Thank You, Exxon CEO Rex Tillerson, For Educating Us On Oil Prices

The oil patch mumbo jumbo continues unabated. Today, Rex Tillerson, the CEO of the nation's largest oil company, Exxon, took a minute or two to instruct us about the reasons for the current price of oil. This is the same personage who, a while back informed us, his customers, that "ethanol is moonshine."

This time around, according to Tillerson, "Inventory levels are at historic high levels--especially in the U.S." he then provides us with his particular self-serving oil patch rationalization for high oil prices.

You see, it is not the machination of OPEC of which Exxon and its peers are the primary beneficiaries, nor the speculation of oil traders and bank holding companies, nor the possibility that the producers, with their enormous cash reserves, might be gaming the price of oil on the exchanges. No, in the spirit of that great American philosopher Alfred E. Neuman, Mr. Tillerson has come up with a causation that is outside the perceived responsibility of the oil industry. Who, him worry? You see, it mostly rests with the currency effect of a weak dollar.

According to Tillerson some $20/25 per barrel is due to the erosion of the dollar. Really? Since February of this year the price of oil has increased some 250% from $33/bbl to reaching $80/bbl Just a few days ago. This while the value of the dollar has eroded some 15% only. A relationship between the price of oil and the erosion of the dollar on a percentage basis should bring the price of oil to approximately $38/bbl. Certainly not the near $80 we are transferring to Exxon and their comrades in arms.

Far be it for the industry to play it straight, to simply state that price as currently constituted has nothing to do with market dynamics of supply and demand. Something far more sinister is afoot and it is long past due that our oversight agencies such as the CFTC take a very serious look at how our commodity exchanges are contributing to these distortions.

But then again, within the confines of the oil industry Grimm's Fairy Tale narrative, Mr. Tillerson's imaginative turns of phrase are always welcome.

 

Comments

[seawolf77]

Let me aks you this why are showing a bunch of tankers off the coast of Malta evidence of a supply glut? Why is it not evidence of hoarding?

[ld]

Good article. I want to add that a lot of people I talk to take gas prices as in strange ways. People are generally aware something's wrong but are burned out over gas costs and confused by the defenses in the corporate media.

Here in California we have paid a dollar or so more than the national average for a gallon of gas for years. During those years, our local paper (owned by Media News group, which is run by Dean Singleton who also runs Associated Press) kept printing excuses about refinery outages, extended refinery maintenance, and what not. Last summer they printed an article admitting that they had no longer had an explanation for the higher Cali prices. Interestingly, the article didn't even suggest that there could be price fixing. Also interestingly, the article had a tone of light humor. The writer and editor seemed to think the situation is sort of cute.

[Viper]

Impossible to have free markets and cartels at the same time...


Regards

[BlackTom]

20 years ago, my college philosophy prof talked about how oil was independent of supply and demand market rules. It's great to see this discussion come out of the shadows.

Since there are some actual economists on the board today, I wonder if there are any experts on energy speculation, or oil company structures that can demonstrate the process by which they manipulate prices.

[Jeff8462]

Oil Companies = Liars, Politicians = Bigger Liars,

Oil companies don't want prices to go too far up or talk of electric and hybrid heats up, till we have real over haul of government instead of the pandering of politicians to big oil... amazing thing is that Obama received big money in donations from energy.. so don't let anyone be fooled just cause GWB is out of office big oil is still in charge in the White House, just get's overlooked from the left, who cried so much with W being the cause of all what ails us..

[steppenwolfsayshi]

People are speculating in commodities because the real economy is crummy. The dollar is falling because the real economy is crummy. It's not like investors stopped trading dollars in order to trade oil.
We have a huge glut of oil, but a shortage of refineries. To make the price of gasoline go down, we need more refineries to make the product we actually use. There's no reason gas shouldn't still be $1.50/gal.

[Wendy Rosner]

not true. they're closing refineries to pump up the prices. google it.

[Ironhelix]

Confirmed. i was told by a President of Texaco that they closed a refiner in Bakersfield, CA for the purpose of causing a "supply shortage" which would drive up the price. They do it because they can and the gov't is unwilling to stop them from ripping the American people off.

Thanks H.W. and W.

[sposton]

Oil prices rise until they reach a point at which investments into alternative sources of energy become viable. Then oil prices suddenly drop taking the wind out of those alternatives' sails. This seems to happen at regular cycles which we humans are mysteriously unable to discern. ;-)

They can always point at some exogenous causes like OPEC, China's demand for oil, etc., but never, never anything like deliberate oil price manipulations!

[peterg76]

Actually, the oil companies do embrace supply and demand and currency issues, but only when they work in their favour.

[cadsuch]

Price has EVERYTHING to do with predatory pricing, in an attempt to stop the alternate fuels industry from building up their supply structure, and building up their plants. Whenever predatory pricing goes on (like turning on a faucet) the alternate fuels industry closes some more plants and closes some more plant construction projects. MY state has a HIGHER gasoline tax then neighboring state and yet I can buy gasoline $.20 cheaper then the the state next door (where their alternate fuels industry is attempting to get off the ground. ) But we ignore the laws that stop monopolies from ruining our market place so we should think nothing of oil companies using predatory pricing to ruin the market place also. I have posted this on the internet before and my post won't get published THIS time either!

[TXfemmom]

Oh, and if this kind of marketing and payment scale went into effect, day old bread would cost more than fresh bread.

[TXfemmom]

Perhaps, $7.50 of the price is due to erosion of the dollar, the rest is unmitigated thievery. I have relatives in the oil industry and there is oil standing in every tank, every underground storage facility, and every tanker in the world. Some of the tankers are just parked, in out-of-the way places just storing the stuff. If market values actually came into play, oil would be $35 a barrel, where it was when Iraq started.

[TxAggie]

Your relatives are pulling your leg. "We" i.e. the USA do not have a surplus of oil, we do have a surplus of natural gas. We need all the oil we can find and produce to offset the trade deficit. Yes there are folks that store oil, hoard oil and speculate on oil. What commodity doesn't have that?

[alumcreek]

Is there some legal requirement in force that would urge this CEO not to lie his ass off?

[dpmol]

and us lemmings keep on a-comin.
free markets in America? where? tell me so i can go there.
maybe we should put oil on Ebay.
the price would bottom out just like all other categories that have taken a nose-dive on their site.
just plain ole goddam interesting, isn't it.

[darker]

OIL CEOs, execs are the HIGHEST PAID LIARS IN AMERICA,
all let loose by Bush-Cheney Texas oil guys to SCREW YOU, AMERICA.

[DougNTexas]

Folks it is no coincidence that gas prices at the pump goes down right before a Presidential election. It happens every time. That reason the past few years was to help the Rethug candidates. The oil companies control what the prices are. Its a joke.

[TxAggie]

So Doug- why are "they" going out of business, consoladating, laying off employees and suffering through the current low price of the product and high cost of services? By choice? If "they" control prices, they are doing a poor job of it.