Oil is still inexpensive, says Big Oil CEO
According to the head of France's Oil Giant company Total, oil is still "too inexpensive." This surprising statement is what Total's CEO Christopher de la Margerie said in an interview for French economy magazine Revenu. Even at more than $130 a barrel, he said that oil is still cheaper than in 1974, once we discount inflation. He continues by saying that if oil was actually too expensive, it would discourage demand in countries like China and other emerging economies (it isn't). He also claimed that, "oil is still a non-expensive source of energy if we compare it with other consumer goods."
[Source: Revenu via Autoplus]
Reader Comments (Page 1 of 2)
Richard 11:58AM (5/23/2008)
China's price of gasoline if protect by it's government so demand continues with reckless abandon just like it's done here. Although gasoline may be fairly inexpensive, the automobiles available to us consume too much of it, that's the problem. I don't care if gasoline costs $10.00/gallon, I want a car that gets 100 mile/gallon. My total cost for gasoline would go down. America needs incentives for some of these European companies to bring their fuel sipping, good looking autos over to the states so that we can start putting a hurtin' on addiction to oil.
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John E. 12:16PM (5/23/2008)
It's inexpensive if you make billions of dollar in your annual income not cheap when you make $300 a week plus you have to pay for school... i hate oil companies they are all douche bags... and car companies are freaking a****** cause they should make fuel efficient cars. i hate how our world revolves around oil.. maybe one day we will look at all this and say i remember those days that oil companies made billions dollar of profit.
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John 12:20PM (5/23/2008)
Wow...gas is still too cheap...hmmm, I wonder who has a company gas card and a chauffeur for his 15mpg highway, Maybach limo...
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BlackbirdHighway 1:02PM (5/23/2008)
It's not cheap, but it's not nearly as expensive as it could be, so maybe that's what he was trying to say.
It's certainly expensive enough that people are taking it into account when buying vehicles, locating their homes and employment, planning vacations, etc. For most the last couple decades, people largely disregarded the price of gas, so it was definitely cheap.
Over the short term, gasoline is very price inelastic. Even though the price of gas doubled, you are still going to fill up to go to work, because you don't have much of a choice. Over time, demand will be lowered as people replace vehicles, swap jobs and houses, and make other lifestyle changes.
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Rick 2:16PM (5/23/2008)
What was he saying 8 years ago when gas was $26 a barrel?!?1
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steven 1:27PM (5/23/2008)
@4: Let's watch it with those "lifestyle changes". This IS a family site.
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fnc 1:48PM (5/23/2008)
The CEO of a major corporation thinks his product is cheap at twice the price? I guess it really is all about perspective.
Looking at technology for moving metal boxes containing people around, however, he has a point. None of the alternatives currently come close to matching the price of an ICE burning gas for a few years (though that price over a few years could change a great deal in that time). Batteries are an obvious winner when it's time to fill up, but that upfront cost is still a killer. I did wonder the other day, if as much manufacturing capacity were devoted to batteries as is given to internal combustion engines today what their price per Kw/h would be.
But even with its advantages and deep entrenchment, I still think gas is in a precarious position. Each bump in price spurs more research into alternatives that are getting close, slooooowly adding another word to its obituary. I wonder if oil company executives watch this process, wondering if they should go for broke for more expensive fields hoping they can turn on the taps again someday and get the price down where people don't worry so much about replacing it again. It's kind of a paradox, the more profit they make on the stuff they have today, the shorter the lifetime of their product's use becomes. Terrifying, and interesting, times.
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ug 2:19PM (5/23/2008)
How long will they keep arbitrarily cooking the books in comparing oil embargo prices from the 70s to today???? I thought oil prices long crossed the barrier of the highest inflation-adjusted oil embargo price.
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Wave54 3:47PM (5/23/2008)
For the work it does and the choices it gives us in life, gasoline IS relatively cheap.
Many people who complain about $4/gallon gas happily spend $10/gallon on 1/2 liter bottles of water, over-priced restaurant and fast food, theme park admissions, ridiculous cable and cellphone plans, designer clothing, $150 sneakers, and on and on...
Haven't been in a bar in 20 years -- what does a drink cost? $5 and up, probably, for 1 ounce of alcohol and some ice or soda. Yet, all the nightclubs are packed with eager patrons handing over piles of cash every day.
Let's not forget the vehicles themselves, with too much horsepower and too many accessories and too much weight to drag around. Only a minority of folks would have purchased a European econobox until this year. That's why they're not in the US -- yet...
