No quick fix on oil, says U.S. Treasury Secretary Henry Paulson from Qatar--it's a supply and demand problem.

We are not the bad guys, says ExxonMobil senior vice president and treasurer Donald Humphreys, recently telling a Wharton B-School audience that ExxonMobil's own analysts believe that based upon the historical supply and demand curve, crude oil should be pricing closer to $50 a barrel.

Don't blame us, continues Humphreys, ExxonMobil is frustrated, too. Despite record 2007 profits of $40.6 billion, the company, with a profit rate lower than "many typical American corporations," feels constrained in its efforts to drill for offshore oil or construct new facilities.

Critics, he adds, should think about the U.S.'s "need for energy and the world's need for energy, because China isn't going to stop growing and India isn't going to stop growing."

True--OPEC reports that non-OECD countries, chiefly China, the Middle East, India and Latin America, are expected to account for almost all of this year's growth in oil consumption. OPEC forecasts full-year global daily oil demand at 86.95 million barrels, just off previous expectations of 86.97 million barrels because of weakening calls for transport fuel in North America.

One North American impact is in the air. Fuel (and service) related problems, reports Aviation Magazine, kept enough Americans off domestic flights to cost the U.S. economy more than $26 billion from April 2007 to April 2008.

But what about that supply and demand problem? Humphreys dispels the theory that the world's supply of oil and hydrocarbon reserves is dwindling. "We don't really think so," he says, adding that humans have used about one trillion barrels of oil since the 19th century, with an estimated two trillion barrels remaining in the ground, plus shale and other fossil fuels.

Two trillion divided by 86.95 million?

Jeff Heilman

6/2/08