The debate behind $80 oil

Industry executives say there’s no reason crude prices should be anywhere near current levels. Others say the fundamentals are there, and Big Oil is playing politics.

NEW YORK (CNNMoney.com) — To listen to Big Oil executives, there’s no reason why a barrel of crude costs $80. But others say strong demand and limited supply justifies at least that much, and that the industry is clearly looking out for itself by saying oil is overvalued.

“No one has to wait at the gas pumps of the world. There is no physical problem,” Jeroen van der Veer, head of Royal Dutch Shell, recently told reporters in Calgary. “[There’s] a lot of psychology in the price.”


Van der Veer’s comments echoed those of Exxon chief executive Rex Tillerson, who said earlier this month that he “cannot explain why we have $70 oil today. We are not having trouble finding oil. There is something else going on that I don’t get.”

Exxon declined to elaborate on Tillerson’s remarks, and a spokesperson for Shell was unavailable for comment.

But for some, the motivations behind the executives claims are clear.

“They have political motivations for trying to talk down the price of oil,” said Ken Carol, an oil company analyst at Johnson Rice & Co, a reserach and investment banking firm.

CNN