Afterward, Tillerson told reportersthe industry is making capital investments that should help the market moderate within a couple years. He added, though, that he sees no logical explanation for todays crude oil prices.

The NPRAmeeting took place this year withthe industryunder the microscope due to sharp increases in energy prices and high corporate profits. Tillerson and other executives have been called before Congress to answer complaints that their companies face too little competition. Some elected officials have suggested the nation should undo past mergers. Other corners of government have proposed windfall profit taxes to siphon earnings gained at consumer expense. Exxon Mobil recorded the highest annual profit ever for a publicly traded company with net earnings of $36.1 billion in 2005, a 43 percent increase from 2004.

Tillerson insisted government intervention would make todays situation worse.

These measures would only increase costs and reduce supplies for American consumers over the long run by interfering with market demand signals crucial to determining the proper market supply response, he said. He recalled past crises, saying price controls and crude allocations caused fuel shortages in the 1970s, andwindfall taxes in the 1980s diverted $79 billion that could have been invested to produce more oil.

The history of our industry is littered with the waste and negative impacts of government attempts to interfere with the efficient workings of the market, he said.

Tillerson called the U.S. refining and supply system the most sophisticated and efficient in the world, saying throughput grew 27 percent in the past 25 years despite a 50 percent drop in the number of refineries. The industry in North America is unparalleled, he said, in its flexibility to process different types of crude and its ability to convert them into energy and petrochemical products. He cited American Petroleum Institute findings that gasoline refining and distribution costs, adjusted for inflation, dropped in half since 1980.

Tillerson attributed those achievements partly to process and technology advances such as catalysis. But he maintained that consolidation has also helped, by weeding out uncompetitive players and giving large companies the scale needed to tackle increasingly expensive exploration projects.

Our industry is more competitive today than it has ever been, and American consumers are the beneficiaries, he said. You see this intense competition in our increased production rates, in our high rates of capacity utilization, in the greater efficiencies we have achieved over time.

While recent profits have drawn public derision, Tillerson cast them as an economic mechanism that signals demand for more energy and encourages companies to supply it. During a briefing with reporters after his speech, he said companies have indeed made investments to boost output, although it will take time for them to come to fruition.

The signals have been sent, he said. We will see new supplies coming online. We may be in a period of very volatile prices for the next year or two while the market straightens out.

The head of the worlds largest and most profitable energy company confessed an inability to predict where crude prices might head this year – or even to explain current levels.

There really is no fundamental basis to support the high [crude] prices we have today, he said, noting that inventories are historically high. He allowed that concerns about political instability in some oil-rich regions push prices upward. But I dont think that fully explains the situation.