A corporate refugee from the congestion, noise, occasional violence and high taxes of New York City takes up residence in Fairfax County later this month.
Mobil Corp., the nation's second biggest oil company and by consensus the most outspoken, is moving the headquarters of its domestic refining and marketing operations to new offices on a 130-acre tract at the intersection of the Beltway and Route 50. About 1,100 persons will work there.
The division operates seven refineries scattered from New Jersey to California, and last year sold an average of more than 36 million gallons of petroleum products each day. About half of that was gasoline for motor vehicles sold primarily through about 17,500 Mobil service stations around the country.
With revenues of $7.473 billion in 1979, the sales of this single division of Mobil more than tripled those of any private corportion operated for profit in the Washington area. The largest, the Chesapeake and Potomac Telephone Company, had sales of $2.450 billion.
But as the cost of crude oil has skyrocketed in recent years, a smaller proportion of every oil company's sales dollar has turned up on the bottom line. Thus, while C & P was earning $306.2 million on its sales, Mobil's U.S. refining and marketing division had net income of $189 million.
Nevertheless, the division ran afoul of the Carter administration's price standards during the third quarter of last year. After sharp criticism from President Carter, the company, still maintaining it was a victim of a retroactive rules change, agreed to "repay" $30 million of what the Council on Wage and Price Stability originally insisted were $45 million worth of revenues garnered in excess of the price standard. To make payment, the division recently cut prices to hold its revenues this quarter and next below what the voluntary price standards would otherwise allow.
Overall, the division provided slightly more than 15 percent of Mobil Corp.'s worldwide sales of $45.24 billion last year. The corporation also owns major chemical operations, the Montgomery Ward retailing chain, Container Corp. of America, a forest products company and numerous other ventures, including Mobil Land Development Co. which is developing more than 3,000 acres of land in Reston, Va., and plans to redevelop part of the Colonial Village Apartments in Arlington.
The $189 million the refining and marketing division earned was a bit less than 10 percent of the corporation's consolidated net income of $2.007 billion. Mobil made far more, $491 million, from its production of oil and gas in the United States, even though revenue from those operations, $1.825 billion, was only a small fraction of the refining and marketing division's $7.473 billion.
With both price controls on gasoline and the administration's price standard biting hard in the United States, last year the corporation did far better internationally with its refining and marketing operations. As markets tightened dramatically in the wake of the Iranian revolution, sales of refined products outside the United States climbed 34 percent to $19.844 billion, but earnings on those foreign sales soared from $222 million in 1978 to $818 milllion in 1979, a 268 percent jump.
Mobil's U.S. and foreign refining and marketing operations are both headed by Allen E. Murray, who will remain at the corporation's New York headquarters but also have an office in the new building in Fairfax County.
While no announcement was ever made, the company originally intended to move its entire corporate headquarters to Virginia. However, after it said in 1976 it was relocating the domestic refining and marketing division Mobil came under what a spokesman called "very heavy pressure" from New York City officials to keep the rest of its headquarters there. Early in 1978 it said it would do so.
Murray, in a recent interview, said that when Mobil began its search for a new headquarters site, its first criterion was excellent air service. On the basis, the company quickly focused its sights on Washington, Chicago, Dallas and, to a lesser extent, Atlanta. Washington, with three major airports in the area, headed the list, he said.
The company's second criterion concerned the general business and tax environment. Would the state and local government welcome Mobil? how heavily would both the company and its relocated employes be taxed
"virginia was picked," Murray said, "because it looked the best in the United States from our point of view."
Uniquely, too, in a Washington suburb, the division would be close to the Department of Energy officials who regulate so many facets of the oil industry, and to Congress where so much legislation affecting the industry is constantly pending. But Murray placed that consideration a distinct third.
Wherever a peroleum refining and marketing headquarters may be, these days it has become an uncertain business. Crude supplies can vanish at a moment's notice, demand can plummet in the wake of worldwide oil price hikes and government regulations can be changed overnight.
