From: Douglas Grandt answerthecall@me.

com
Subject:Are you prepared to avert the impending oil crisis?
Date:June 22, 2017 at 9:40 PM
To:David Cleary (Sen. Alexander) David_Cleary@alexander.senate.gov, Dan Kunsman (Sen. Barrasso)
Dan_Kunsman@barrasso.senate.gov, James Quinn (Sen. Cassidy) James_Quinn@cassidy.senate.gov,
Jason Thielman (Sen. Daines) Jason_Thielman@daines.senate.gov, Chandler Morse (Sen. Flake)
Chandler_Morse@flake.senate.gov, Ryan Bernstein (Sen. Hoeven) Ryan_Bernstein@hoeven.senate.gov,
Mark Isakowitz (Sen. Portman) Mark_Isakowitz@portman.senate.gov, John Sandy (Sen. Risch) John_Sandy@risch.senate.gov,
Travis Lumpkin (Sen. Cantwell) Travis_Lumpkin@cantwell.senate.gov, Jeff Lomonaco (Sen. Franken)
Jeff_Lomonaco@franken.senate.gov, Joe Britton (Sen. Heinrich) Joe_Britton@heinrich.senate.gov, Betsy Lin (Sen. Hirono)
Betsy_Lin@hirono.senate.gov, Patrick Hayes (Sen. Manchin) Patrick_Hayes@manchin.senate.gov, Jeff Michels (Sen. Wyden)
Jeff_Michels@wyden.senate.gov, Michaeleen Crowell (Sen. Sanders) Michaeleen_Crowell@sanders.senate.gov,
Kay Rand (Sen. King) Kay_Rand@king.senate.gov, Angela Becker-Dippmann (Senate ENR Ctee)
Angela_Becker-Dippmann@energy.senate.gov, Colin Hayes (Senate ENR Ctee) Colin_Hayes@energy.senate.gov,
Michael Pawlowski (Sen. Murkowski) michael_pawlowski@murkowski.senate.gov, Kaitlin Fahey (Sen. Duckworth)
Kaitlin_Fahey@Duckworth.senate.gov, Matt VanKuiken (Sen. Stabenow) Matt_VanKuiken@Stabenow.senate.gov,
Scott Fairchild (Sen. CortezMasto) Scott_Fairchild@CortezMasto.senate.gov, Natalie Rogers (Sen. Gardner)
Natalie_Rogers@Gardner.senate.gov, Allyson Bell (Sen. Lee) Allyson_Bell@lee.senate.gov, Will Batson (Sen. Strange)
Will_Batson@strange.senate.gov
Cc: Darren W. Woods Darren.W.Woods@ExxonMobil.com, Jeffrey J. Woodbury jeff.j.woodburv@exxonmobil.com,
Suzanne M. McCarron Suzanne.M.McCarron@ExxonMobil.com, William (Bill) M. Colton William.M.Colton@ExxonMobil.com,
Max Schulz max.schulz@exxonmobil.com

You owe me a response to 79 letters and emails.

Are you prepared to face ExxonMobil insolvency?
The daily news is fraught with opinions and analyses of the international oil market in view of
the Saudi price war in response to the global supply glut and decline in worldwide demand
for hydrocarbon fuels.

I see constant appraisals of equities and recommendations to buy or sell, this stock or that
stock, subject to a diverse collection of caveats. The trend is getting worrisome, given the
new instability in the Middle East, most recently involving Qatar, Iran, and Saudi Arabia, as
well as China and Russia. You know better than I, but what I read is not promising.

Following is a collection of news articles dated yesterday and today. They portend what I
fear will be decisions made by Boards of Directors in desperation as continued declining oil
prices plague the industry. ExxonMobil is the pinnacle of stability, but it is becoming a fragile
house of cards created by financial engineering intended to prop up share value by
shamelessly manipulating finances to increase dividends as a touted "dividend aristocrat. I
believe ExxonMobilmy first career employer in the early 1970sis on very shaky ground.

Once again, in view of todays news, I implore you to call hearings for the Management and
Board of ExxonMobil and similarly situated production and refining organizations to testify
before the Senate Energy and Natural Resources Committee to explain how they will act in
the Public Interest and National Interest as they exercise fiduciary duty in the face of debt
default, insolvency and bankruptcy.

Now the news

Doug Grandt

Oil tumbles again as analysts start to throw in the towel

CNBC - June 21, 2017 - Bit.ly/CNBC21Jun17

The big issue is, when will supply come in line with demand? More specifically,
when will the U.S. shale producers blink? Oil took another tumble midday Wednesday,
below $43 a barrel, and regardless of the reason we are finally starting to see analysts on
the Street throw in the towel and begin to take down 2017 earnings estimates.
Missing Risk Premium Could Lead To Oil Price Shock
Seeking Alpha - June 22, 2017 - Bit.ly/Alpha22Jun17

