26 April 2006

The Phantom (Oil) Menace

A lot of people who aren’t on some type of welfare like to think that they don’t buy into an entitlement mentality.  Until they get to the fuel pump, at which time they realize that, while they may not be entitled to live off of me, they are entitled to a guaranteed price at the pump.  And they blame the oil companies for depriving them of that to which they are—apparently—entitled.

Pissed off about the price you’re paying at the pump?  Hey, stop blaming me.  Oil companies don’t set the price.  Oil traders set the price; oil companies, like Exxon/Mobile, are little more than middlemen.  And if you don’t know the difference, then you may not know enough to be pissed off at anyone, much less the oil companies.  (And not paying an oil executive $400 million to retire isn’t going to affect your price at the pump.)

But even behind the oil traders is another menace—a phantom menace.  Like the wussie-looking Senator Palpatine, they go round with these long faces wondering, just like us, what can be done about all this.  And, also like him, they work behind the scenes creating the very problem they assure us they are working on—for us.  William Anderson can tell you who’s to blame.  And of course, it’s the people who tell us they intend to get to the bottom of it all:

“[A]lmost all of the anger from consumers — if editorial cartoons are an indication of the direction of the rage — is pointed toward oil companies and their executives. On the other hand, members of Congress, which created this current crisis, are calling for the near-destruction of oil companies, imprisonment of executives, as well as a whole new set of taxes that would further reduce available fuel supplies — all in the name, of course, of lowering gasoline prices.

We cannot put these things into the category of bad policies made by well-meaning people. Instead, we are seeing the attempted destruction of one of the most vital industries in our country to be carried out by incompetent, venal tyrants who have no intention of telling the truth — and we have a cynical media acting as the mouthpiece.

There is a way out of this mess — reinstitute free markets in gasoline and oil — but Congress and the President of the United States, not to mention those who are politically connected, have no intention of permitting the markets to work.”


Now, you may be wondering why I’m telling you to stop blaming me.  It’s simple.  I am big oil: I have a diversified portfolio which includes oil stock.  And I won’t be altering my portfolio any time soon.  Write your congress-person and senator.  Tell them to stop screwing around with the market in an effort to make themselves look important.  If supply and demand were the only two elements at work, your price at the pump would be much lower.  If governments would reduce their take on a gallon of gas sold, your price at the pump would be lower still.  (Or are we going to buy into the anti-democratic-republican notion that there is no such thing as tax gouging?)

Yes, I know the oil companies make billions in profit.  That’s why we are supposed to hate them.  But profit is a measure of what a business makes over and above its costs.  The relevant figure is a percetage, not a dollar amount.  Of what figure, we ought to be asking ourselves, are those billions in profit a percentage?  It does no good to talk about billions in profits if those billions amount to .25% in profit.  I wouldn’t urinate on a fire for a man who would into business with the hope of making a mere .25% in profit.

Finally, no matter what you might think about who’s to blame, repeat this to yourself as many times as necessary until you finally get it:  “I am not entitled to low-cost fuel.”

Or anything else for that matter.

4 comments:

Lee said...

We are not entitled to low oil prices, but they would exist if market forces had not be so rudely interrupted. I do believe we should blame the government. Ridiculous EPA regulations, high tariffs on cheap Brazilian Ethanol, and a million other little laws that do nothing but interfer with 'the invisible hand.'
I am not blaming you, Mr. Big Oil, but I am blaming years of Congressional big shots.

Sincerley,
A poor consumer

James Frank Solís said...

As I understand you, Lee, we are agreed that we are not entitled to low oil prices, but are entitled to a government that stays out of the market (unless, of course, it's purchasing--at market prices, of course).

So, good, we don't blame me. We blame Big Government, who never has to cut his profit margin!

Sincerely,
Big Oil

The Schaubing Blogk said...

Look, everyone out there who wants lower oil prices, it's not that hard. They sell it at the price they want to... you buy it at the price you want to... as long as these two things agree. If you don't want gas at that price, don't buy it.

You want the gas prices to come down? Here are a few easy steps to guarantee it:
1) Look around for the lowest price, buy it from them... even if it is inconvinient, there is a line, the bathrooms are dirty, they don't have your favorite candy or you don't like their sign.
2) When the price goes up, drive less. Skip the driving vacation and have a picnic in the back yard.

You see, two things drive prices: supply and demand. Supply goes UP when prices go up (so you don't have to worry about that) and prices go down when demand goes down. So LOWER demand on the high price gasoline, and LOWER demand overall.

Duuuuh.

vonstakes.blogspot.com

Gone for now said...

The market is a bit different with oil. When we are speaking of cell phone technology, for instance, we are speaking of a luxury, not a need. Oil is a basic need. We cannot simply opt not to purchase it without freezing our homes or keeping ourselves from getting to work in our automobiles. If it were a free market, there would probably not be a big issue, as the market would find its own level, oil would be drilled on every available site, and refineries would be erected to satisfy the need. But, thanks to our environmentalist, liberal friends, it is not free. The Government regulates it. Since the oil companies gain advantage from government regulation, they must be held accountable. Of course, the real answer is to get the Government out of the business, but, alas, that will not happen.

The problem is, oil is an internationally traded commodity. Thus, the price is largely dictated by the international value, however arbitrary it may be. Many economists believe oil prices are inflated due to politics and invalid speculation. Nevertheless, we pay. That is the price of internationalizing our oil market. We made our bed, now we must lie in it.

Andrew

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James Frank Solís
Former soldier (USA). Graduate-level educated. Married 26 years. Texas ex-patriate. Ruling elder in the Presbyterian Church in America.
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