Mobil Corporation Business Information, Profile, and History

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Our "Mobil: The Energy to Make a Difference" message captures the spirit of our drive to become a great, global company. In this quest, Mobil is dedicated to building trust and respect through innovative people, products, and partnerships. The company is also committed to achieving a better future for our stakeholders.

History of Mobil Corporation

Mobil Corporation is one of the world's largest oil companies and a vocal representative of the oil industry. Its sophisticated public relations is in keeping with Mobil's background in the financial, marketing, and administrative aspects of the oil business. Neither of the two companies whose 1931 merger created Mobil--Standard Oil Company of New York (Socony) and Vacuum Oil Company--had significant experience in the production of crude oil. Both were refiners and marketers, and it is in those two areas that Mobil has achieved its considerable success.

19th-Century Precursors

Of Mobil's two progenitors, Socony was the larger and more generalized oil company, while Vacuum's expertise lay in the production of high-quality machine lubricants. Vacuum got its start in 1866 when Matthew Ewing, a carpenter and part-time inventor in Rochester, New York, devised a new method of distilling kerosene from oil using a vacuum. The process itself proved to be no great discovery, but Ewing's partner, Hiram Bond Everest, who had invested $20 in seed capital in the project, noticed that its gummy residue was suitable for lubrication, and the two men took out a patent on behalf of the Vacuum Oil Company in 1866. Ewing sold his interest in Vacuum to Everest shortly thereafter. The heavy Vacuum oil was soon much in demand by manufacturers of steam engines and the new internal-combustion engines. In 1869 Everest patented Gargoyle 600-W Steam Cylinder Oil, which was still in use into the 1990s, and the firm continued to prosper.

Within a decade Vacuum had expanded sufficiently to catch the eye of John D. Rockefeller's Standard Oil Company. Beginning in 1872, Standard had bought up scores of refineries and marketing companies around the country, and in 1879 it added Vacuum Oil to its list of conquests, paying $200,000 for 75 percent of Vacuum's stock. By that date Standard Oil had achieved an effective monopoly on the oil business in the United States. Despite its small size, Vacuum was given latitude by the Standard management, who respected its excellent products and the acumen of Hiram Everest and his son, C. M. Everest.

The Everests pursued an independent course in foreign sales. As early as 1885 Vacuum had opened affiliates in Montreal and in Liverpool, where its staff included 19 salespeople, and within the next decade the company added branches in Toronto, Milan, and Bombay. Vacuum became the leader among Standard's companies in the use of efficient marketing and sales techniques, packaging its lubricants in attractive tins, pursuing customers with a well-organized, efficient sales team, and, when necessary, bringing in a lubricants specialist to help customers choose the oil best suited to their needs. Company oils were made according to a secret formula, and by 1911 the Vacuum marketers had made the name Mobil oil known on five continents. In the United States, Vacuum products were sold nationwide by the Standard chain of distributors and in the northeast by Vacuum's own agents.

In 1906 Vacuum added a second refinery to its original Rochester plant, and in 1910 Standard Oil Company of New Jersey (Jersey Standard), the holding company for the Standard interests, invested $500,000 to enable its big Bayonne, New Jersey, refinery to manufacture some of Vacuum's lubricants for export. In 1911 the Standard companies were ordered to break up by the United States Supreme Court, and among the 34 splinters were Vacuum Oil and Standard Oil Company of New York (Socony). Socony, the second-largest of the newly independent companies, had been created along with Jersey Standard in 1882, both as a legal domicile for Standard's New York assets and to serve as the administrative and banking center for the entire Standard Oil Trust. William Rockefeller, John D. Rockefeller's younger brother and long-time business partner, remained the president of Socony from its inception until 1911.

From the first it was planned that in addition to serving as Standard's headquarters, Socony would handle the great bulk of the trust's growing foreign sales. It took over from Standard Oil Company of Ohio ownership of the merchant firm of Meissner, Ackermann & Company, with offices in New York and Hamburg and agents around Europe. At first Standard relied exclusively on such brokers for its foreign business, but as the years went on the company set up its own foreign subsidiaries around the world. By 1910 the Standard subsidiaries had usurped almost all of the foreign sales, with Socony's affiliates handling about 30 percent, while Vacuum Oil, which had also built a small but widespread sales group, contributed six percent to the total. In addition to the sales it made itself, Socony also bought and then resold all Standard products leaving New York, and even for a time those shipped out of California to Asia. Bolstered by its double role, Socony's sales were among the largest of any Standard company, and as Standard's official overseas representative, it became a familiar name in many countries.

