effect now, oil companies this year would pay $400 million more in U.S. income taxes -about as much as Exxon will spend to expand the Baytown refinery. The windfall-profits measure will die if Congress legislates an oil-price rollback, but some increase in taxes seems certain.

Emilio Collado, an Exxon executive vice president, says that any tightening of the rules that permit foreign taxes to be subtracted from U.S. taxes would hurt Exxon worse than many of its competitors, partly because the company's foreign operations are so extensive. Collado insists that critics of the industry should look at not just the U.S. taxes but also the worldwide taxes that it pays. Exxon last year, he asserts, paid 60% of its global taxable income to various governments. The industry's defenders argue further that tax rules have given it no profit bonanza. Until last year, U.S. oil companies' profit return on investment was only about average for all manufacturing industries.

The figures are correct but subject to an altogether different interpretation: that tax benefits for years in effect subsidized unrealistically low oil prices, which in turn tempted corporations and consumers to burn the fuel wastefully. The best thing to do now would probably be to restrict or repeal many of the tax benefits and let prices stay high.

Overseas, the threat to Exxon is even greater. Incoming Venezuelan President Carlos Andres Perez has pledged to take over all foreign oil concessions, including plants and equipment, long before present agreements expire in 1983. The Saudi Arabian government has already bought 25% of Aramco, has negotiated an agreement to take over 51% by 1982, and will probably exert control much sooner.

Just where that will leave Exxon and the other majors is probably the big oil question of the next decade. Leaders of the producing countries have heady visions of refining, transporting and selling worldwide through their own national oil companies. Exxon officials, who can remember expropriations in Mexico, Peru, Cuba and Iraq, remain quietly confident that the producing governments in the end will turn to them for help. They already control refineries, pipelines, tankers and gas pumps that, they still believe, the producers cannot do without. Iran nationalized its oilfields in 1951, but a consortium in which Exxon has a 7% share still operates the wells and sells most of the oil.

Choice Area. It is clear, though, that producing governments will increasingly call the tune. Saudi Arabia has already slowed an ambitious Aramco expansion program, and will likely permit output to rise only slowly from the present 7.3 million bbl. a day even after the embargo ends; Faisal's government has little need for the revenues that additional sales would bring. Thus Aramco has next to no chance of boosting production to 20 million bbl. a day by 1982, as it once planned. That Saudi policy alone will keep worldwide oil supplies tight for years to come.

Exxon is gearing up to close the gap as much as it can. The company is rich in reserves of what oilmen call "politically insensitive crude"-oil least subject to nationalization. It is among the largest developers of the two richest fields discovered in the past decade: in the North Sea and on Alaska's North Slope. Both should reach peak output around 1980. Exxon also owns most of a field off Santa Barbara, Calif., which holds reserves estimated as high as 1 billion bbl. but cannot be fully exploited until environmentalist objections are overcome. More oil surely lurks beneath the Gulf of Mexico. When the Government two months ago auctioned off drilling leases on promising lands off Florida, Exxon picked up one of the choicest areas by bidding $343 million.

In confronting the changes now racking the oil business, Exxon is not without its strengths-to put the matter in a classic Exxon understatement. Whatever Arabs or Congressmen do, the company's wealth, experience, savvy, diversity and proven ability to adjust promise to keep it the most formidable tiger in the world of oil.

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