CNBC Transcript: Chevron CEO Mike Wirth Speaks with Sara Eisen from the CNBC Evolve Global Summit

July 13, 2022

The following is the unofficial transcript of a CNBC interview with Chevron CEO Mike Wirth from the CNBC Evolve Global Summit, which took place today, Wednesday, July 13th. Video from the interview will be available at 

All references must be sourced to the CNBC Evolve Global Summit.

Realtime Transcription by

SARA EISEN: Hi Tyler.  Good morning, and thanks to everyone for tuning in. Mike Wirth here with me at the New York Stock Exchange.  It’s great to see you again.

MIKE WIRTH: Sara, it’s good to be with you.

SARA EISEN: You know, the spirit of the conference, Evolve, talking about businesses undergoing massive transformations.  We are at a very interesting point in history for you, your industry, your company, because we need fossil fuels now more than ever, and the war in Ukraine has only exacerbated that, but we also need to protect our planet and prevent climate change. So how do you navigate that tension as a company that’s planning years in advance?

MIKE WIRTH: Sara, we’ve been around for 143 years, so we’ve had to evolve from a time when our products weren’t used for cars and planes, because those had not yet been invented.  So we’ve evolved continuously for, like I say, you know, nearly a century and a half. I’ve never seen a more exciting time for our industry.  We’re leveraging our capabilities to deliver the lower carbon energy that our growing world needs.  That means we deliver the oil and gas the world desperately needs today.  And at the same time, we invest in new technologies:  Renewable fuels, hydrogen, carbon capture and storage, geothermal, to build out an energy system for tomorrow that is more diverse, that is lower carbon, and it can help support the growth that we see in the world. So the opportunities today are greater than they’ve ever been.  The challenges are great, but it’s an opportunity for us to apply innovation, human ingenuity and harness the power of markets to meet these great big challenges.

SARA EISEN: So you can do both at the same time.  You can turn into a more ESG-friendly energy producer but also pump out record amount of oil because the world needs it right now?

MIKE WIRTH: Well, I think we’ve always done multiple things at one time.  Actually, the word used to describe this conference, Evolve, is the right way to think about the energy transition. Oftentimes people describe the energy transition as if it would happen instantaneously or very rapidly.  And, in fact, the global economy continues to grow, the population continues to grow, and the energy system has always evolved with the expectations of society, with the advances in technology and the demands of consumers. So our business continues to evolve, and we have to be able to do both, meet the needs of today even as we build the energy system of tomorrow.

SARA EISEN: How severe, how acute is the supply shortage right now in the world?

MIKE WIRTH: Well, the world is pretty tight, there is no doubt about it.  The price signal tells us that production was constrained when global economies were shut down, and demand declined.  And as demand has come back very rapidly, supply in our industry and many others can’t respond quite as quickly as demand has grown, so we see that in the prices. I think markets are tight and likely to continue to be so for some time.

SARA EISEN: The question is, what happens with the economies? You mentioned a lot of it was caused by the burst, the reopening after COVID.  Now there are concerns about recession.  We’ve got another hot inflation number today.  The Fed is going to keep hiking interest rates, and the price of oil has really come down, reflecting a weaker environment for Europe, the U.S. So does recession sort of help deal with the supply crunch and the price increase?

MIKE WIRTH: Well, ultimately, when you have a high price, you know, market is telling us demand is strong, supply is tight, and you need somehow for those to balance better to bring the price down.  That can be through more supply, it can be through less demand. I think in the short term the thing that moves wore rapidly is demand.  And so a slower economy does take some of the steam out of that demand growth, which can help moderate prices. The real challenge for the globe I think is to see the investment in supply continue so that supplies can grow.  And as we come through whatever form of economic slowdown that we see, that the supplies are there to support growth going forward.

SARA EISEN: Do you think we’ve seen the peak in terms of price of oil?

MIKE WIRTH: It’s so hard to say in this business.  I can tell you what the price of oil will be, but not the day that it will be that number.  What I would say is that the tightness in supply hasn’t gone away, and so to the extent that we were to see China reopen fully — and we’re still seeing some COVID restrictions there — see air travel return fully, there are some up legs in demand that could start to really pull hard on that supply again.  And then of course there’s the risks around the situation in Ukraine, the sanctions, and how all of these things play out. So I would say I think it’s good for the economy that prices have moderated, but I also see the risks remaining skewed towards the outside.

