Donald D. Humphreys, a senior executive with oil giant ExxonMobil Corp., was speaking of the controversy over carbon emissions and global warming during a recent Wharton Leadership Lecture when he noted that, “We would just like to be in the debate, and not viewed as, ‘…We’re bad and nobody likes us.'”

The carbon emissions issue is just one of several controversies surrounding the world’s largest corporation — a list that includes gasoline prices surging towards $4 a gallon, ExxonMobil’s push for expanded oil exploration and drilling at home and abroad, and its high-profile war of wills with the president of Venezuela, Hugo Chavez.

During his remarks, Humphreys, senior vice president and treasurer of the Irving, Texas-based behemoth, said one reason he welcomed the opportunity to speak to a Wharton audience was to erase widely held misconceptions about the powerful company that traces its roots back to the 19th century and John D. Rockefeller.

While the populist perception of ExxonMobil — which earned a record $40.6 billion in profits in 2007 — is that it has too much power and is partly responsible for the run-up in gas prices, Humphreys said the company still earns a lower rate of profit than many typical American corporations and is often frustrated in its efforts to drill for offshore oil or construct new facilities. Critics, he added, should think about the U.S.’s “need for energy and the world’s need for energy, because China isn’t going to stop growing and India isn’t going to stop growing.”

Humphreys, who was born in Oklahoma, earned an undergraduate degree from Oklahoma State University, served in the U.S. Army until the mid-1970s and then came to Wharton for an MBA. After graduation, he joined Exxon, which merged with Mobil in 1998. His work took him around the globe, including a stint in Malaysia. He became a vice president of Exxon in 1997, just before the merger.

His presentation comes during one of the greatest upheavals in the oil and natural gas industry since the late 1970s, with the price of crude oil now surpassing $120 a barrel, an all-time record even when adjusted for inflation. The price surge has also meant unprecedented costs for American motorists and widespread complaints about oil company profits; its $40.6 billion in profits last year were a record in terms of raw dollars. Profits for the first quarter of 2008 were $10.9 billion.

According to Humphreys, analysts at ExxonMobil believe — based upon the historical supply and demand curve — that the price for crude oil should be much lower, closer to $50 a barrel. There are several reasons for the spike, he stated, including geopolitical anxiety over the stability of the Middle East and other oil-producing regions, the steep slump of the U.S. dollar, which is the basis for most oil transactions, and an unprecedented level of speculation in oil as a commodity. Recalling that prices were expected to keep rising into perpetuity when he joined Exxon in the 1970s, only to decline to much lower levels for most of the 1980s and 1990s, Humphreys said he believes oil will fall again, but he won’t predict when. “If I knew the answer to that, I wouldn’t be up here.”

Taking on Hugo Chavez

In the meantime, the company has found itself on center stage in Venezuela, engaged in an epic legal battle over $12 billion in Venezuelan assets — held in the U.S. and Europe — that were frozen by ExxonMobil after Chavez nationalized some of the company’s oil fields. Humphreys said ExxonMobil will continue its defiant stance — despite a recent decision by Chavez to increase taxes on oil exports — noting that the company’s ability to develop oil and natural gas fields depends on the long-term sanctity of its contracts.

“This is a commercial deal — we want our money,” Humphreys said. “It’s really pretty straightforward, but we feel we have to stand up from time to time. Somebody has to put a stake in the sand and say, ‘Look, if you do this and these new terms allow you to do this, it’s a slippery slope.'”

The broader reasoning behind that stance is the enormous long-range costs of developing new oil and natural gas fields around the world. Humphreys spoke of Exxonmobil’s new facility on Sakhalin Island in the Pacific Ocean off Russia, where the price tag will ultimately reach $15 billion or more for a project that took roughly 10 years to develop and will, the company hopes, produce oil for some 40 years. The spending is necessitated by the high-tech technology required to reach an oil field that is seven miles offshore. “Basically, it is a 50-year time horizon for this development, and that is why we talk about the long term.”

In fact, citing the complicated negotiations that involve ExxonMobil executives and the highest-ranking officials in the foreign countries — where it has been doing business, in some cases, for more than a century — Humphreys said that working for the global corporation can feel like holding a job in the U.S. State Department. One goal of the company, he added, is to ensure that shared oil wealth is put to good use by the host country. He cited the example of his own time working in Malaysia in the early 1990s. “When you go in and have a dialogue with the host government and say, ‘This is what I can bring to the game to develop your resources,’ it works out well for everyone. Malaysia is a poster child for good development. They took their oil wealth, invested it in education and high tech activities, and made themselves into a different country.”   

Bribery Scandal

Humphreys said that some bad experiences in the past — including an Exxon-related bribery scandal in Italy in the 1970s that led to the passage of the Foreign Corrupt Practices Act — have caused current executives to place a strong emphasis on ethics, particularly in the company’s international dealings. ExxonMobil, he added, simply walked away from two potentially lucrative deals in foreign countries because government officials wanted to be paid off. “In this business, if you don’t operate with principles and integrity, you’re going to have problems.” 

In addition to ExxonMobil’s ethics focus, Humphreys said the average gas customer may not be aware of the company’s increasing emphasis on developing new technology, which includes the work of about 15,000 scientists and researchers companywide who obtain about 1,000 or so new patents every year.

“It’s hard for people to think of us as a technology company,” Humphreys noted, adding that the company’s research and development team is focusing on three areas: onboard separators that can produce hydrogen while a car is operating to power high-tech fuel cells; the use of algae as a promising new source of biofuels; and technology to create cleaner coal by removing carbon dioxide. Newer forms of renewable energy, such as wind and solar power, will grow at a rapid rate, according to Humphreys, but not come anywhere close to meeting the world’s energy needs, especially with the current growth in developing nations.

That said, Humphreys is not a subscriber to the theory of peak oil — the belief that the world’s oil production will soon start to diminish, if it hasn’t started already, as supplies dwindle. “There’s a lot of talk today that the world is running out of oil or hydrocarbon reserves. We don’t really think so,” he said, adding that while humans have used about one trillion barrels of oil since the 19th century, an estimated two trillion barrels remain in the ground, in addition to other types of fossil fuels, such as shale.  

In a recent reversal, however, ExxonMobil officials have come to agree that climate change and the role of fossil fuels is a problem. “We think there’s an issue, and we acknowledge it as an issue; we’re not sure what the best ways are to deal with it,” Humphreys said. “The tradeoff that you’re always facing is economic development versus carbon emissions, so we think there needs to be a healthy debate.” He said a cost-to-carbon plan of limiting pollution might work, but it would not help to lower the cost of gasoline.

In other words, Humphreys said, solving this problem — like many other issues — would take a lot of political will, which is something that he has found lacking in our current political culture. “It’s your generation that’s going to have to make some tough tradeoffs — we all are,” he said. “There’s going to have to be economic development. But with no carbon emissions, what are you going to do?”