Exxon CEO: Oil Price is 9x Higher than Production Cost

[kpete]

Exxon CEO: Oil Price is 9x Higher than Production Cost

by The Anomaly

At the recent Senate hearing where Big Oil CEO's defended their billion dollar tax breaks, it was disclosed that the production cost of oil was nearly 90% less than its market price of $100 per barrel:



****** Rex Tillerson, the boss of ExxonMobil admitted last week that the price of oil–based purely on supply and demand- should be in the $60 to $70 a barrel range. The reason it’s above $100 a barrel, Tillerson explained, is due to the oil majors using futures contracts to lock in current high prices, and speculation that is engineered by the high-frequency trading of quantitative hedge funds...

*****Here are some other juicy disclosures from the hearing:

–The average cost of producing 1 barrel of oil was $11; the average price of the oil in the marketplace–$72– some 6.5 times the cost of getting the oil out of the ground.

–The profits for the big 6 oil companies was $36 billion in the year’s first quarter. A large part of the $36 billion was used to buyback shares or pay dividends to shareholders.
http://www.cbsnews.com/video/watch/?id=7366912n&tag=segementExtraScroller;housing

MORE:
http://www.dailykos.com/story/2011/05/22/978363/-Exxon-CEO:-Oil-Price-is-9x-Higher-than-Production-Cost?via=siderec

[ProfessionalLeftist]

1. Three words: futures, speculation, trading

Says it all.

[BREMPRO]

2. yes, but also dollar devaluation factored in rise...

dollar dropped in value when fed flooded the market with cash to stop the economy from tanking.. therefore oil is more expensive in dollars. combination of this (which i believe was necessary) and unregulated speculation (which should be regulated) and we all pay the price.. we all lose except oil companies and US based exporters who can sell our goods overseas for less- good 4 manufacturing here...jobs..

[bemildred]

3. So the magic of the market results in extortionate prices? nt

[Bigmack]

5. Yup... bend over... here comes the magic! nt

[dkf]

4. But it is the most expensive barrel that fulfills demand that is relevant.

It doesn't matter what the cheapest cost is nor what the average cost is. What is important is the price it takes to get the last barrel of oil that fulfills our requirements. The price of oil needs to provide incentive for that crew to drill.

Sometimes I wonder if people who write these analysis have a clue or if they are being disingenuous.

[katnapped]

6. But...but...but!

One of our resident apologists should be around any time now....

[w4rma]

7. Price gouging. Speculators. Price manipulation. (nt)

[Romulox]

8. No "efficient market" or "free market" theory can explain the price of oil

Oil is the most manipulated commodity on the planet. Everything from pre-emptive war for oil, price fixing cartels, massive domestic tax breaks, to the President running defense for BP after it devastated the Gulf Coast.

There is no such thing a "free" market in oil.