If you were running an oil company, what would your number one priority be? Jacking up production, right? I mean, prices have just shot up from $50 to $120. And you know that whatever you produce, you’ll sell. Can it get any simpler than that? Whatever it takes, push product out.

Now, we may not be dealing with a bunch of Einsteins at the head of these oil majors, but they’re not dopes either. They understand what’s going on. So, why is it that when ExxonMobil, Royal Dutch Shell, BP, and ConocoPhillips all reported in the last two weeks, each and every one of them said the same thing.

Profits are up on price increases. And volume is flat. Let me repeat that. VOLUME IS FLAT. What the heck is going on?

Take these companies with market cap’s of several hundred billion dollars … the latest drilling technologies … thousands of acres … billions of barrels of proven reserves … tens of billions more of unproven reserves – add it all up and they can’t produce more oil this quarter than they did last quarter or the quarter before?

Have these companies gone OPEC on us?

I mean, we know that OPEC keeps production just low enough to keep prices high. But they only provide about 40% of the world’s oil.

What’s the excuse for these private oil majors? Have they also found it in their interests to keep a lid on production? (This wouldn’t be the first time we’ve seen a manufactured shortage to hike prices.)

I almost wish there were an unholy conspiracy between OPEC and the other oil producers. If there were such a thing, it might mean with a little arm-twisting, we could get non-OPEC producers to push up production.

But, alas, there is no conspiracy.

There is something else … something much more ominous…If we were talking about food, I’d say there’s a worldwide famine brewing. But it’s oil, which isn’t quite as brutal as a famine. People have to eat. But do they have to drive?

No. But a worldwide shortage of oil is knocking on the door. Right now, supplies are tight. But they are more or less in balance … with admittedly no excess capacity to spare. It’s not going to last. Global oil demand is about to leave oil supply in the dust.

Shell’s production fell six percent year-on-year. BP’s fell two percent. ExxonMobil’s fell 10 percent. According to Credit Suisse, overall production will fall two percent this year from last. I believe that underestimates the slide.

And while OPEC – being OPEC – has no quarrel with the soaring price of oil, the fact is, even OPEC countries (except for Saudi Arabia) can’t produce more than what they are now.

Saudi Arabia is producing 12.5 million bpd (barrels per day). It has plans to increase that amount to 15 million. Or should I say “had” plans. The Saudi government has put those expansion plans on hold. It doesn’t want to take the risk of expanding into the teeth of a global recession.

OPEC as a whole plans to increase oil production by five million bpd. That won’t be enough. Global demand should increase by 11.5 million bpd by 2030.

Russia came to our rescue in 1999 when it finally opened up its fields to Western participation. Russian production rose by four million bpd from 1996 to last year. During the same period, Saudi Arabia’s production increased by 600,000 bpd.

Can any of the non-OPEC countries come to our rescue once again? Russia won’t. It’s too busy renationalizing its oil and gas industry.

Mexico? Nope. Their Cantarell field is getting long in the tooth.

England? Norway? No, their North Sea production is winding down.

Venezuela? Don’t make me laugh. Mr. Hugo Chavez is more intent on using his petro-profits as a tool of foreign policy, not plowing them back into oil production to help lower oil prices for the U.S. and its friends.

And the oil majors can’t help us because they can’t help themselves. Every time they think they’re getting access to a big field bursting with oil, something happens. Expropriation … terrorist acts … renationalization…

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