With international tensions and Wall Street speculation pushing gas prices up, experts are floating the possibility of $5 gas prices this summer. Conservatives have seized on unsubstantiated explanations for higher gas prices, from President Obama “wanting” expensive gas to restricting domestic production, despite it being at an eight-year high.
Today, Exxon Mobil CEO Rex Tillerson said that the “supply and demand is fine” — the driving factor is “concerns about the rhetoric” over Iran. As Tillerson points out, hawkish rhetoric is enough to fuel oil speculation and gas prices:
As I look at just the supply and demand fundamentals, I would not expect to see prices reach that [$5] level. Again, the unknown in here is if the markets view of the political risk, if the rhetoric gets more heated, if there’s a problem someplace else in the world that flares up, then certainly it can drive these prices up further.
Even during last year’s price spike, Tillerson admitted the major role speculation played, adding up to $40 more per barrel.
Exxon is not especially interested in oil production levels or easing gas prices, despite lambasting “dysfunctional regulation.” Not only is supply and demand “fine,” but Tillerson noted the company cares less about production than maximizing profits:
Rather than immediate production, Mr Tillerson said a priority for the company was to do “a lot of studying” to understand how to maximise the long-term value of its resources.
“A lot of the players in this space are more cash-flow driven. We’re return-driven. We don’t have ongoing cash flow to maintain our holding around these resources. It’s really about how are we going to develop these over the next 20 to 30 years and have them really generate good profitability.”
Of course, this is not the story the industry tries to tell the public. Big oil benefits from the higher gas prices — no matter whether it’s driven by speculation on international conflict. The big five are slated to take at least $5.8 billion more profit from higher prices for the first three months this year.