Friday, November 11, 2005

Record Profits for Big Oil and Big Government

The one thing the media won't tell you when they run with the "Big Oil Reports Record Profits" stories is that the biggest profiteer in all of this is the government. To see those hypocrites pounding the podium over the price of oil in Washington DC makes my stomach turn.

The oil companies exist in a long term world. They were spending billions of dollars on facilities and exploration back when they were making little to no profit at all. Believe it or not they are probably not going to increase their long term spending because of a short term bump in profits.

The funny thing is even when the price for a barrel of oil does fall and oil company profits go in the tank the good old government will continue to rake in "record profits". I am not so much defending the oil companies who have gleefully enjoyed this speculation driven price increase all the way to the bank as I am chastizing the government for using their bully pulpit to berate the very industry that enriches them. Paul Sperry's revealing article in the American Spectator really says it all :

And isn't it ironic that the same town complaining about big oil's profits benefits from them big-time? Oil companies fork over 35% of their profits to Washington -- and that doesn't include the average 16% cut government takes at the pump. Perhaps it should be the pols at the witness table explaining how they're spending their own multibillion-dollar windfall.

Once again the media in this country fails to tell the whole story. The average person never complains about the huge take the government gets when he or she sees the price at the pump go up and up. But in truth the government makes more money over the long haul from oil than the oil companies do. Like the media, politicains live in a short term world - it's called the election cycle. They both benefit from the affliction of short term memory that seems to have infected nearly all Americans.

Lee Raymond, the outgoing CEO of Exxon-Mobil, was very candid in a recent interview on the Charlie Rose show. He said that the oil industry is very interested in effiency and does not oppose hybrid cars or efforts to make cars more efficient. They have spent billions making their operations more efficient and cleaner. They have studied extensively alternate energy sources with an eye on replacing oil (since they want to be in business in the future) and have absolutely concluded that oil is the most efficient, cost effective energy source for transportation. They spent billions on research in the 70's and renewed their efforts recently only to find that the laws of thermo-dynamics have not changed.

Raymond also reminded Charlie that Exxon and all the other oil companies operate in an integrated world - a global economy. Events such as Katrina and war and instability in the Middle East will affect the price oil regardless of how much or how little we pump out of the ground in America. I found that a very interesting and sobering statement. In other words we can not allow the politicians to use the stale rhetoric of severing our dependancy on Middle East oil as the holy grail to our energy woes. It just doesn't work that way.



TJ Willms said...

Ditto! In Fact Double Ditto!

This is the single most misunderstood industry in the country perhaps the world, (at least at the consumer level) and our beloved "free press" is skewing the facts to sensationalize the story. I expect this kind of imbecilic behavior from congress because these opportunists constantly want to play to the lowest common denominator. (That would be the dumbest of voters)

The futures market is heavily influenced by speculative analysis. (This means guesswork to you and me) The price rises and falls based on this educated guessing sometimes impacted by nothing more than fear. Because the increases lamented on the news reports today affect the price of crude oil next month oil companies have to raise prices at the pump immediately to ensure that they can afford to buy their raw material next month when the price will be higher. As the situation that caused the futures market to spike stabilizes, the price gradually falls to levels that are in keeping with the current availability.

One final thought Oil companies do what they do to MAKE MONEY! They don’t get involved in this market to fulfill their sense of civic duty, or to make our lives easier, or to see that mom can get the kids to the soccer game, they do it to make a profit. They are one of the MOST heavily regulated and taxed industries in this country. The intellectually lazy feel justified when they repeatedly act shocked that oil companies are making a profit it must somehow be at our expense. Our disingenuous politicians and the journalistic vultures like it that way. They have long ago decided that we are too stupid to see past the half-truths they pass off as news and important government functions to hold them accountable for their deceptions.

I understand completely how maddening this nonsense is but short of tossing the TV out a second story widow and torching the newspaper everyday before reading it you will see this idiocy for the rest of your natural life. Remember the Wizards first rule!

"People are stupid," they will believe any lie because they want it to be true, or are afraid that it might be true.

Great piece!