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Hey, Big Oil! Is This Any Way to Run an Oligopoly?!

If oil giants really do control the market, their timing is terrible...

Recall the good old days, before the election, back, oh, about six months ago.

Here at RedState, it seemed that every other diary was titled “Drill, Drill, Drill” or “Drill Here, Drill Now!!!” or “Drill, Baby, Drill!”, or some variation on the theme.

A common belief among liberal trolls, and even some die-hard conservatives, was that the markets for crude oil/gasoline are firmly in the grasp of an Evil Oligopoly. The implication was that this combine naturally colluded to peg crude oil/refined gasoline prices (it was never really clear to me which one) at whatever price suited them, and that price was, naturally, a high one.

Rational and highly logical conservative bloggers (namely, me) made the counterargument that the major American oil companies and their international private counterparts (ExxonMobil, Chevron, ConocoPhillips, BP, Shell and a few others) are a flyspeck in the global oil market. Seventy to eighty percent of the world’s reserves are controlled by National Oil Companies, many of them in nations that are hostile to the U.S. The $140/bbl oil price reflected a shortfall of supply of a terrifically valuable commodity, coupled with a historically low valuation of the US Dollar against world currencies: in short, Supply vs. Demand.

Well, last weekend I refilled a rent-a-hog with $1.80/gal regular (10% Totally Green Ethanol) up in OKC. It seems the urgency folks felt about energy prices has abated.

Twelve month oil price graph

Now, consider these recent news dispatches:

BP’s Thunder Horse now producing 100,000 barrels per day from two wells (Oct. 29, 2008)

HOUSTON: BP Chief Financial Officer Byron Grote confirmed that the company’s Thunder Horse field in the Gulf of Mexico is now producing from two wells at a rate of over 100,000 b/d. A third well is scheduled to come on line, likely in November, and fourth is expected before the end of the year.

Chevron starts pumping at Blind Faith Field in the Gulf (Nov. 12, 2008)

Chevron Corp. began pumping oil today at its $1.4 billion Blind Faith platform in the Gulf of Mexico. … Output from the field is expected to reach the equivalent of 70,000 barrels of oil a day when production peaks. …

Chevron fell $6.26, or 8.5 percent, to $67.28 in New York Stock Exchange composite trading,* joining other producers that plunged as oil futures dropped to a 21-month low in New York.* The Standard & Poor’s Integrated Oil & Gas Index was down 6.9 percent with all seven companies trading lower.

Fellas, fellas! Is this any way to run an oligopoly?! You’re bringing production on now, but wellhead prices are half what they were a mere 4 months ago! Couldn’t you have planned better? After all, you do control the markets, don’t you? Don’t you?

The Human Mind finds more comfort in the notion that “Somewhere, someone is in control”, as opposed to “The Real World we inhabit is governed by chaos and randomness”. Thus, many will willingly turn their lives over to Big Brother, the Messiah who will protect us from conspiracies and the cartels who would victimize us.

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