Another of Socony's important functions, especially prior to 1899, when Jersey Standard began assuming such duties, was to administer most of the Standard group's internal affairs. In the New York City office building at 26 Broadway were housed not only Socony's own corporate leaders, but also the small group of men who ran Standard Oil. Some individuals, such as William Rockefeller, served on both boards, and the interplay between Socony and the Standard group was intimate and complex. Socony also assumed banking functions for the group. After 1899 Jersey Standard became the sole holding company for all of the Standard interests, but Socony continued much as before in its various key roles.

Regrouping Following the Antitrust Act

By the time of the dissolution of Standard in 1911, Socony had established its position in Europe and Africa and built a thriving business in Asia as well. China became an important market for Socony. Socony eventually built a network of subsidiaries from Japan to Turkey that by 1910 was handling nearly 50 percent of the kerosene sold in Asia. In the United States, Socony's five refineries turned out kerosene, gasoline, and naptha for sale in New York and New England, through jobbers and a growing number of the new roadside stores known as "gas stations."

In 1911 the Supreme Court upheld a lower court's conviction of Jersey Standard for violation of the Sherman Antitrust Act and ordered the organization dissolved. Each of the 34 new companies created by the order was allotted varying proportions of the three basic oil assets--crude production, refining, and marketing--but neither Socony nor Vacuum Oil ended up with any sources of crude. Both companies were strong marketers and refiners, and both became occupied by the search for enough crude oil to keep their plants and salesmen busy. Socony's need for its own crude supplies was greater since it produced a large volume of oil-based fuels and lubricants, while Vacuum's business was more limited in both volume and variety. Socony set out to secure ownership of its own wells.

At that point in the history of U.S. oil production, the natural area in which to explore was Texas, Louisiana, and Oklahoma. In 1918 Socony bought 45 percent of Magnolia Petroleum Company, which owned wells, pipelines, and a refinery in Beaumont, Texas, and did most of its marketing in Texas and the Southwest. After buying the rest of Magnolia in 1925, Socony purchased General Petroleum Corporation of California to help supply its large market in Asia. Then it entered the Midwest for the first time with a 1930 purchase of White Eagle Oil & Refining Company, with gas stations in 11 states. Socony now needed even more crude oil to supply these additional market outlets, and like most of the other big international oil concerns, Socony looked to the Middle East.

World War I had demonstrated the crucial role of oil in modern warfare and prompted the U.S. government to encourage U.S. participation in the newly formed Turkish Petroleum Company, operating in present-day Iraq. A consortium of U.S. oil companies was sold 25 percent of Turkish Petroleum. By the early 1930s only Jersey Standard and Socony were left in the partnership, with each eventually holding 12 percent. Oil was first struck by the company, renamed Iraq Petroleum, in 1928, and by 1934 the partners had built a pipeline across the Levant to Haifa, Palestine. From Haifa, Socony could ship oil to its many European subsidiaries.

In the meantime, Vacuum Oil had made a number of important domestic acquisitions and had strengthened its already far-flung network of foreign subsidiaries, but continued to share Socony's chronic shortage of crude. The two companies, similar in profile and complementary in product mix, joined forces in 1931 when Socony purchased the assets of Vacuum and changed its name to Socony-Vacuum Corporation. The union was the first alliance between members of the former Jersey Standard conglomerate and created a company with formidable refining and marketing strengths both at home and abroad. To supply its joint Far East markets more efficiently, in 1933 Socony-Vacuum (SV) and Jersey Standard created another venture called Standard-Vacuum Oil Company (Stan-Vac). Stan-Vac would ship oil from Jersey Standard's large Indonesian holdings to SV's extensive marketing outlets from Japan to East Africa. By 1941 it was contributing 35 percent of SV's corporate earnings.

