Wednesday, March 09, 2011
ExxonMobil, the best of the bigs, is investing $100 million per day to increase production:
Oil prices are climbing higher again today on renewed fears regarding the already tense situation in Libya and the looming "day of rage" in Saudi Arabia that is planned for Friday, but that may not be the biggest news pertaining to members of the Big Oil and Gas Stocks Index, which is lower by 0.1%.
Rather, the top oil news of the day may be coming from Dow component ExxonMobil (NYSE: XOM - News), the largest U.S. oil company, which said it plans to spend $100 million per day over the next five years to increase its oil output. ExxonMobil, the largest U.S. company by market value, said it will spend $34 billion this year and that its budget will range between $33-$37 billion per year through 2015, Bloomberg News reported.
There are companies that do important things in the world, and the integrated oils are among them. XOM could return that money in dividends and, effectively, slowly liquidate, but instead it is spending billions to increase production. That will make us all richer at the margin, every one of us, so I'm calling that good news. And, of course, it is a thumb in the eye of the limits-to-growth crowd, who would much prefer that most of us freeze in the dark, to borrow a phrase from the 1970s.
More of that, please (even if the Obama administration is trying to stop you).
Isn't it always the case that higher oil prices lead to increased production, often in areas where it is too expensive to tap oil at lower prices? It would be great to reduce the trade deficit by tapping local sources though.
Yes. Price signals work.
Rest of the world:
PS: Price signals work. This is not political, just systems.
The optimist says the glass is half full. The pessimist says the glass is half empty. The engineer says the glass is twice as big as it needs to be, and pays attention to the feedback mechanisms.