"The Mobil world, the whole world, has changed," Murray explained. "It is no longer a matter of saying what you can get sell. Marketing has become not a leader, but a follower . . . We are not out looking for markets.
In such circumstances, Murray said, the goal of his division has to be efficiency of operation. "We want to make ourselves the most efficient company in the industry," he declared.
To that end, Mobil, like most of the industrty, wants "to put the most gasoline through the fewest outlets it can," he said. Last year it had 5.8 percent of the nation's retail gasoline market, behind Exxon, Standard Oil Co. (Indiana), Shell, Gulf and Texaco. The leader Exxon, had only a 7.7 percent share.
Mobil has pulled back much less sharply than, for example, Texaco, another oil giant that used to market in every state. But the number of Mobil's outlets still is shrinking. In 1965 Mobil had nearly 26,000 retail outlets in the United States, a number than changed only slightly until after 1972 when the world oil picture was altered so drastically. Since then, the company has been dropping about 1,000 outlets a year, and is now down to about 17,500.
The volume of the division's product sales also dropped from a high of 978,000 barrels a day in 1972 and 1973 to a low of 822,000 in 1975, when the economy was in a deep recession. Since then it has risen slightly to 864,000 barrels a day last year. (Each barrel has 42 gallons.)
Of the remaining 17,500 outlets, Mobil only owns and operates with salaried employees about 400. It also either owns outright or leases another 4,700 which are operated by independent dealers. The remaining stations are neither owned nor operated by Mobil.
Murray said that, on the basis of data "a year or two old," Mobil trails only Shell in terms of the gallonage sold by the average stations owned or leased by Mobil. Mobil has no intention of increasing significantly the number of company-owned and operated stations, he added. This is a particular sore point with independent dealers who resent the rapid growth of so-called gas-and-go, high-volume stations -- many of which are being opened by the companies themselves.
"We believe in the dealer system," Murray continued. "Assuming there are no laws prohibiting it, we always plan to have some company-owned stations" for training purposes and in some cases to achieve higher volume. Also, he said, Mobil often "will run a new station for a year or two to get the volume up before leasing it."
Meanwhile, as the number of retail outlets has dwindled, Mobil had been streaming the distribution system moving products from its refineries to its stations and other customers. The company has closed numberous bulk storage plants around the country, a step that has often eliminated one entire layer of paper work and accounting, he said.
As for the seven refineries themselves, Murray is proud of the fact they are already more efficient than the industry average in two ways.
First, about 60 percent of all of the crude they use can be "sour" crude; that is, it has a high sulfur content. (Such crudes are usually cheaper and more easily acquired.) The industry average is just over 50 percent.
Second, the refineries produce a "lighter" barrel of products than the industry average. That means more gasoline, home heating oil and diesel fuel instead of heavy fuel oil for industrial and utility boilers. "The biggest questions about refineries down the road," he said, "is how much you do to modify them to make more gasoline instead of heavy fuel oil.
"With an enlightened energy policy," Murray continued, "coal and nuclear power will increasingly replace heavy fuel oil as an energy source for big boilers. If that occurs, then the industry will have to use more of that heavy bottom of the barrel to make gasoline and middle distillates -- making large capital expenditures to enable it to do so."
At the corporate level, Mobil undoubtedly will continue to be highly visible, what with its constant stream of controversial advertisements on energy matters and its close and rapidly growing ties with Saudi Arabia. Murray's fondest hope, after all of President Carter's bitter criticism of Mobil's failure to comply with the voluntary price standard, probably is that his division will get as little notice as possible from now on.
Meanwhile, from Fairfax, Robert G. Weeks, a vice president of Mobil Oil Corp. and Murray's deputy will be handling the day-to-day business of refining and moving those 36 million gallons of petroleum products to market.
The most visible impact locally may be the traffic jams on Gallows Road.