In 1934 Socony-Vacuum Corporation changed its name to Socony-Vacuum Oil Company, Inc. (SVO). The company's growth made SVO the second-largest U.S. oil concern by the mid-1930s, with nearly $500 million in sales, exclusive of Stan-Vac. From warehouses and gas stations in 43 states and virtually every country in the world, SVO sold a full line of petroleum products, many of them sporting some variety of Vacuum's famous Mobil brand name or its equally familiar flying red horse logo. With 14 refineries in Europe alone and a fleet of 54 ocean-going tankers, by 1941 SVO's holdings were truly international in scope and balance--a situation that caused growing anxiety as World II approached. When the Nazis stormed across Western Europe they found working SVO refineries that they promptly put into the service of the Third Reich. The largest prize, a huge refinery at Gravenchon, France, was destroyed by the retreating French in a blaze that lasted for seven days. Similarly, the $30 million Stan-Vac refinery at Palembang, Indonesia, was kept out of Japanese hands by burning it to the ground. The war also cost SVO some 32 ships and the lives of 432 crew members, lost to German submarines. Throughout this period, increased military sales generally made up for SVO's wartime capital losses and declining civilian revenue.

Socony-Vacuum Oil Company's search for crude oil continued. In the immediate postwar years SVO completed a transaction that would provide the company with oil for many years to come. In the 1930s, Standard Oil Company (California) and the Texas Company--later known as Chevron and Texaco, respectively--had bought drilling rights to a huge chunk of Saudi Arabia, and when they realized the extent of the fields there the two companies sought partners with investment capital and overseas markets. SVO and Jersey Standard had ample amounts of both, and they agreed to split the offered 40 percent interest in the newly formed Arabian American Oil Company (Aramco). SVO had second thoughts about so large an investment and settled for ten percent instead. This miscalculation was rendered less painful by the truly enormous scale of the Arabian oil reserves. In the coming decade of economic growth and skyrocketing consumption of oil, SVO would develop and depend upon its Arabian connection even more strongly than the other major oil concerns.

Postwar Rise in Demand

In the United States a new culture based on the automobile and abundant supplies of cheap gasoline spread the boundaries of cities and built a nationwide system of interstate highways. SV's long use of its Mobil trade names and flying red horse logo had made these symbols known around the country, and in 1955 the company capitalized on this by changing its name to Socony Mobil Oil Company, Inc. (SM). In 1958 sales reached $2.8 billion and continued upward with the steadily growing U.S. economy, hitting $4.3 billion five years later and $6.5 billion in 1967. In 1960 a subsidiary, Mobil Chemical Company, was formed to take advantage of the many discoveries in the field of petrochemicals. Mobil Chemical manufactures a wide range of plastic packaging, petrochemicals, and chemical additives. In 1989 it contributed 32 percent of Mobil's net operating income--generated on sales representing less than seven percent of the corporate total.

Egypt's nationalization of the Suez Canal in 1956 was one of many indications that SM's Middle Eastern dependence could one day prove to be problematic, but there was little the company could do to reduce this dependence. Even significant new finds in Texas and the Gulf of Mexico were not able to keep pace with America's oil consumption, and by 1966 the Middle East, principally Saudi Arabia, supplied 43 percent of SM's crude production. Also in 1966 Socony Mobil Oil Company changed its name to Mobil Oil Corporation, using "Mobil" as its sole corporate and trade name and de-emphasizing the use of the Pegasus logo in favor of a streamlined "Mobil" with a bright red "o." Still constantly searching for alternative sources of crude, Mobil got a piece of both the North Sea fields and the Prudhoe Bay region of Alaska in the late 1960s, although neither would be of much help for a number of years. In the meantime, world oil consumption had slowly overtaken production and shifted the market balance in favor of the Organization of Petroleum Exporting Countries (OPEC), which would soon take advantage of the relative scarcity to enforce its world cartel.

The Oil Crisis of the 1970s

During the 1960s Mobil Oil's nine percent annual increase in net income was the best of all major oil companies, and it continued as a major supplier of natural gas and oil to the world's two fastest-growing economies, West Germany and Japan. In 1973, however, OPEC placed an embargo on oil shipments to the United States for six months and began gradual annexation of U.S.-owned oil properties. The price of oil quadrupled overnight, and a new era of energy awareness began, as the international oil companies lost the comfortable positions they had held in the Middle East since the 1920s. On the other hand, the immediate result of OPEC's move was to boost sales and profits at all the oil majors. Mobil Oil's sales nearly tripled between 1973 and 1977 to $32 billion, and 1974 profits hit record highs, prompting a barrage of congressional and media criticism that was answered by Mobil Oil's own public relations department. Mobil Oil quickly became famous as the most outspoken defender of the oil industry's right to conduct its business as it saw fit.

