Friday, June 06, 2008

Energy Hypocrisy

We've all experienced, one way or another, the ever-increasing gas prices. And as people point fingers and look for answers, the most popular target is inevitably... the oil companies. The companies who are making record profits, while the "price at the pump" is affecting daily decisions, making us choose the Wendy's or Taco Bell value menu, instead of spending $8-10 on a better quality meal elsewhere. While it is true that the price has in fact risen, it is hardly the oil companies who are to blame. I'll explain (and please keep in mind that I do not receive any money or support from these companies... this is all me).

Historically, the oil companies have made a percentage profit on every dollar of oil. For argument's sake, let's say 5%. So, if gas is $1 per gallon, the companies get $0.05 for each gallon you pump. If the price quadruples (as it has) to $4 per gallon, that same 5% rate would also quadruple the dollar amount of oil company profit ($0.20 per dollar, in this example). So, technically the oil companies are in fact making a killing off the price of oil jumping, but they haven't changed their "going rate." By the way, neither have the Federal and State governments. Check out this chart, and look at each oil company's profits compared to the total amount of taxes collected:

(click the image to enlarge)

Courtesy of the Tax Foundation

As you can see, the government pockets 2-3 times as much for each dollar than what the oil companies are collecting. Maybe people should start pointing their fingers at their local and federal government instead. Granted, given the huge profits, the oil companies COULD take in less profit to lower the price of gas. But they should not be vilified for making their profits. They are in the business of making money off of importing and selling oil. Last I checked, that wasn't the government's line of work.

It surely wasn't the oil companies that designed and sold all these bigger, fuel inefficient SUVs. It wasn't the oil companies who stand in the way of additional drilling in domestic locations, like in Alaska and off the coast of Florida. It wasn't the oil companies standing in the way of building new oil refineries.

1) Oil companies didn't make and sell bigger, fuel inefficient SUVs

The big car companies banked on the attractiveness of bigger, tougher, better trucks and SUVs. And Americans fully bought into it. Having a big, bad truck or SUV pads our egos and makes us feel bigger and tougher. Hell, the few times I've borrowed my parents' Chevy Suburban and stopped at a light next to a small compact car, I felt automotively-superior (not sure that's a real term, but whatever). On an unrelated note, I recently heard on the news that Hollywood hypocrites stars feel the "in" or "cool" thing is to be seen in a Toyota Prius. Yeah, ok.

2) Oil companies aren't standing in the way of domestic drilling

As the price of oil climbs higher and higher, these companies are pocketing their short-term profits, but they have to have long-term concerns. With the current trend, of oil prices, people will begin making drastic changes to their daily lives, avoiding driving, using bikes, moving closer to work, working closer to home, working from home... anything to avoid having to spend sky-high prices on oil. That's why some of the companies are investing big bucks on hybrid and other new technologies. But if the companies want to stay in business, as they know it, they need to find some more oil. It's in their interest to find and to pump out more of the black gold. So, why aren't we drilling in domestic locations, where we know there are rich oil deposits? Our Democrat-controlled Congress is standing in the way, saying we will ruin the environment by drilling. This is an obvious pander to the liberal tree-hugger segment of the base, but the arguments have no merit.

While Dems complain about how we'll ruin the lives of the caribou in the area, the Alaskans (who presumably would hate such a horrible environmental disaster) are actually big supporters of the drilling. It will create job for the state, and surely will pump money into the local and state economies. So, those concerns are b.s.

How about the oil deposits off the gulf coast, off the western coast of Florida. Well, more concerns about the oil spilling out into the ocean and harming the sea life. However, the reality is that our technology has improved to the point where we can drill safely off the coast while avoiding such disasters. During Hurricane Katrina, not that long ago, nearly 1,000 oil rigs off the Louisiana coast were damaged or destroyed. Do you remember all those stories about oil seeping out everywhere? No, I don't either. That's because not a single one of the rigs gave off any oil. Our technology has improved the risks of potential environmental hazards to the point where they are not a major concern.

3) Oil companies want more refineries

They import the crude oil, and they want to sell it to us. Well, it has to get refined first. We have not built a new refinery in over 30 years, and all of the current refineries are filled beyond their desired capacities. They are prepping that gasoline for us as fast as they can, but unless we have more of them, it's hard to keep up with the steadily rising demand of new drivers in a growing population. Again, these companies want more oil to come in. Limiting the amount that can be processed does not help achieve that goal. I can't recall the state (I'm thinking South Dakota, but I'm not 100% sure) that recently voted in favor of a ballot initiative to build a new refinery. I heard about it on the news, and they mentioned how it would be the first in almost 4 decades. The next comment was, "Well, it remains to be seen what will happen now... the environmental groups are soon going to get involved."

Which creates a perfect transition to my next planned post on the theory of Global Warming... the environmental hoax du jour.

So, you stay tuned. But more importantly...

You stay classy


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