The spike in the price of crude oil has been brought about by the “market pricing in the risk premium on the future oil supply,” rather than a lack of supply currently, said Rex Tillerson, CEO and chairman of Exxon Mobil.
Tillerson, head of the world’s largest publicly-traded oil company , was responding to the view of the Saudi Arabian oil minister. The cost of oil hovered below $105 a barrel.
“The $20 jump we've seen in the last few weeks is really the market pricing in the risk premium, as they [the Saudis] view it, on the future supply of oil,” he told CNBC.
Tillerson added oil is plentiful at this point, but the situation could change if delivery from a major supplier were to be disrupted.
He said that the disruption from Libyais of minor importance because the country's production accounts for only 1 ½ percent of the global oil supply.
The last time the supply chain was broken in the US was after Hurricane Katrina in 2005 when the country’s strategic oil supply, a system in place throughout the world, had to be tapped, because oil tankers could not deliver crude oil to refineries in the gulf coast region.
Because each region in the world maintains strategic oil supplies to use in the event of a physical disruption, Tillerson said, the world is now better prepared for a crisis.
Tillerson also discussed US energy independence. Click hereto listen.