Are Big Oil executives shrewd or just cowardly?
By Norman Rogers – December 6, 2021
The price of oil is inelastic. A shortage causes the price to soar, and excess production creates ruinously low prices. Naturally, the producers want to limit production when necessary to protect the price and their profitability. Currently, Russia and Saudi Arabia are holding back some production to support the price. Prior to 1940, the U.S. was the world’s dominant oil producer, and the Texas Railroad Commission limited production of oil to support the price. In other words, the government did for the oil companies that they could not do for themselves without violating anti-trust laws. Starting in 1959, the federal government limited imports of oil for 14 years, keeping the U.S. price far above the price of oil in the Mideast.
OPEC is a cartel run by oil-producing countries that attempts to control production to protect the price. OPEC suffers from common cartel problems. Members may cheat on their production quotas, and keeping the prices high encourages development of resources out of its control.
Starting in the 1980s, the global warming catastrophe was invented. The term “global warming” was later switched to “climate change” due to lack of warming. Global warming greatly benefited its promoters — academics studying climate, environmental organizations, and governmental organizations fighting supposed climate change. It greatly appeals to the left because it is a recipe for the expansion of government authority and regulation. The left would prefer that we don’t have private automobiles, don’t live in leafy suburbs, and in general are dependent on and under the thumb of the government.
The big oil companies are scientifically sophisticated in geology, chemistry, physics, and engineering. They are not dumb enough to believe the global warming story. Lee Raymond was CEO of ExxonMobil from 1999 to 2005. He was an outspoken critic of global warming. But since Raymond’s time, Big Oil has been publicly supportive of global warming, even building solar farms and wind farms.
Why would these giant companies support a movement that has the goal to destroy their business by outlawing fossil fuels? Their support for global warming is nominal in comparison to the scale of their business. These are companies that spend tens of billions to develop oil fields. Millions for wind farms are blips on their financial statements.
As a student of global warming, I always wondered why Big Oil would pay lip service to and even spend money on what they surely knew was a fraud and not good for the long-term survival of their business. One theory is that their support for global warming is a P.R. stunt, disinformation designed to take the heat off them. Another theory is that the executives are simply too timid to challenge such an obvious big lie as global warming.
I don’t know any CEOs of oil companies, but I have a hard time believing that men that spend billions of dollars in third*world hellholes are timid or cowardly.
The shrewd oil executive theory is that global warming is doing for the oil companies what the Texas Railroad Commission and OPEC used to do: protecting the price by limiting production. The beauty of this is that the global warming believers, including the Biden administration, are taking all kinds of steps to limit production of fossil fuel in the name of global warming. Unlike the oil companies, the Biden administration is certainly dumb enough to believe the global warming story.
The global warming believers and the oil companies both favor higher prices for oil. The global warmers figure that higher prices will limit consumption. The oil companies want higher prices but not so high as to produce an overwhelming flood of new oil or to attract onerous government regulation of their business.
The trouble with the shrewd oil executive theory is that it is too complicated and too conspiratorial. Most people are not devious enough to follow such a theory. Oil companies know perfectly well that schemes to replace fossil fuels with wind and solar are a fool’s errand. There is absolutely no chance that these schemes will replace fossil fuels. So they can try to depict their companies as partners in the global warming mission, secure in the knowledge that it is going nowhere.
This commentary was first published at americanthinker.com December 6, 2021.