Quote:
Originally Posted by The55
It wasn’t political until your last statement which was very political. No doubt the oil companies are making big profits right now. My only question is, if it is this simple why don’t they always operate this way. It wasn’t long ago gas price was less than half what it is now. Did the oil companies just now become greedy?
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No, since you want to have this conversation within a thread about the track surface from a race last week, they’ve always been “greedy”. Oil companies, like all publicly traded companies, are beholding to their shareholders. Since everyone is now in the stock market (and has been for twenty years) because of your 401k, your fund managers demand that publicly traded corporations make money, every quarter, no matter how well they did the previous quarter or previous year. The old accounting term “retained earnings” which is what we used to do with extra profits from one quarter to smooth things out for a future bad quarter is now obsolete. Now you just fire everyone and make the next guy show a profit when you have a bad quarter.
What this causes is oil companies, and all corporations, to worry more about stock price than productivity. Stock price, today, is about speculation, not productivity. Schlumberger, the largest oilfield service company in the world, lost billions in 2020, laid off a 1/3rd of their workforce, squeezed ALL of their suppliers for pricing concessions, cut cost to the bone, and made their stock price skyrocket because investors liked their “fiscal discipline”. They didn’t complete any wells (aka “frac”) to get that stock price. They cut cost and lived off their stock price. The banks figured this out and decided they liked this strategy better than the usual borrow and spend and overproduce and drive the price of oil down cycle that we’ve gone through for the past 25 years.
So here we sit. Oil production is stalled because fund managers like fiscal discipline, oil companies like higher stock prices, and everyone that knows nothing can blame it on supply chain issues, labor shortages, and the inability to drill on federal land in Texas (which comprises less than 2% of the drillable acreage in Texas). In reality, the government hasn’t done anything to stifle production.
But what do I know. I’ve only been living this roller coaster for 25 years.
LET’S TALK ABOUT RACING!