The Willy Sutton Theory of Oil Pricing

Expanding on Willy Sutton, America’s notorious bank bandito’s famed dictum, “that’s where the money is” today’s oil industry rationale for the pricing of oil could be capsulated by, “that’s where the money is, but hey, don’t worry, the system is still working”!

Just this past week, one of Organization of Petroleum Exporting Countries’ (OPEC -producers of some 40 percent of the world’s oil supply) most ardent adherents, Qatar Oil Minister Abdullah Al Attiyah instructed us that a $60 US crude oil price was “moderate”.

“The world lives with $60…$60 per barrel crude is moderate for consumers”. Thereby he clearly articulated OPEC’s objective of rigging a $60/barrel price by the imminently cutting production some 1.2 million barrels a day. This, at the very outset of the winter heating season.

$60 a barrel is treble what the price of oil was four years ago. Not one iota of additional economic value has been added by oil producers, whether OPEC or otherwise. Virtually no further costs have been incurred in oil’s production and in many cases production costs are actually less given the efficiencies achieved. A barrel of oil four years ago, which then provided oil producers with handsome profits, is the same as a barrel of oil today. Yet the trebling of the oil price in dollar terms brings the following avalanche of riches to oil producers worldwide.

Huffington Post