09 November 2005

Oil Company Executives Harassed By Senate


Your US Senate is wasting the valuable time of oil company executives who are busy trying to find more oil for our trucks and SUVs. The senators are again claiming price gouging, collusion, whatever. How many times do we have to go through this to find once again that there is no collusion and there is no gouging. There have been investigations like this for the last several years and nothing of the sort has ever been found.

Even more outrageous than this is the call by the junior senator from NY, Mrs. Bill Clinton to impose a windfall profits tax on the oil companies who have the sheer audacity to report a profit. The economics of such foolishness are likely to make us even more dependent on foreign oil producers than not. Either she is a crass socialist, or she is utterly ignorant of market forces. I suspect it is the former, and she doesn't realize that her slip is showing.

Oil companies are in two businesses simultaneously; getting oil out of the ground to sell on the world market, and in some cases retail sales of oil derived products such as fuel and lubricating oil. When the worldwide demand for oil is up and temporary shortages in refined oil products drive up the prices on speculation; a company that produces the commodity involved will see an increase in revenues, and if costs are in order, an increase in profits. This is purely the result of a successful business endeavor, and not some evil conspiracy.

I am all about increasing our energy independence profile and have blogged about it several times, call me naive, but I don't buy into the whole "big-oil-industry-is-sticking-it-to-us" meme. If you do, I have a little challenge for you.

I will give you a shovel and let you to go get the oil for a day. Oh yeah, by the way, we'll need several hundred million 55 gallon barrels today, and after you dig it out of the ground, you'll then need to transport it several thousands of miles. After you do that, I'll need you to subject it to extreme heat and pressure to refine it into the useable fuel I would like to buy from you.

Well ?

Get busy, you've got a lot of work today. Pretty quickly you will surmise that you will need a bit of help to achieve this task. Perhaps you would like to use larger equipment than a shovel. Some of this oil is under thousands of feet of water. Are you starting to get the idea here? Unless you are God, you will need the next best thing with which you might get such help; capital.

The oil derived fuel you put into your car every few days or so represents a huge achievement of capital at work, and if the oil companies turn a decent profit every once in a while, perhaps they will be able to go get you some more of it.

There are steps we can take to lessen our exposure to some of the extremely volatile sources we use now but it will require the political will to put the leftist-socialist-environmentalists in their place. Pie in the sky nonsense about "green-energy" is just that. By the estimates I read; a so called hydrogen infrastructure, if it can ever be considered an economically viable replacement for oil at all, is at best decades away.

This great piece at Tech Central Station highlighting the folly of green energy as well as this great piece from James K Glassman which also addresses the supply side of the equation, and the one here from Glenn Harlan Reynolds, with some keen insights.

If these Senators are so terribly concerned about high energy prices and their effects on the consumer, then they should act immediately to reduce the federal tax burdens on these products and the companies that produce them. They can't control OPEC, but they can sure as heck lower the tax burden.

They should act to immediately lessen the bureaucratic and environmental regulations that impede the flow of cheap reliable energy products to market.

Well ?

I'll bet that not one Senator mentions reducing the Federal governments take from the energy industry so as to lessen the burden on their constituents they are shedding crocodile tears over.

Any takers on that bet? -SpinDaddy