Big Oil?

OK, there is something that has been bugging me for awhile now.  It’s this liberal drone that calls for the destruction of "Big Oil," whatever that means.  They decry the "windfall profits" and want to tax them.  Somehow, this is going to make the little guy feel better, as we are finally "sticking it to the man."  You know, make them feel the pain at the pump that we feel.  So, so sad… and wrong.

The fact is that the oil companies are owned not by some big oil tycoon, who sits behind a desk twirling his slick moustache around his finger, they are owned by stockholders.  You and me!  I know what you’re thinking, "But Lee, I don’t hold any stock in an oil company!"  Don’t be so sure.  Most retirement funds are, well, funded by stocks that are held in companies.  Some of those companies are oil companies.  "But Lee, why then do oil company CEO’s make an obscene amount of money?"  Well, it’s because those companies do an obscene amount of business… every day… 365 a year!  Oil is a multibillion dollar a year business, so don’t you think that the people in change of running that business and securing profit for the stockholders should be rewarded?  After all, when you are the whipping boy for the Democratic Congress, you deserve a larger pay scale just to have to sit and listen to those blowhards.

"But Lee, the profit margin of oil companies is out of control.  Why are gas prices so high while they make so much money?"  This can be answered in two parts.  First off, why are prices so high?  Supply and demand.  The supply side has decreased now that China and India have got their shit together and joined the modern world.  They are sucking up oil at an ever increasing rate, thereby lowering the worldwide supply.  This, in conjunction with the "green" movement, which will not allow drilling in ANWAR (which is something both Obama and McCain are against) or the construction of new oil refineries or even nuclear power plants, have lowered the amount of oil we in the U.S. can have on a daily basis.  When something becomes more rare, it becomes more expensive to obtain (for the same reason that a Picasso or a Rembrandt costs so much to own).

Secondly, the "windfall profits."  I’m going to use a quote from Glenn Beck, who was kind enough to look into the numbers involved for me, as he has access to such things.  In this, we find that there are far worse "offenders" that we should be going after – if we should be going after anybody – before we attempt to stop "Big Oil."

They are not talking about the hedge funds because the hedge funds give them all kinds of money. The hedge funds, these guys Chelsea Clinton works for a hedge fund. John Edwards worked for a hedge fund. Al Gore works for a hedge fund, owns his own hedge fund. Nobody wants to talk about hedge funds. You want to talk about obscene profits. Now, I don’t believe this is an obscene profit. I really don’t. I think if you can make this kind of a profit, God bless America. God bless America. But here’s their profit margin. Their profit margin in hedge funds is 87%. 87% profit margin. That is printing money. So you want to talk about an obscene profit margin, there it is. Again, as a capitalist I say God bless you. But that is ten times the profit margin of oil. Oil’s profit margin is about 8.5%. This is ten times the profit. Why are we going after them? How about healthcare facilities? 48%. Publishing, periodicals, magazines is 34%. Information delivery services, 23%. Silver is 22%. Application software industry is 22%. Shipping, 21%. Well, not anymore. Copper is 19%. Tobacco products, 19%. Drug manufacturers, 17%. Insurance brokers, 16. Beverages, wineries, distilleries, 15%. Long distance carriers, 15.8%. I mean, railroads, railroads, 13.9%. Steel and iron, 13.8. Cigarettes, 13.7. Integrated circuits, semiconductors, 13.6. I mean, the list goes on and on and on and on. Money center banks, 10.8. Hotel/motels, 10.6. Asset management, 10.5. Beverage, Brewers, 10.5. Resorts and casinos, resorts and casinos are 10.5. Casinos are 10.5. Oil is 8.5. I mean, when a casino makes 10.5 and a hedge fund makes 81.7, you’ve got to ask yourself what’s an obscene profit margin. Why aren’t you going after those guys? – from Glenn’s Radio Program

So please, for the love of all that is good and holy, pull your head out of your asses Democrats and think before you point the finger.  After all, you may find (with an 87% profit margin) that the finger is pointing directly at you.

(NOTE: McCain is a very liberal Republican and I do not agree with him on all of his positions, but I will vote for him because Obama is farther left than Hillary Clinton.)

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5 thoughts on “Big Oil?”

