Big Oil's PR Campaign Response In The Face of Waning Demand

Postulating that we can recognize a broad and well-crafted PR campaign for higher oil prices orchestrated by those interested oil industry parties, oil companies, oil traders, and compliant media, evidence to the contrary clearly indicating waning demand is all around us. Read on to understand how their self-interested manipulation could be everyone’s downfall.

Let’s begin by noting the following fresh oil exec quotes from a recent MarketWatch article.

“There’s been a fundamental shift in the U.S. demand and the price of gasoline,” said Lynn Westfall, chief economist for Tesoro Corp., an independent refiner that posted a loss of $179 million in its latest quarterly report. “Growth in China and India are driving crude prices higher. But demand in the U.S. is weak and so you can’t pass the higher costs along.”

“Given the state of the economy, the state of the unemployment rate — people’s jobs, my guess is that a lot of people aren’t feeling a lot better about this year’s vacation than they did on last year’s,” Rex Tillerson, chief executive at Exxon Mobil, told reporters on Thursday.

Spare me the China oil demand argument. While auto-related demand is strong in China, there are many other factors of far less significance to the price of oil compared to waning U.S. demand, starting with U.S. GDP being double that of China’s.

The trouble comes downstream where we find the major oil company’s refining operations. The three oil majors together reported fourth quarter losses of over $1 billion. At time same time, energy stocks have been rallying! Their stocks have gone up on “hopes” of greater demand and economic rebound.

During that same time, Wall Street bid up the price of oil from $70 to over $80 a barrel. Nonsense based on the reality of worldwide crude demand and the development of alternative energy resources to partially replace it.

Brief: Asia’s Commitment to LPG for Taxis and Public Buses

Once again, we recall Asia’s serious commitment to alternative fuel today and for the future: approximately 1000 Shanghai public buses and the vast majority of Shanghai Taxi Company vehicles totaling around 30,000 vehicles runs on LPG gas, so I fail to understand why in the future anyone thinks China won’t see more and more cars running on LPG rather than oil. In Guangzhou, China’s massive southern metropolis, 85 percent of the city’s 6500 buses and 16,000 taxis use LPG, more than anywhere else in the world. Way up north, Harbin’s 5000 plus taxis use LPG. In Japan, over 250,000 taxis run on LPG gas.

Other factors driving the PR campaign for higher oil and oil company stock prices amount to nothing more than speculation hopes and manipulative greed. The major countries of the world are executing to add in the neighborhood of 300 new nuclear power plants. Its not a “should we” discussion. Add up the capacity totals and share them with an oil industry exec if you want to see them sweat.

As to looking more deeply into the why of it all, the following paragraph from the Market Watch article gives us the big clue:

“The current malaise in stock prices and refining margins grew from the sudden onset of the global recession, just as the oil and gas industry completed huge refinery expansions, which were planned in the years leading up to the heady days of $100-a-barrel oil in 2008.”

Ah now I get it. Heading into 2008, the oil and gas industry companies had just invested in huge refinery expansions for the future which were based on oil priced in the minimum $90 to $100 range. Then the price of oil tanked along with everything else when the financial crisis hit. So instead of sucking it up like the rest of us when business isn’t so good, the big boys have the power and leverage to make the price go up anyway. Problem is, that’s big trouble for the rest of the world already teetering at the edge of the economic and financial abyss.

So if demand isn’t there to drive up the price of whatever it is you sell, don’t sweat it. Just gather up the common interest players to orchestrate a global-sized PR campaign instead.

 

Mario Cavolo has been based in China for over 10 years. He is a professional speaker, writer and media personality providing multinational and media industry clients with training, coaching, communication, market research and advisory services.  Take advantage of 7Mario’s “on the ground” China insights by visiting www.mariocavolo.com, where you will find insightful articles and commentary on business challenges, communication, and global market advisory with a special focus on China business and culture.

 

Information in this article comes from sources believed to be reliable. Mario Cavolo does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. The author may or may not hold positions in issues referred to in this article. No representations are to be taken as advice or recommendation by the author to buy or sell any asset. Copyright © 2010, Mario Cavolo. All Rights Reserved.