The CEO of Occidental Petroleum, Vicki Hollub, said an interesting thing last week as reported by Reuters. The article begins with a quote by Hollub.

“HOUSTON, May 11 (Reuters) – Oil companies worldwide have been trying to increase production, but are struggling to balance increases without undercutting shareholder returns, Occidental Petroleum (OXY.N) Chief Executive Officer Vicki Hollub said on Wednesday.” [Italics mine]

The effect on executive decision makers of “undercutting shareholder returns” is not to be underestimated. When margins are high, why voluntarily reduce them with increasing production?

She goes on to say-

“”It is almost value destruction if you try to accelerate anything now,” Hollub said during a conference call to discuss the company’s first quarter results.”

Everyone knows there is widespread public anger and distrust simmering on the matter of high gasoline prices in the US. Fuel prices are at a reported 14 year high and are helping to drive inflation. Everyone is feeling the pain either directly as a tank full of 85 octane or in the inflated price of widgets elsewhere.

Oil producers are feeling the heat but are reluctant to increase production. Hollub said “There are a lot of headwinds to increasing production worldwide,”

Unfortunately, the only market lever consumers have is to reduce fuel consumption.

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