Big Oil

So let me get this straight…Congressmen are lecturing Big Oil on how much they earn without asking how they spend it. Big Oil should have asked the Congressmen how much they spend without earning it! That would make more sense. One thing I have learned is that just because these clowns get elected does not mean that they should be considered authorities on anything. Big Oil makes a lot but boy do they spend a lot on reinvestment. The price of oil is so multi-faceted that to blame one segment is just wrong.

 

Let's see who is to blame. Big Oil sure likes the price of oil but remember that Exxon controls only 3% of the world’s oil. That is still a lot but consider the big players like OPEC. Yes Exxon made hundreds of billions but their net profit is only 9% or 10 billion. Suddenly things look very much like GE who made 14 billion in profits but paid nothing in income taxes. Big Oil benefits from high prices but does not set them.

 

The consumer does not control prices because even when we cut back our use, the price remains high. It is amazing to see just how many different things rely on oil to make their products. Demand and supply are defied here because oil is a unique beast. So many different things make up the price. Sherlock Holmes said by finding where something is not, you can find where it is…

 

One factor is world instability. If our access to oil is threatened by world events, the price of oil goes up even when we don’t import much oil from the hot spot: see Libya. World events are such a big factor because we import so much oil. We are sitting on the world’s largest reserves of oil but CHOOSE not to go after them. This makes the price go up because our inability and unwillingness to get our oil play heavily here.

 

Another factor is the many blends that are needed to keep up with various state’s requirements which often are affected by their locale. Summer blends are different than winter blends as they do better for starting in the heat but don’t do well in the winter. Then there are those states who just have higher requirements. Oil companies let inventories go down in very early springs so that they can start fresh with the summer blend.

           

The pressures of inflating the money supply is also driving up the price. Oil is indexed to the dollar and when dollars are cheaper (and they are now) it takes more to buy the same amount. Yes, the Obama Administration’s attempt to keep up with the debt is driving up the price of oil.

Bottom line is that it is easy to blame Big Oil  but it is also very simplistic to do so as well. Still, knowing this does nothing to ease the pain at the pump but it would help those in charge to stop making fools of themselves on a national stage.