Using Tough Tactics to Divulge an Industry's Secrets

After all, for most of the past 30 years, refining has offered only lots of headaches and sub-par returns, he continued. Now that the industry has consolidated into a handful of players, the plan is to follow the OPEC model of "disciplined investment." And, during times like these, when gas supplies are tight, he said the majors charge their own branded dealers below-market wholesale prices to weaken the market position of the independents.

Going forward, he said, the real action would be in ethanol. "The plan is to stand back and let the farmers ride the ethanol craze for a while, then wait for the bubble to burst and swoop in and buy up the industry for a song," he explained. "In the meantime, we'll continue to charge them inflated prices for all that fuel they need to run their tractors, transport their corn and turn it into ethanol. That way, we get 'em coming and going."

Subject admitted to selectively using financial data to confuse Congress and the public. Exxon Mobil, for example, claimed it has invested more money in exploration and other capital expenditures during the past five years -- $74 billion -- than it made in profit. But the important number, he explained, isn't profit, but cash flow from operations, which totaled $161 billion -- more than enough to pay $34 billion in dividends and still have plenty left over for executive comp.

Subject became agitated and abusive on the subject of taxation. He complained that Exxon Mobil last year made so much money that it ran out of tax loopholes and actually had to pay an effective corporate tax rate on U.S. profits of 33.5 percent. Only three years before, the effective tax rate was 5 percent.

Subject simply smiled when asked about Republican congressmen beginning to make noise about some form of windfall profits tax. "Election year posturing."

But his mood changed dramatically when asked to read a proposal from a number of liberal economists calling for a big new fuels tax -- with the money rebated to consumers through a reduction in the payroll tax.

"The Europeans realized years ago that, in the long run, it is not consumers who pay a fuels tax -- it's the industry," he said. "Why else do you think our margins over there are so low? We've been lucky that Americans and their politicians have never figured that out."

Steven Pearlstein will host an online discussion at 11 a.m. today athttp://washingtonpost.com. He can be reached atpearlsteins@washpost.com.