On the Today show, the glib Matt Lauer interviewed the head of Exxon-Mobil Rex Tillerson about the company’s record high profits and the record high prices at the pump. I thought it was cool that this guy came on at all, since he certainly didn’t need to. I liked him. He didn’t seem to be very full of shit.
He basically said that they can investigate all they want, but the government won’t find evidence of collusion in price gouging. I believe that. There would be too much drive to get the other companies to work together. He also said, or at least implied, that the oil companies are being used by politicians in this election year, to turn some of the blame away from the politicians themselves.
The best part was at the end. Lauer asked if the company was willing to cut profits to reduce prices at the pump, and Tillerson said that they have a responsibility to their shareholders, and what not. Lauer said, “so that’s a no,” and the CEO said that they are in the the business to make money.
So true.
They’re in business to make money, of course, on top of which the basic principle of supply and demand is at work. Economists who’ve looked at the petroleum marketplace recognize it as one of the most efficient markets out there. There are very good reasons to believe that global crude oil supply extraction is as high as it can ever get, because of some rather fundamental facts about petroleum geology. The rate at which we can extract oil from most major oilfields is declining and there are few unexplored areas left in which to look for new oilfields. There are no valves to open. Perhaps the best discussion of this problem, from a business perspective, comes from Matthew Simmons, an energy industry investment banker. He discusses the evidence that Saudi Arabian oil production is beginning to decline in his book “Twilight in the Desert.”
So with almost every oil producer pumping as fast as they can, it’s no wonder that oil futures are up. It won’t take much of a disturbance in any producer to really create an oil shortage. And there’s good reason to believe that this lack of future oil production capacity is one of the reasons that new refineries haven’t been built–in a few years, they’ll have nothing to refine!
Dipshits like Lauer cheer whenever free markets make it cheaper to buy random consumer goods, but what about when free markets cause the price of a scarce commodity to rise? Let’s encourage more consumption (by lowering prices) of something we’re running out of!
I agree. People complain about the oil companies, and blame them for the high prices, but what are they supposed to do? It is their business to charge people for the goods. In this case, the supply of the goods in decreasing all the time, and the demand is up. What else could happen but high prices? I think it’s too bad that some people are having trouble with their personal budgets, but it is just that, too bad. Adapt your life to meet the realities of the modern world.