Cynical Synapse

Mon, 15 Sep 2008

Is Big Oil the Victim?

Filed under: Business, Gas Prices, Oil, Politics, Profiteering — cynicalsynapse @ 11:11 pm

I suppose in the blogosphere, mine is a “baby blog.” It should be no wonder, then, I get excited at any comment. I especially enjoy the thought-provoking ones. Such as with tsfiles‘ comment on Fact or Fiction—Obscene Gas Prices.

Disclaimer: I admit Big Oil, and gasoline prices, is a sore spot with me. I drive 174 miles round-trip to work each day. I could move closer to work, but Michigan’s economy and housing market is in the shitters. And, there’s precious little mass transit, so that’s not an option either. Today, car companies are bragging about 30 mpg; my Hyundai SUV gets 26, so I’m in the ballpark. But I digress.

Here’s my reply on tsfiles’ blog:

I’m afraid I didn’t keep track of the sources, which is why i didn’t link to them in my reply. I’ve visited a lot of blogs since Friday on the topic of gas prices. However, I googled fuel supplies today and Flordia and Knoxville (which, by the way was one of the hot “gouge” complaint areas) are two examples.

That doesn’t mean we didn’t have stations run out of gas because of idiot consumers. Stations have to wait their turn for resupply. Nor does it mean there won’t be a tightening in supply. As you said, two dozen refineries are down, along with some of the major pipelines.

I don’t disagree that political interference is not helping the situation. But I suspect politicians no longer represent their constituencies. Rather, they represent special interests, including Big Oil. I think that’s why the pointless investigations you refer to haven’t yielded anything substantive. They’re just a way for politicians to make the public feel good.

You’re right: petroleum is what drives our economy. I don’t disagree that environmentalist agendas have restricted expansion of nuclear power and made new refineries and even new conventional coal-fired power plants less economically attractive. I’d be interested, however, to see the comparison of oil company taxes with revenues, write-offs, expenses, tax incentives, and profits. I don’t believe their taxes are as high as they might want us to think.

Oil companies can’t be left to conduct business as they see fit. Citgo, for example, was judged guilty of criminal violations of the Clean Air Act and has consented to emissions cleanup. Oil companies are not the best corporate citizens, no matter what their websites say.

I never said any profit was obscene. Oil companies are certainly entitled to profit; that’s what they’re in business for. I’m not the economic expert or the all-knowing guy to decide where the division is between high, but acceptable profits, and profits that are too high. But with the pundits constantly talking about recession and with unemployment on the rise in 43 states, things like ExxonMobil’s record-breaking $11.68 billion profit are kind of hard to take. That’s what’s obscene.

Not being a petro-economist, I’m not sure who’s making the big money on the current situation. The spikes in gas prices we’ve seen are largely driven by stupid people who seem to think this is their last chance to get gas before the world ends. But I’m suspicious that it begins with Big Oil hinting there will be disruptions in supply. The media snatches that and launches their hype. Before you know it, you have a self-fulfililng prophecy. In some cases, the money-maker is the immoral, profiteering station operator.

And yes, we’re all hostages of this, because oil is entwined into every aspect of our modern economy.

I don’t think Big Oil is the victim here. I think OPEC and Big Oil are trying to get all they can because they know they’ll be used up has-beens in the next 50 or so years. They’re trying to get big money, just like professional athletes, because their time in the spotlight is limited. If there’s a victim here, it’s us, the ordinary folk.


1 Comment

  1. It’s not about victimhood. It’s about production. You cannot consume that which you cannot produce. If we want to consume fuel, we must, if sane, permit the production of fuel. End of story.

    As for “record profits”, yes, oil companies make lots of money. They are also extremely large companies. If you divide their profits by the size of their investment, you’ll find that their return on investment is usually about 7%, and is now probably slightly higher than that. Fine. The drug industry makes about 21%. The software industry averages about 15%. The oil industry about 7%.

    You cannot say that a 1 billion dollar company which turns a 100k profit is doing as well as a 100k fast food joint which is turning a 100k profit. It’s apples to oranges.

    Comment by Rich — Wed, 17 Sep 2008 @ 8:00 pm

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