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

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Sunday May 22, 2011 · 6:02 PM PDT

2011/05/22 · 18:02

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.

Saudi Prince Alwaleed says that production costs are even lower – in the range of $4 to $6 per barrel:

As Goldman Sachs has admitted, speculators have caused the price of oil to rise at least $25 per barrel above what fundamentals would dictate. In truth, the entire media narrative has been spun to mislead the public into believing that price moves are being driven by increases in demand. Despite the fact that oil consumption decreased by 1.1 Mbd over the last year, news outlets have suggested otherwise by stating that there has been a "drawdown of inventories". This is because deliveries of oil have decreased by 1.2 Mbd over the same period.

Clearly there is no shortage of oil, the US has 1.75Bn barrels of oil in storage, enough to offset 186 days of imports (9.4Mbd) and 60% of those imports come from Canada and Mexico, not OPEC so our 1,750 MILLION barrels of storage would offset over 500 days worth of imports from the Middle East and Africa – even if it was TOTALLY cut off...
Oil jumped yesterday, as it often does, on a draw-down in oil inventories which Criminal Narrators Boosting Crude play off as an indication that demand is picking up. This could not be further from truth! What CNBC, the WSJ or any kind of real journalist COULD do, in roughly 30 seconds, is LOOK at the ACTUAL EIA Report. Doing that, they would see that the net drawdown of 100,000 barrels was caused by Net Imports of crude dropping from 10.62Mbd last year to 9.42Mbd this year.

Here's the rub: Instead of adding value to the process by driving down prices, brokers on Wall Street are working in concert with Big Oil (and the corporate news media) to rip everyone off.

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