SARA EISEN: Assuming that Russia, I guess, gets shut out, what’s going to happen to Europe and the gas that’s flowing there?

MIKE WIRTH: Well, I think the next few months are very concerning for all of Europe; Germany kind of at the epicenter of that.  It’s a big, industrial economy that relies heavily upon the energy system that supports it today, and the risks to that are very real. One of the big pipelines that supplies Germany is down for maintenance right now.  Inventories are not building the way they normally would.  And as we head through the fall and into the winter, I think these risks begin to accumulate.  So it’s a real concern, and I think the whole world is watching and trying to help in whatever way it can.

SARA EISEN: The concern that Russia, after this Nord Stream pipeline maintenance, eventually shuts it off?

MIKE WIRTH: Well, or that supplies are limited, that sanctions and other consequences of the conflict create restraint or constraints on the supply of energy into Europe, which can further exacerbate the challenges that they’re already facing.

SARA EISEN: Can you do anything about that?  Are you helping to alleviate some of that pressure, natural gas production?

MIKE WIRTH: We’re working with the U.S. government, with other governments, to try to offer suggestions.  We produce gas around the world.  The challenge is, you need to be able to get the gas to the market.  And the easiest and most efficient way to get gas into the market is with a pipeline.  Right now, the pipelines tend to run from European supplies. The other way to get it is liquified natural gas.  The U.S. is a big exporter of liquified natural gas.  We have positions in Africa, in Australia.  Generally, these tend to be committed on long-term contracts to customers, that we can’t just unilaterally redirect supplies and not meet our contractual obligations. So a lot of work going on around the world between producers, consumers of gas that may have alternatives that can generate power differently, that could free up some of that gas to go to Europe.  But it’s not a simple equation.  That’s why I think the risks remain skewed to the upside.

SARA EISEN: Did Europe — did Germany just make a huge geopolitical error relying on Russia in this way?

MIKE WIRTH: Well, I think it’s a broader question than that.  Germany, for the last couple of decades, has pursued an energy policy that has increasingly emphasized rules that say shut down coal, shutting down the remaining nuclear, and has relied heavily on national gas primarily from Russia. There’s a saying that goes back to Churchill in World War II, that energy security is grounded in flexibility and diversity of supply.  And I think what we’ve seen is, as you narrow your choices, you create vulnerabilities.  Unintentional, no doubt.  But I do think that the policies that we’ve seen pursued there have created a vulnerability now that is very real.

SARA EISEN: What about our own energy security in the U.S?  Obviously, we’re in much better shape and we have great production.  How much of your production is coming from the U.S. right now?

MIKE WIRTH: Over a third of our production is based here in the United States, and growing, growing rapidly.  Last year was the highest production we’ve ever had in our 143-year history.  First quarter this year was up 10 percent on the prior year. We’re producing over 700,000 barrels a day in the Permian Basin.  By 2025, we’ll be producing a million barrels a day in the Permian Basin.  And our company only produces about 3 million barrels a day.  So a third of our production just a few years from now coming from West Texas and New Mexico. So our country is blessed with abundant resources of all types, including energy resources.  The responsible development of them is something that our industry has shown we can do, and it’s a great strength of this economy to have that resource and the diversity of resource, not just oil and gas, coal, but uranium, wind, solar, biofuels.  This country is blessed with resources of all types.

SARA EISEN: But the Democrats, other politicians, say you’re not doing enough.  We need more oil.  We need more refining capacity.  You’re instead returning cash to shareholders and not investing it in the energy we so desperately need right now.

MIKE WIRTH: Well, we’re actually investing much more this year than we did last year.  Our capital spending will be up nearly 50 percent, from around $12 billion to over $18 billion this year.  We’re growing oil and gas production.  We’re also growing renewable fuels production.  We’re investing over $4 billion just this year, out of our $18 billion budget on renewable fuels, primarily in the United States. So we’re trying to do our part.  But what we need to see is policy that encourages responsible development of all types of energy resources here, and policy that recognizes we need a pragmatic balance between economic prosperity, energy security, and environmental protection.  And we can’t have policies skewed just to one of those three elements or we get the unintended consequences that we see in other parts of the world.  I think that’s the challenge for our country.

