Wednesday, April 2, 2008

Big Oil: Pure Evil or Just Business?

How many times have you heard someone go off about BIG OIL cheating the masses when it comes to gasoline prices? I hear this almost daily, and when I ask them to explain I always get the same answer. bigoilbushgreedycontroltheoilpricecheneyhalliburtonoldwhitmenexxoncorruptioncheneychevronrichevilwhitemenbushbigoiltheycouldsellitcheaperiftheywantedtogreedybastardscheneyhalliburtonexxonbritishpetroleumcigarsmokingbackroomevilgreedyworlddominationcontrolthepriceofoil. I realize that I could have written that where it would be easier to read but on the off chance that you have never spoken to one of these people, I wanted you to experience, in part, some small measure of the head poundage that occurs when they start in. These ranters have no factual basis for what they are spewing they just have a "feeling". The people who say these things aren't crazy or even stupid, they are frustrated. And as we know frustrated people will often operate on feelings alone when there is a lack of evidence. The following is my feeble attempt to explain why oil companies, big or small, are not evil.

Who is Big Oil? Well lets see, Exxon, Chevron, Royal Dutch Shell, British Petroleum, Chesapeake Energy, Etc. Ok we all know their names but WHO ARE THEY really? First and foremost they consist of thousands of employees worlwide. Secretaries, accountants, janitors, lawyers, welders, equipment operators, truck drivers, marketers, managers,cooks, CEO's, pilots, security gaurds, ad infinitum. Secondly since they are all publicly traded companies, they consist of hundreds of thousands if not millions of people who have a stock portfolio or a 401k. The upshot is this, BIG OIL may be you and if not you then almost certainly someone you know and like. Keep in mind, these are companies in business to make a profit just like every other company on the planet.

What about BIG OIL controlling prices in order to make huge profits at our expense? Of all the outrageous claims this one takes the cake. Between 1982 and 2002 oil almost never got above $30 per bbl and spent a lot of that period down around $12. If oil companies can control the price of their commodity why on earth hasn't it always been $100 or even $200 per bbl? Sorry folks but just like anything else, the market sets the price for oil. Any commodity, from pork bellies to prostitutes is worth whatever somebody will pay for it. The current record oil prices are due in small part to major war in the middle east and lack of exploration in Alaska, California, Florida and their coastal waters. But in large part to the fact that China and India have charged boldy into the 20th century. The recent discovery, in these progressive economies, of the light bulb and the horseless carriage has driven the demand for energy off the chart.

It's just business. When oil is $15 per bbl the oil companies tighten up and keep operating, thank God, and spend their meager R&D budgets trying to find ways to more efficiently extract the energy they have already discovered. When oil is $100 per bbl, they spend their huge R&D budgets finding new fields and creating new technology to go deeper. The expenses are staggering and the risks are huge so it stands to reason that the rewards are equally impressive. In the future, instead of demonizing legitimate businesses, save your pennies and invest in them, the dividend money should more that offset the higher energy price.


King Selfish said...

Well done. Too bad the whiny liberal ninnies of the world will never be able to grasp this concept.

Tara said...

Very nice post.