Despite its apparent ability to make money in any oil environment, Mobil Oil was concerned about the imminent loss of its legal control over the Middle Eastern oil on which it depended. Under the special guidance of President and Chief Operating Officer William Tavoulareas, Mobil Oil chose to strengthen its ties with Saudi Arabia, spending large amounts of time and money courting the Saudi leaders, investing in industrial projects, and in 1974 acquiring an additional five percent of the stock in Aramco from its partners. In 1976 Mobil Oil Corporation again changed its name, to Mobil Corporation. In the early 1990s it enjoyed one of the closest relationships with the Saudis of any oil firm, a bond whose value increases sharply when oil is scarce but is a liability when plentiful supplies make Mobil's purchases of the expensive Saudi crude less than a bargain. In addition, Mobil considerably increased its budget for oil exploration, concentrating mainly on the North Sea and Gulf of Mexico regions. Although these efforts largely succeeded in replacing Mobil's reserves as fast as they were used up, the company bought Superior Oil Company in 1984. Mobil paid $5.7 billion for Superior, mainly for its extensive reserves of natural gas and oil.

By that time the oil market had once again changed course. Conservation measures and a generally sluggish world economy reversed the price of oil in 1981, and it continued to drop throughout the decade. Mobil thus found itself locked into contracts for expensive Saudi crude and burdened with the debts incurred in the Superior purchase at a time of falling revenues. To make ends meet, Chairman Rawleigh Warner, Jr., and his 1986 successor, Allen E. Murray, made substantial cuts in refineries and service stations, upgrading Mobil's holdings of both to a smaller number of more modern, efficient units. By 1988 Mobil had pulled out of the retail gasoline business in 20 states and derived 88 percent of its retail revenue from just 14 states, mostly in the Northeast. It had also cut its oil-related employment by 20 percent as well as getting rid of its Montgomery Ward and Container Corporation of America subsidiaries, holdovers from a move toward diversification in the mid-1970s.

The $6 billion sale of assets was used to reduce debt, and Mobil's financial performance improved accordingly as the decade drew to a close, although not enough to please Wall Street analysts. The 1980s were generally not a good period for Mobil, which continued, on paper at least, to show a worrisome decline in proven oil reserves.

Challenges in the 1990s

World events in the early 1990s had contradictory repercussions for Mobil and the petroleum industry as a whole. The Persian Gulf War in particular, and instability in the Middle East in general, heightened the importance of Mobil's carefully cultivated friendship with Saudi Arabia. But a recession in the United States and the worldwide economic slowdown lowered the demand for energy and chemicals, thereby weakening prices.

The corporation marked its 125th anniversary in 1991, but there was little cause for celebration. As earnings across the gas and oil industry dropped, Mobil's profits fell by only one-half percent, but the corporation braced for a deepening recession with restructuring and internal investment. Asset sales of $570 million in 1991 included a Wyoming coal mine and hundreds of wells in western Texas. Capital and exploration spending crested that year at over $5 billion, up almost 16 percent from the previous year.

The recession deepened in 1992, and Mobil Chairman and CEO Allen E. Murray continued restructuring as earnings plunged precipitously across the industry. By the end of the year, Mobil had divested itself of a polyethylene bread bag manufacturing business, a polystyrene resin business, and its interests in nine oil fields in west Texas and southeast New Mexico. Mobil also cut its domestic work force by more than 2,000 in 1992 and slashed $800 million from that year's capital and exploration budget. It may have seemed that even nature moved against the oil industry: August's Hurricane Andrew forced the evacuation of oil and gas rigs and platforms on the Gulf of Mexico, in Alabama, on Mobile Bay, and even as far inland as Beaumont, Texas. Gulf operations began the return to normal within a week of the devastating storm.