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Lad 5:43PM (5/23/2008)
We have been burning gasoline in 20-30% efficient ICE cars for a hundred years; in effect tossing away 7/10s of each gallon of fuel, in the form of heat and emissions, for each gallon we use as power. Now the rest of the world wants to do the same thing...it's simply not sustainable and what you are seeing is speculation that gasoline prices will go ever higher as other country adopt the American life style of wastefulness.
The price of gasoline and its affect on the price of living is relative to only the poor and middle-class. Total's CEO is not concerned with these problems, he is unaffected simply because he's rich.
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jpm100 5:59PM (5/23/2008)
"oil is still a non-expensive source of energy if we compare it with other consumer goods."
Thanks genius. Most other consumer goods have major energy costs to them. So as oil goes, so do they. So not only does the make oil stay 'cheaper' the term 'cheaper' is relative because everything costs more.
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stevefazek 6:09PM (5/23/2008)
how to make oil over priced. If you run one of 3 markets that sell crude. oil and then refuse delivery of it. That way you can claim you ordered this much oil and only got that much. Oil producing countries will refuse to produce any more oil see Saudis just this week.
If you think i am full of it look at the actual figures of the Nymex since 2004 and you will see thats when they started to play this game.
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stevefazek 6:37PM (5/23/2008)
i agree that cars need to get better MPG. How the hell does a civic today almost break in at 4,000Lbs?@!?!?!?!!?
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MikeW 10:29PM (5/23/2008)
What civic is 4,000lbs?
About 2600-2900lbs
http://www.hondanews.com/categories/959/releases/4251
http://www.hondanews.com/categories/959/releases/4253
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Kevin Nugent 11:03PM (5/23/2008)
oil is still a non-expensive source of energy if we compare it with
other consumer goods."
Yeah you make alot of sense. Are you serious oil is inexpensive whenyou compare the inflation rate of the 70's . For all i care you can goto hell . I really do hope that i can see the day when oil becomes a thing of the past and we use fuel made right here in the us made from what ever the hell we come up with . It woudl be so satisfying for me to see oil companies fall and beg for us to buy oil. Their people will starve and tehir economy plunder. Hey fair is fair. You a** f*** the american race and laugh about it and on top of it make record profits. Heed my word america will get you back ;) . Pay back is always a b*** So you just watch wait and see.
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len simpson 10:53PM (5/23/2008)
It,s not comfortable, but it,s actually good that we are being forced away from our excesses. Maybe walking & exercise & less fattening will occur.
Re: the above article, 1915 gas, adjusted for inflation, would be $5.00
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Chris M 12:45AM (5/24/2008)
Apparently oil is too cheap because the oil companies don't own everything yet!
Ug is right, the analysis was warped by comparing current price to artificially inflated prices during the oil embargo. If compared to the average historical price (adjusted for inflation) the current price is very high. Another thing that Mr. de la Margerie ignores is that the major cause of inflation IS oil prices.
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Richard 9:52AM (5/24/2008)
Oil IS too cheap 'cause nothing comes close. Oil is the closest thing to magic that we have. A jetliner gets you to Europe in 6 hours versus a sailboat that takes 10 days. You'll know when oil is too expensive when Ford make a battery powered F150.
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Richard 10:06AM (5/24/2008)
Water is the most precious liquid on earth cause we can't live without it but it's cheap because there is plenty of it. Oil is also extremely precious. Its price reflects only its availability not its actual worth. Compared to alternatives, oil is still quite cheap.
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Eric 1:34AM (5/26/2008)
You know, I really am getting tired of people beating up on oil companies. We are in a free-market here people and they are able to make as much or as little profit as they want. Everyone thinks their huge profit = screwing the public but consider this. Oil companies were making money when extracting the crude and selling it for $20 or $25 a barrel. Now that were over 5 times that price for the supply, their profits should be five times what they were. They own the supply and if it costs them, for example $10 a barrel to extract, and the fair market price is $130+ then look at that, huge profit margins.
High gas prices suck, but focusing blame on oil companies makes about as much sense as focusing blame on President Bush. There haven't been any new oil refineries built in the U.S. in 30+ years, and fuel subsidies in China and other developing countries keep their fuel cheap and demand up. All of those factors, as well as ones we don't know contribute to high gas. Yes, it is terrible and I hate paying $4 a gallon as much as the next guy, but demonizing oil companies or government will not make the price at the pump go down. If 5 years ago when the Energy Bill going through Congress would have passed allowing exploiting of the untapped oil off the continental shelf and in ANWR, and included promotion of new refinery construction, $4 a gallon gas may not be as much of a reality as it is today. Especially since the Saudis are reluctant to increase production of oil because we have dragged our feet on exploring our oil reserves.
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