Confrontation is brewing as Saudi Arabia, Gulf Cooperative Council nations, Israel, and the
U.S. all firm opposition to Iran.
The recent actions against Qatar by GCC nations and U.S. missile deployment in Syria are not
good signs for peace.
The real risk to oil production in the Middle East is in Iraq, which looks like a sacrificial lamb,
and Iran, which can't win an all-out conflict.
Oil services stocks serving U.S. shale oil are highly levered to rising oil prices.
Over the past two years, there has been essentially no "risk premium" in oil prices due to a
supply glut and large inventories. That could change if tensions in the Middle East turn into wider
conflict. With oil supply and demand in balance, even small disruptions to supply or
transportation could disrupt inventory enough to drive oil prices higher.
Currently, the future's price of oil exceeds the expected future spot price of oil, a condition called
"contango." This implies the risk is that oil prices will fall further and that there is essentially no
risk premium for future oil delivery. The market is saying that the current oil glut will last at least
another year and that the cost of storage is a bigger risk than the potential costs of finding oil to
deliver.
With the market believing that oil will remain in a glut at least another year, I think it is important
to ask these questions: What if the market is not taking into account all factors? What if today's
supply and demand, as well as inventory, are being considered within a vacuum of pure price
speculation independent of consideration for potential supply disruptions?
In a paper by Steven D. Baker of the McIntire School of Commerce, University of Virginia, and
Bryan R. Routledge of the Tepper School of Business, Carnegie Mellon University, they discuss
The Price of Oil Risk. The paper harkens back to the ideas surrounding contango and normal
backwardation of Keynes:
'normal backwardation' (or 'natural') refers to the situation where the current one-year
futures price is below the expected spot price in one year. This you will recognize as a
risk premium for bearing the commodity price risk.
Wednesday Is Becoming Oil's Least Favorite Day of the Week
BloombergMarkets - June 22, 2017 - Bit.ly/Bloom22Jun17

The weekly falls illustrate rising concern that a concerted effort by OPEC members to cut output
wont be enough to rebalance the market and crimp U.S. production.

Macquarie: OPEC Deal To Collapse In 2018

OilPrice - June 22, 2017 - Bit.ly/OilPrice22June17

OPECs deal has not had the cartels desired effect on the markets, neither in terms of oil prices
nor in drawing down the global glut. The volume of U.S. shale output is nullifying OPECs efforts.
They cant get the price up to a level where they can keep the shale guys out of the game.
Why it's time to short oil
CNBC - June 22, 2017 - Bit.ly/CNBC22Jun17

The other factor underestimated by OPEC has been the rebound in U.S. production from both
the Gulf of Mexico and the shale producers. We have only just begun to see the shale output hit
the market from the attendant rise in the U.S. rig count. At this point, if there is no industry
response, prices will grind lower. The OPEC, non-OPEC deal adherents need to do more, but it
may be unpalatable for them to give up increasing amounts of global market share. China has
actively shopped around for supply from sources, in response to the cutbacks.
It may sound like heresy, but the best tactic for Saudi Arabia may be to unleash its productive oil
capacity and crash the market. They are by far the low-cost producer, and an ultra-low price
environment would harm their regional rivals, although Iran knows how scrimp along very well,
after years of sanctions.
Why the falling oil price isnt hurting markets
Economist - June 22, 2017 - Bit.ly/Econo22Jun17

The two great oil shocks in the 1970s were unambiguously bad for Western economies
ushering in stagflation and transferring spending power to the oil-producing countries. In turn,
low oil prices in the late 1990s coincided with the dotcom boom.
"But when oil fell in the second half of 2015, that was seen as a bearish sign for the global
economy and markets. Now oil is falling again, with both Brent crude and West Texas
intermediate dropping more than 20%. But the decline has barely made a dent in the upward
march of the S&P 500 index.
"The key to the differing market reaction is why the oil price is falling. Back in 2015, the fear was
falling demand. Investors worried in particular that the Chinese economy was slowing. If that
assumption had been right, demand for much more than oil would have suffered. The equity
markets did not rebound property until the spring of 2016.
"If cheap oil is caused by excess supply, it is the equivalent of a tax cut for Western consumers;
that ought to be good for equities. It also means lower headline inflation, which may explain why
Treasury bond yields have been drifting down; the ten-year yield is 2.15%.
"It seems like a big but is needed and here it comes. Any price is the balance between supply
and demand and it is hard to tell which is the dominant force. Other commodity prices have also
been weak; the Bloomberg commodity index is at a 12-month low. The Chinese authorities are
tightening monetary policy again; the Federal Reserve is pushing up interest rates; hopes of a
fiscal stimulus from President Donald Trump may have to wait until 2018. Low bond yields (and
a flattening yield curve) are often seen as indicating a weaker economy. Markets could yet
decide a weak oil price is a bad sign after all."

