Big Oil: We told you so

With prices sharply lower from the summer’s highs, Big Oil’s decision to hold off on new production now seems rather wise.

NEW YORK (CNNMoney.com) — It would be tempting to say they told us so.

Back when oil prices were going nowhere but up, public officials, consumer rights groups and newspaper editorials chastised the major oil companies for not investing enough in new production. Big Oil, they argued, was simply lavishing shareholders with massive stock buybacks and dividends at the expense of the motoring public.


“The results illustrate an industry with plenty of resources to produce more oil in the U.S., but slow to spend the money to develop them,” Judy Dugan, research director at Consumer Watchdog, wrote in a statement last August, just after Chevron posted a quarterly profit of $6 billion.

“In a normal market, with prices for a product rising like they have for oil, manufacturers in competitive markets would be spending like crazy to make more of it,” Dugan continued. “Yet oil companies are able to sit back and make more money by selling less.”

The oil companies, in turn, argued that commodity prices are cyclical and would fall soon enough. In addition to a lack of access to resources and skyrocketing production costs, the companies said planning projects that can take a decade to build and cost billions of dollars meant they needed to take a long-term view. In short, they just didn’t believe the high prices were here to stay.

With oil prices now barely a third of that they were just 4 months ago, it seems they were right.

CNNMoney.com