SARA EISEN: Well, so what does that say about this administration’s policy?  You’ve been critical.  A few weeks ago you sent a letter to President Biden, got a lot of attention, and then he called you sensitive. Has there been any follow-up since then?

MIKE WIRTH: I’ve had interactions with the Secretary of Energy since then, and we’ve talked about the near-term situation and concerns, particularly about hurricane season coming up, and fuel supplies to this country, so there’s a dialogue that is underway at that level. And we’re working with the government to try to find a way to deal not only with the near-term concerns that they have, but also to have this balanced conversation about the medium and longer term policy framework to ensure that we have stable markets, that we have a lower carbon energy system and that we support our economy.

SARA EISEN: Why did you feel that you needed to speak out publicly and send that letter to President Biden?  What are they not understanding about the industry and what you’re trying to do?

MIKE WIRTH: Well, the President had sent a letter to me earlier, that I felt called for a response.  And it had suggestions that the industry was not investing to support the growth in energy supplies; it suggested that we could do more, and I felt like it was important to tell him what our company is doing, and also to call on him to have a more balanced conversation. This is an administration that has been critical of our industry, has come in with a climate agenda, which we support.  We want to see a lower carbon energy system.  We believe climate change is real. But we need to have a balanced conversation about how we move forward, and so that was really part of what I wanted to respond to the President’s letter with.

SARA EISEN: The President also tweeted out blame for oil and gas companies for keeping prices at the pump high and not bringing them down for American consumers, something that Jeff Bezos went after the President saying that that is incorrect.  Do you have any ability to affect the prices at the pump?

MIKE WIRTH: The large majority of service stations in this country are owned by independent business people, small business people.  Of the stations that have our brand on them, there are fewer than 5 percent that we actually own. So we supply to our franchisees that then sell on to the public that set their own prices, and they have a variety of issues they deal with everywhere that they — including their competitive markets.  And so I’m not sure that the President’s tweet fully appreciated the nature of the market and the people that actually operate the service stations.

SARA EISEN: You also get criticized for buybacks.  Given the fact that you are seeing profits double, quadruple, given what’s happening with oil.  What is your response to that, why that is a good use of cash?

MIKE WIRTH: Well, we have a financial framework that we’ve long had.  The first priority is to sustain our dividend, which we’ve grown for 36 consecutive years. The second priority is to reinvest in the business, to grow the cash flows in the future.  To support that dividend, we have to keep a strong balance sheet because we’re in a volatile business, as we’ve seen.  Two years ago, oil prices were negative.  Today, they’ve been, you know, over a hundred dollars this year.  You need to have the financial strength to weather these kind of commodity markets.  And they only have cash surplus to those first three needs. The shareholders are the owners in the company.  We are a publicly traded company.  We have an obligation to the pension funds, the teachers, the firefighters, the others that are represented through our investors to return the cash to them because it really is their investment in our company. So we can do it all.  We can grow production, as I said, we can invest to deliver more energy to the market, and we can be responsible and return cash to our shareholders at the same time. I think that’s what a good company does.

SARA EISEN: So as long as oil prices stay high for Americans, do you anticipate more political blowback like this, investigations perhaps that Democrats have called for looking into whether you and the industry are price gouging?

MIKE WIRTH: Well, high prices are hard on the economy, they’re hard on our customers.  We would like to see prices more stable and in a more moderate band. So, history tells us when we’re in a period of time like this there are political solutions that people seek, there are policy ideas sometimes that have unintended consequences that get proposed, there are investigations that get launched. We’ve seen this before.  I would hope that we could have a different kind of a conversation about this as we go forward, but no doubt we’ll see some of the other activity, as well.

SARA EISEN: So you mentioned that you are investing around renewable energy, which is something the administration and society wants to see, as well. How far are you along those goals of where you want to be?