China Set To Slow Refinery Runs in Q3, Hurting Oil Demand Growth
OilPrice - June 21, 2017 - Bit.ly/OilPrice21Jun17

Chinas refineries are expected to shut nearly 10 percent of the countrys 15.1-million-bpd
refinery capacity in the third quarterthe peak demand seasondampening prospects for
global oil demand growth on which the market is pinning its hopes for drawing down the glut.
Grappling with domestic surplus of gasoline and diesel.
Why Saudi Arabias quest to prop up oil price is failing
Washington Post - June 21, 2017 - Bit.ly/WaPo21Jun17

There are several reasons prices havent responded more: A more than doubling in the number
of drilling rigs and increases in shale-drilling efficiency has boosted U.S. crude oil production to
more than 9.3 million barrels a day, up about 850,000 barrels a day from September. Nigeria
and Libya, both torn by internal political strife and exempt from OPEC quotas, have boosted
production, offsetting other OPEC cuts and raising the cartels total output.
.

A lot of inconsistencies are driving oil prices through the floor

Business Insider - June 21, 2017 - Bit.ly/BizIn21Jun17

It may seem counterintuitive to be bullish on oil when the immediate problem is that there's too
much of it. If you're bullish on global growth, then you should be bullish on oil. If you're bearish
on global growth, why is the S&P trading above 2,400? There's a lot of inconsistencies here.
.
.

This is the real reason were drowning in oil, says Ed Yardeni

Market Watch - June 22, 2017 - Bit.ly/MktWa22Jun17

Yardeni titled his blog post, Drowning in Oil suggesting that advances in technology have
contributed to higher production rates in the U.S. as demand world-wide may increasingly suffer
from the use of alternative energy sources like solar. A report from International Energy Agency
released in mid-June showed that global oil supply rose by 585,000 barrels per day in May to
96.69 million barrels a day. That was 1.25 million barrels a day above a year earlier the
highest annual increase since February 2016, the IEA said."

Oil prices drop to 2017 NADIR as fears grow of FTSE 100 stock crash
Express - June 22, 2017 - Bit.ly/UKexp22Jun17

Brent crude hurtled to fresh seven-month lows below $45 a barrel as panic of market oversupply
Brent crude hurtled to fresh seven-month lows below $45 a barrel as panic of market oversupply
showed no signs of letting up. The losses prompted Britain's FTSE 100 to sink another 0.5 per
cent to around 7,413, with oil giants and mining stocks the biggest losers. Oil prices have been
suffering as the US produces more, while demand from Asia has also showed signs of slowing.
Last year, stock markets suffered huge losses prompted by falling oil prices, which hit as low as
$30. Now values could easily hit $40, according to experts amid fears this could again trigger
wider market panic.

Booming U.S. shale production sends oil into bear territory

Investing - June 22, 2017 - Bit.ly/Invest22Jun17

U.S. crude was at $42.89 a barrel in New York trade, up 36 cents, or around 0.9%, after
touching its lowest since August 11 at $42.05 in the prior session.

Brent oil tacked on 52 cents to $45.34 a barrel. The global benchmark hit $44.35 on
Wednesday, a level not seen since November 14.

Since peaking in late February, oil has dropped around 20%, meeting the technical definition of
a bear market.

Crude prices have been under pressure in recent weeks as concerns over a steady increase in
U.S. production added to fears over a glut in the market.

U.S. drillers last week added rigs for the 22nd week in a row, according to data from energy
services company Baker Hughes, implying that further gains in domestic production are ahead.

According to the U.S. Energy Information Administration, domestic output climbed by 20,000
barrels to 9.35 million barrels a day last week, almost 8% higher than the same period last year.

The increase in U.S. drilling activity and shale production has mostly offset efforts by OPEC and
other producers to cut output in a move to prop up the market.
.
Fossil fuel companies face big loses as world transitions to
low-carbon economy
Public Radio International - June 21, 2017 - Bit.ly/PRI21Jun17

Thirty percent of investments planned by oil and gas majors over the next decade could be
wasted if the world economy retools to cap global warming at two degrees Celsius, researchers
warned Wednesday.

The two-degree target is the cornerstone of the 196-nation Paris Agreement, inked in 2015.
President Trump has announced the US is withdrawing from the agreement warning it will
hurt the country's economy but other nations are proceeding to meet its goals.

The new report, "Two degrees of separation: Transition risk for upstream oil and gas in a low-
carbon world," suggests some big energy companies are failing to adjust their businesses to
meet the low-carbon economy required by the agreement and could end up with problems as
a result.

Up to 50 percent of ExxonMobil's proposed capital expenditure to 2025, for example, is

allocated to uneconomical projects likely to disappoint shareholders, the researchers concluded.

Shell, Chevron, Total and Eni were found to have put 30 to 40 percent of future spending at risk,
about average for the companies examined. All told, projects worth $2.3 trillion could become
unprofitable as energy shifts toward renewables and if fossil fuel prices stagnate, according to
an analysis of investment budgets for 69 publicly traded oil and gas companies.

At the other end of the scale, 14 companies including state-owned giant Saudi Aramco
were seen as well-aligned with the "2C" scenario.

"This report is a real game-changer for the future of corporate-investor engagement," said
Nathan Fabian, director of policy & research at PRI, a UN-backed network of investors who
oversee $62 trillion in assets.

"Investors in oil and gas companies have been in the dark about their exposure to climate risk
now they will be able to confront companies with precise information.