Just last week Exxon announced a significant increase of 41% in its quarterly earnings in spite of a 4% drop in Exxon's oil production. This is an earnings trend that will certainly continue to barrel along, given that oil prices rose another 18 % in October alone.
Ironically this increase in earnings came to pass after ExxonMobil Chairman and CEO Rex Tillerson, to his great credit, virtually pleaded in May with the pooh-bahs of the Senate Finance Committee to rein in the excessive speculation, if not manipulation, of oil on the commodity exchanges.
The excessive speculation was, according to Tillerson, distorting the price of oil by some $30/40 barrel (also please see "Are Our Leaders Hearing ExxonMobil CEO Tillerson?"). For those readers doing your sums, at $30 per barrel on the some 20 million barrels/day consumed in the U.S. alone, comes to a $600,000,000 tax on American consumers each day or $4.2 billion a week. Hardly an issue a vigilant and engaged government would leave to fester, impacting our economy and national security.
The inaction of our somnolent government agencies is shameful, be it the Department of Energy, the CFTC or the Department of the Interior (whose lax oversight helped us toward the Gulf Oil Spill disaster). The Administration has done little to set meaningful programs while permitting the sovereign immunity extended to OPEC national oil companies by our courts to make a mockery of our antitrust laws and traditions. The Obama Administration has made no effort to re-initiate countervailing legislation such as the NOPEC bill that then President Bush scuttled in 2007 by threat of a veto -- a bill that would have legislatively curtailed OPEC's sovereign immunity on American soil and helped to counter OPEC's glaring distortion of the oil markets.
Then of course there is our hapless Department of Energy (think Solyndra) that has done less than little to bring about a healthy market in the United States, the world's largest consumer of oil, reflective of prices determined by the realities of supply and demand, rather than the manipulated conditions that currently rule the roost in determining its price (think of calling out OPEC's manipulation, highlighting the speculation driving prices, broadening the application of natural gas in transportation, to name but a few issues where the Department's intercession could have played a role).
Then there is our forever deliberating Commodity Futures Trading Commission (CFTC), an agency that has used the escape hatch of 'studying the issue' as a euphemism for doing next to nothing. Even recently, after announcing trading limits on a bevy of commodities including oil, the new caps on speculation will only become effective 60 days after the agency completes a 'related rule' which is expected to take months. And if the impacted interests can help it, probably years.
As currently formulated there are already gross loopholes, such as permitting the likes of Bank Holding Companies -- such as JPMorgan Chase, Goldman Sachs, Morgan Stanley -- who have access to the Fed Window, to load out supertankers, keeping them at sea for months at a time and filling land storage, gambling (sorry, proprietary trading) with hundreds of millions, if not billions of dollars of physical oil holdings for which they are neither producer nor consumer, inventories that they will continue to be able to hedge on the commodity exchanges thanks to CFTC rule making.
But don't despair, President Obama's ever vigilant Justice Department trumpeted the formation of the 'Oil/Gas Pricing Fraud Panel' a half year ago to deal with this issue. Now months since the eye opening Tillerson testimony (if anyone knows, the Chairman and CEO of Exxon certainly does), there has been not a peep from Attorney General Holder's august committee.
And so it continues. Billions ranging into the hundreds of billions of dollars being transferred to oil interests from a market that has left all vestige of market pricing based on supply and demand, while our government and its hapless agencies snore away.
Perhaps the lone cogent voice among the current Commedia dell'Arte of Presidential candidates on the issue of energy are the recent pronouncements of Governor Jon Huntsman. His position on energy makes great good sense and without hyperbole: As reported in Politico he was quoted "We cannot simply drill our way to energy security, we also need to use the power of the market place. This means breaking oil's monopoly as a transportation fuel and creating a truly level playing field for competing fuels."
With vast new reserves of natural gas accessible through new drilling techniques that have made great advances to safeguard the environment, with the progressing development and availability of electric/hybrid cars, with an ever growing focus on bio fuels and sources, it just makes great good sense.
Now, if we could only get our government to wake up. Shhh, not so loud!
Follow Raymond J. Learsy on Twitter: www.twitter.com/raymondLearsy