  1. Christopher says:

    Good post Lee. As a left-leaning independent, I've done more research about issues than most people (since they tend to only listen to their party pundits). I feel that CEO compensation ratio to the average employee is a completely different monster… but you're right. The CEO deserves to be rewarded.You are also right that the percentage that is profit on the sale of oil or gas is low. About the only thing I can think of that's lower is that of a grocer (nearly 1 – 1.5%). Don't forget, these guys aren't just selling to Americans… this is a global economy and they are profiting from sales across the globe.It seems to me that the main influence on the current price of oil and gas is the futures commodities market. This is where speculators are helping to drive up the price of a barrel of oil by investing heavily in it, in anticipation of the price going up.One of the reasons for this is that the US Dollar is plummeting in value… in part because of the mortgage and credit 'situation'… making commodities one of the safest investments out there.Add in the fact that other soon-to-be global economic superpowers are about to add millions of cars to the streets and tens of thousands of new factories to the industrial markets, and you've pretty much got yourself a perfect storm.Honestly, we should be happy that oil prices are still this LOW. You basically have 2 choices. 1) stop going places.2) use a more fuel efficient vehicle to get to the places you do go.Regardless, it's in your best interest to help to encourage development of energy sources that are less expensive than oil (which at $135/barrel means just about ANY other energy source).As a planet, we're going to need to go this route anyway within the next generation or two, since that is when oil is expected to dry up. So why not start moving that way now?

  2. LCJS says:

    Thanks Christopher. I'm a reasonably moderate Republican (moderate because I'm not rich or a religious zealot). As a firm believer in personal responsibility and the "American Dream," I have no problem with people earning profit, as that is the point of business – earn as much profit a person can. I once heard a quote that said, "The Republican Party isn't the party of the rich, it's the party of anyone who wants to be rich." I agree with this as they tend to allow more freedom when it comes to leaving you to your own devices to gain profit.That being said, I absolutely would love to move to alternative fuels – like now! I don't want to destroy the planet (while I'm not sure that we are causing any of current climate change, we certainly will be if we keep doing what we are doing – so there is no debate there). It makes smart, economic sense to move to a fuel that can compete with / replace oil, and if I had the ability, I could make tons of money providing that to people. It's capitalistic and it's all-American. That's why a free market, left to it's own devices, will eventually achieve this goal. People need a hit to their pockets before change is mandated, and if other fuel options could compete with oil, then we would see a mass migration to the new fuel.I often disagree with Democrats because they are hypocrites in that they railed against the "fear mongering" of George Bush in the lead up to the Iraq War but then go and do the same thing when it comes to domestic issues like this. Companies aren't evil, they are us… CEO's can be evil (like Enron) but they end up facing the full extent of the law because evil CEO's are bad for business.The government needs to defend my rights, protect our borders and stay out of my way. In this instance, my rights need defending in that it's becoming too expensive to achieve life, liberty and the pursuit of happiness because gas costs so much. Working towards an alternative is something our elected officials should do, but we don't need a scapegoat… we know that oil is in demand. They need to just quit pointing fingers and get this done.

  3. Christopher says:

    I agree that "big oil" has been the scape goat… What it will likely take to speed up the transition to a new fuel is some sort of financial incentive for the R&D… like a tax break or some sort of subsidization for startups and industries working to lower the productions costs of alternative fuel production equipment and such. Without these financial motivators, change will come, but much more slowly.My only question about "big oil" is this: Why is the US government still subsidizing these giant, profitable, global corporations? (and letting them get away with not paying the royalties to some of the local and state governments to whom they owe millions… but that's a different issue)In all the research that I've done, I have never come across an argument in favor of these subsidies, yet, for some reason they continue… Can you shed some light on this?All in all, I'm glad that gas prices are shooting up so quickly. I wish it hadn't happened on top of the other financial hits that many Americans are taking simultaneously, but it sure is making it's point loud and clear.This is what we needed to kick our asses into gear and actually think about the consequences of our actions on a more global scale.I'm not going to pretend to know all the answers… and right now, I don't think many people have many answers… but at least the conversations are taking place.

  4. LCJS says:

    The government subsidizes essential industries to keep the profitable and accessable. It's like how they subsidize the airline industry so that the price of a ticket doesn't become so high that most cannot afford to fly. I'm not in favor of giving money to a company that is already making a profit, but the only reason I can think of for these subsidies is that without them, the oil companies would be operating in the red and not turning a profit at all. Without profit, they would get out of that business and then there might not be anyone to provide fuel for the nation.I look at one of my local companies, the Iron City Brewing Company. They have filed for bankruptcy and can't pay their water bills, but they provide many jobs and prestige to local Pittsburgh communities. So, the local government has provided them with some subsidies to help them get back on their feet, as they believe that giving them some money now will lead to more money in the local economy later. If this was an essential company (like an oil company, whose product is necessary to live our daily lives – sadly beer isn't in that category… yet 🙂 ) then giving them money to keep them in the black and up and running would be beneficial.I'm not sure, as I'm not an economist or run a multi-billion dollar business, but keeping oil companies afloat and in business is beneficial to all Americans – if that is the case. If not, then I'm all for removing those subsidies, because there is no need for me to give free tax money to someone who is already making profit of their own.

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