Catfight

A recent ExxonMobil ad makes an excellent point:

"America has made progress since the 1970s ?energy shock?. The U.S. economy today is nearly 50 percent more energy-efficient than 30 years ago. Every form of transportation ? planes, trains and automobiles ? now benefits from improved fuels an engine systems.

"So why is it that despite this overall progress, the average fuel economy of American cars is unchanged in two decades?

"It?s because underlying engine efficiency gains have been largely offset by the increasing weight of vehicles, reflecting a growing share of the market moving to light trucks and sport utility vehicles."

Indeed.

You can read a Chrysler spokesman's response yourself. His basic point is that "greed by the big oil companies" is to blame for high gas prices. Hm.

Let's set the record straight. Oil prices are dynamically determined in a global market. Iinternational oil companies, such as Exxon, Shell, BP, etc, own about 6% of world oil reserves and have access to under 25% of world reserves. Most oil reserves are controlled by governments that severely limit or even forbid foreign access to their fields (e.g. Saudi Aramco, controlled by the al-Saud family, owns about a quarter of the world's oil reserves). In other words, international oil companies have very little control over the global oil market, especially today, when any bad guy with a bomb can send prices soaring. In an age of increasing terrorism against oil infrastructure, and instability in oil producing countries, high oil prices are here to stay. Auto companies that don't want to get their clocks cleaned by more nimble competitors should take heed of that fact and adjust their product lines accordingly.

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