Friday, May 13, 2011

Who's Really to Blame for $4 Gasoline?

Faced with blistering criticism from Senators this week, Exxon Mobil CEO Rex Tillerson blamed "speculators" for the high price of gasoline at the pump.  He claimed that the market price of oil really should be $60 to $70 per barrel, and that the extra $30 to $40 per barrel being paid right now is the result of speculation by traders making bets on margin.

Bloggers on Forbes picked up the cry, calling speculators "social parasites, gamblers who produce absolutely nothing of value."

Think about what this means for a moment.  It means that the CEO of Exxon Mobil said that we do not have a supply problem.  Or a demand problem.  The only problem we have -- a problem that costs $30 to $40 per barrel -- is speculators using margin to run up the price of oil and make a profit at society's expense.

How I wish someone would have pushed him on this point.  How I wish someone would have said:

"So, Mr. Tillerson, are you saying that we have adequate supplies?  That the moratorium on drilling in the Gulf following the BP Deepwater Horizon catastrophe is not giving traders legitimate reason to hedge against increasing prices for oil?  That your inability to drill in the Arctic National Wildlife Refuge is not affecting the price of oil?  That increasing demand from China, India, and other developing nations is not affecting the price of oil?  That unrest in the Middle East is not a legitimate cause for concern in oil markets?"

"Are you really saying, Mr. Tillerson, that speculation is the only reason why prices are above $60 to $70 per barrel?"

Obviously, he would never have agreed that speculation is the only reason why oil prices are so high.  He threw that out there because we live in a world of soundbites, where blaming speculators on Wall Street will shift the blame and get you good press in certain circles.

So why did Senators not press him on these points?  Because that Senate hearing was not about finding solutions to our energy problems.  It was about creating soundbites that Senators could use in the next election.

Which points out the real problem we face as a nation.  Neither our corporate leadership nor our political leadership is willing to have a serious conversation about the real problems and tough solutions we need to create a viable and sustainable energy policy.

John Howley
Woodbridge, New Jersey

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