The company notes that environmental and philanthropic efforts have been a hallmark of Mobil's operations. In 1991 Mobil started the industry's first nationwide used oil collection program, and it continued to contribute to such cultural and educational projects as "Teach for America," a nonprofit teacher corps. But Mobil's environmental record was marred in 1992 when, after three years of litigation, an environmental manager at Mobil Chemical proved that his superiors attempted to force him to falsify the findings of environmental audits. A jury awarded the former employee $1.75 million in damages and interest in his wrongful discharge suit against Mobil.

Mobil's worldwide influence, with strong positions in Saudi Arabia, Nigeria, and Asia's Pacific Rim, included a commanding presence in Indonesia. In the early 1990s, Mobil was the largest U.S. firm extracting natural gas in Indonesia, which was one of the world's largest producers of that resource. Natural gas constituted 50 percent of Mobil's worldwide resources at that time, making the Indonesian activities doubly important.

By 1994, Mobil's position had stabilized, as rising natural gas prices pushed up the company's profits, one-third of which were from natural gas. The following year the company undertook a restructuring of worldwide staff support services, including a 28 percent reduction in staffing. Overall, the company had shaved nearly $2 billion from operating expenses since 1992. In 1995 profits jumped to an estimated $1.9 billion (largely driven by Mobil's 30 percent stake in the rich Indonesian Arun field, which contributed one-quarter of that figure); as a result, Mobil ranked number one in the industry in terms of profitability.

Analysts predicted that the company's profits would increase by another 50 percent in 1996. At the same time, Arun's reserves had peaked, and Mobil was pressed to find additional supplies. Chairman Lucio Noto, who had succeeded Murray in 1994, set his sights on Ras Laffan, a natural gas field in the Persian Gulf, off the coast of Qatar. With deliveries scheduled to begin in 1999, Mobil's 30 percent stake in the field was expected to add $300 million in annual operating earnings in its first decade, and as much as $700 million after Mobil's initial investment was paid down. According to a Mobil executive, when Qatar was first proposed, Noto's response was, "... this is something that could get carved on my tombstone, if we do it right."

Other projects proceeded apace: in May, Mobil announced that the company and a partner would launch a second petrochemical operation at Yanbu, Saudi Arabia, at a cost of $2 billion. The company was also investigating the construction of an ethylene plant in Singapore, and formed a joint venture with a Venezuelan firm to develop a $1.5 billion olefins complex in Jose, Venezuela. Other investments included a 25 percent stake in the Tengiz oil field in Kazakhstan and the acquisition of Ampolex, an Australian oil and gas company. Total resources rose 28 percent. Disinvestments, on the other hand, included the sale of $1.8 billion in assets in land development, chemicals, mining, and gas processing.

In June Mobil announced a new management structure, in which 11 new business groups would take the place of the existing three worldwide divisions. Noto explained, "In this new competitive climate, these changes better focus on our entrepreneurial talent of seizing new business opportunities, while maintaining our commitment to technology and functional excellence in our upstream and downstream activities."

On the retail side, Mobil operated 7,711 highly successful gas stations, concentrated in 18 states, only 600 of which were company-owned. Expanding into full-scale convenience stores, the company introduced about 150 "On the Run" outlets, which it described as "brighter, bigger, bolder convenience stores." On the Run was part of a plan to eventually offer franchises of car care, convenience stores, car washes, and gasoline.

Ending 1996 with $81.5 billion in revenues, the company announced that it had essentially met its target for two years hence, 1998, of more than $3 billion in earnings. The restructuring initiatives that were initiated were expected to reduce annual costs by $1.3 billion annually, and dividends to shareholders increased for the ninth consecutive year. Said Noto: "We began working several years ago toward becoming a great, global company. Today, as a result, Mobil is more efficient, more responsive, and better positioned for growth. In that respect, 1996 was a pivotal year for our company. We can now see the Mobil of tomorrow taking shape--more profitable, a recognized leader in all our businesses, with unprecedented opportunities for long-term growth for our shareholders, better products and services for our customers, and a challenging and inclusive environment for our employees."

Principal Subsidiaries: Mobil Exploration & Producing U.S. Inc.; Mobil Exploration & Producing North America, Inc.; Mobil Land Development Corporation; Mobil Natural Gas Inc.; Mobil Oil Corporation; Mobil Oil Exploration & Producing Southeast Inc.; Mobil Producing Texas & New Mexico Inc.; Tucker Housewares Inc; Mobil International Finance Corp.; Mobil Administrative Services Co., Inc.