MIKE WIRTH: Well, we’ve set a strategy to invest in growing renewable fuels, hydrogen, carbon capture and storage, carbon credits and other types of nature-based solutions and then other novel technologies, like geothermal. We have experience in all of these businesses.  They leverage the strengths, the value chains, the capabilities that our company has.  We don’t do a lot of wind and solar, because it’s not something that we have unique strengths at, and there are others that are very good at it. I mentioned that this year we are spending $4 billion growing our renewable fuels business.  We made a major acquisition of one of the world’s best and largest renewable fuels producers.  We’ve formed a joint venture with one of the largest agribusinesses in the U.S. to create new agriculturally based feedstocks. And we’re investing in things like renewable natural gas where we take methane emissions that are unabated into the atmosphere from dairy farms.  We are working with in partnership with dairy farmers to capture methane emissions, to get those into a pipeline so they can displace fossil fuel, natural gas and can go into the natural gas system. All of these help us meet the lower carbon aspirations of our customers.  So we work with companies that own big trucking fleets with industrial customers, airlines and things like sustainable aviation fuel, the shipping industry, to find ways to bring our technology and capability to bear to create lower carbon solutions that allow them to meet their needs. So this is an active area.  We’re spending billions of dollars on it just this year, and it’s a part of our business going forward.

SARA EISEN: What are the implications of the shift to renewable energy.  Is it inflationary?

MIKE WIRTH: Well, it pulls on different parts of the value chain.  I think this is something to really watch.  When the U.S. enacted the renewable fuel standard in the 2000s, we saw corn-based ethanol become a bigger part of the gasoline pool.  Corn prices went from $2 a bushel to $9 a bushel. So it had an impact on food, because the energy system is so large that you start to attach different parts of the economy to the demand for energy, and it can manifest itself in these, you know, inflationary pressures. Metals are an area that we’re seeing right now.  As you see batteries and battery-powered vehicles growing, the demand for lithium, cobalt, nickel has driven the prices for some of these commodities up.  And electric vehicles are still a very small portion of the vehicle fleet. If you were to see some of the ambitions of the auto makers realized, you’re seeing big multiples in terms of the demand for some of these metals, which come from only a few places in the world.  So you create new supply chains that pull on different resources. And having worked in the energy industry for almost 40 years, one of the things that I’ve learned is that, for most people, the scale of the global energy system is really hard to fathom.  So when you attach these other industries to it, you can create unintended consequences and kind of a ripple effect.

SARA EISEN: What does an EV future mean for your business?

MIKE WIRTH: We anticipate hundreds of millions of electric vehicles to be in the global fleet 20 years from now, and we still see demand for oil and gas growing.

SARA EISEN: How does that work?

MIKE WIRTH: Well, only about 25 percent of a barrel of oil ends up in gasoline.  75 percent ends up in airplanes, ships, agriculture, mining, petrochemicals, a whole host of other uses where there are not easy and readily available alternatives today. So that’s the big challenge for us, is how do we find ways to continue to meet the needs of those industries, lower the carbon emissions associated with that.  But the demand for the outputs of all of these other industries continues to grow as the population grows, as the global economy grows, as the middle class grows.  So demand for oil and gas is not simply tied to cars.  This is one of the great misconceptions.

SARA EISEN: Yeah.  And finally, Mike, just to bring it back to today, we mentioned we got a 9.1 percent gain on consumer prices.  Inflation is everywhere, not just in oil and gas.  What is your expectation about how long this lasts, based on what you’re seeing out there in the economy and the areas you touch?

MIKE WIRTH: Sara, we work around the world, and we see these pressures here in the U.S. certainly.  We see them in the other parts of the world as well. We talked earlier about the supply response to the strong demand we’ve seen coming out of the pandemic.  I think this is a structural element of the economy, at least here in the short to medium term that is very real across many, many different industries. I think monetary policy and fiscal policy in some ways may have contributed to some of the things that we’re seeing, and I don’t think these things unwind immediately.  I think they do unwind over time, but I think, you know, we’re certainly anticipating a higher level of inflation than we’ve seen historically in our planning process, and I think it’s something that all companies should be — you know, I’m sure all companies are rethinking their plans for the next few years.

SARA EISEN: But it’s more entrenched, here to stay, that inflation?

MIKE WIRTH: I think it’s proven durable to this point, and I think we need to prepare for it to have some additional run time.

SARA EISEN: Mike Wirth, thank you so much for the wide-ranging discussion.  Really appreciate it.

MIKE WIRTH: My pleasure, Sara.

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