Dollar, Individual v. Collective, Trust

Oil Company Altruism

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No one will deny that our country is in a deep and severe recession. Major banks have failed, the government has unwisely bailed out large financial institutions to the tune of 700 billion dollars, the Dow Jones is about half of what it was a year ago, housing prices have drastically fallen, foreclosures have skyrocketed and unemployment numbers are up to 8.1%. It is unquestionably getting ugly out there.

So isn’t it nice of our leading energy companies to come along and offer us such charitable prices at the pump? Last year at this time, gas was hovering between $4.40 and $4.60 in Salem, Oregon, where I live. Salem is a boring town unfortunately, so each weekend I wanted to leave for Portland or Eugene (each an hour away). But with those kinds of gas prices, I weighed the pros and cons very carefully each time. Sitting alone in my apartment on a Saturday night isn’t that bad compared to purging my wallet at the gas station.

Nationally, things were a little better as the average price hit a record $3.24 a gallon in May of last year. But then Christmas came early. Apparently the oil executives felt guilty about their record setting profits and felt like they should give some of it back to us less fortunate. This massive outpouring of altruism has lead gas prices to plummet. In Salem gas has been around $1.85 a gallon, the cheapest I’ve seen since I was in high school. And this hasn’t been a short lived phenomenon, it’s been that way for many months. Nationally gas prices have fallen to $1.96 a gallon. For those of us struggling to pay rent on time, the oil companies may be all that’s keeping us afloat. Thank you BP. Thank you Exxon.  Thank you Chevron. And the thanks shouldn’t end there. Oil, which was close to $150 a barrel, has plummeted to $52.77. Apparently OPEC has gotten into the giving spirit too. Thank you OPEC.

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Now unless you are on a record setting pace for denseness, you realize I’m joking around. The oil companies are still as greedy as ever. It’s simply they can’t charge as much because of good old supply and demand. Honestly, think about it: why did the oil executives all of a sudden start to raise prices around the turn of the century? Did they just up and become greedy? Of course not, they’ve been greedy the whole time, they were just restricted by the market. The greed explanation for price fluctuations is nothing more than circular reasoning. The real explanation for the lower gas prices is our inflationary boom has collapsed (financial crisis, housing bubble) and the deflationary adjustment has come. This is bad, but it does have a silver lining. Sure investment and wages will go down, and unemployment will go up, but prices should go down as well (that is unless the government tries to keep prices from adjusting, like they did in the Great Depression). Eventually (again under the delusional, and now incorrect, assumption that the government stays out) the economy will stabilize and everything should return to normal relatively quickly.

Now remember before the financial crisis and bailouts and change talk and all that. Remember back to last summer when all the talk was about the housing crisis and oil prices. The oil companies were gouging us! Hang the CEO’s from the gallows! The hysteria was completely out of control. It should be no surprise that those leftists at the DailyKos jumped into the muck, but so did Bill O’Reilly and many other outraged social conservatives and right wing populists. Congresswoman Maxine Waters even, to her eternal shame, threatened to nationalize the entire oil industry!

Well what now Maxine? What now Bill? What now left wing nuts at the DailyKos? Will you thank the oil companies for their collective generosity? Will you take a quick break from your current outrage over the supposed lack of regulation in our financial markets, to apologize for all the bad things you said about them? You know what, save the apologies and save the gratitude. Here’s another idea, why don’t you all just realize you don’t know the first thing about economics and shut up!

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2 thoughts on “Oil Company Altruism

  1. The Future is a Co-op says:

    Of course the U.S. oil industry should be nationalized and operated as a non-profit public service like many electric companies are. Think about it for a moment. Every American that buys gas from a gas station is directly affected by the price of gas. And oil affects every other industry in this country from trucking to retail to wholesale to the airlines to restaurants etc. All of it. Is the U.S. supposed to allow one single industry to literally hold every gas-buying American and every single other industry in the country hostage? Because that is precisely what is happening. Do you like paying $4/gallon for gas? Will you like paying $5 or $6/gal. or whatever it will be next year for gas?

    If you ask the average American if they want A.) to keep things the way they are and end up paying $4 or $5 or $6 or more per gallon indefinitely and getting ripped off by privately-owned capitalist oil companies; or B.) if they want to nationalize the oil companies for the good of the average American and pay $2.50/gal. or whatever they can bring the price down to when the profit margin is taken out of the picture, I would bet my life on the fact that about 98% of them would say “I don’t care if you call it the Leon Trotsky Red Proletariat Socialist Oil Company, just give me gas that I can afford to fill up my tank with without having to take out a second mortgage on my home.”

    Nationalize the oil companies NOW.

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  2. Andrew says:

    Of course. After all it’s not like the government puts gas taxes on that raise the price of gas or is trying to put in other environmental policies to raise the price of gas. So obviously, the government would lower the price of gas by nationalizing it. Currently, gas taxes average about 48.1 cents per gallon and profits, at least from Exxon, account for 2 cents per gallon: http://www.dailymarkets.com/economy/2011/04/27/gasoline-taxes-vs-exxon-profit-per-gallon/. Currently gas prices are $3.98/gallon nationally. That means if we just “got rid of those profits” we could push that price down to $3.96/gallon. Wow, how my life would be better…

    Now virtually all government ran industries are inefficient, often wildly so (see Amtrak or the old Soviet ran companies or the myriad of other examples). Of course the government could force prices down to $2.50/gallon. But they’d have to raise taxes a lot to subsidize the discount. And of course pushing down gas prices artificially will increase demand above the available supply (this is why we have prices; economics 101) which would mean there would be shortages. The government could divert massive resources to more oil exploration, but would need to raise taxes again because there’s more they’d have to subsidize and there’s a long lag time on getting that oil to market. So they would almost certainly have to put in price controls like they did in the 70’s. Remember the gas lines back then? Well if we implement your plan you’ll no longer have to be nostalgic about them. After all, such rationing was common place in the Soviet Union as well as every other socialist country or industry that has been completely nationalized.

    By the way, utility companies may be state-run, but they are not nationalized, they are ran locally or are private companies that are regulated heavily. Which, for a natural monopoly (which oil is not), these are probably as good as any other option.

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