It's a war against oil

O'Reilly had Chuck Schumer on last night to talk about gas prices. Instead of the usual partisan fireworks we got softballs, which must indicate the level of pain he thinks 'the folks' are going through out in the hinterlands. It's funny, since guys like Schumer and O'Reilly are probably limo-d around town or to the airport to board their Gulfstream V's.

But Schumer isn't the only grandstanding congressman. Others are trampling all over themselves trying to get the best photo op locations in front of the nearby Quick Mart, as station employees are seen in the background using the long stick to increase the price. It's what they do best. After all, Drudge is splashing Exxon/Mobil's first quarter profits--over 8 billion. The WaPo has more, including this little factoid:

In January, Exxon posted the highest quarterly and annual profits of any U.S. company in history: $10.71 billion for the fourth quarter of 2005 and $36.13 billion for the full year.

Notice their fourth quarter profits were higher than the one Drudge is headlining. But still, record profits all around.

One might argue that it's just our capitalistic system at work and the profits are no different than those of Microsoft or Wal Mart. There is truth to that, but also some differences. Consumers may have a choice of which brand of gasoline to buy, but most don't have the option of not buying gasoline. It's simply irrational to suggest that bikes, walking or public transportation are viable alternatives for most people. Gasoline is a necessity item, plain and simple. When you call an ambulance do you want somebody to show up on a bicycle?

That's why it's illogical to ridicule a war as being 'a war for oil', as if trying to compare it to say 'a war for coffee'. A more apt comparison would be 'a war for water'. But, as our soldiers fight around the world trying to bring democracies to countries sitting on mountains of oil controlled by madmen it seems more than sleazy for the oil companies to be cashing in record profits. Wouldn't we be outraged if our local electric utility raised rates during the winter then took home record profits in spring? Oh, wait.

But talk is cheap. What can be done to dissuade such behavior without giving the guvmint too much control? Regulation is out--it never seems to benefit consumers. Schumer mentioned breaking up the oil companies, something that has precedent in this country, such as with the railroad robber barons in the 19th century (caution--I'm no expert on economics and didn't even stay at a Holiday Inn Express last night). But would breaking up the oil companies do anything to drop the price per barrel of oil?

The laughingly predictable Congress does seem genuinely concerned--in their tax revenue stream, that is. Here is Charles Grassley:

"I want to make sure the oil companies aren't taking a speed pass by the tax man," Grassley said in a statement.

Sounds like he's also lookin out for the folks--the IRS folks. But maybe I'm being too hard on him, since he was apparently a part of this idea: "Senate Republicans advocate sending $100 rebate checks to millions of taxpayers, and a Democrat is leading the campaign for a 60-day gasoline tax holiday." That's better--give some of that profit back to the people who paid it, not Congress who'll simply earmark it into the nearest pork barrel.

But did you catch that? The democrats have proposed a 60 day gasoline tax holiday, which amounts to a backdoor tax cut. Personally, I'd rather see a 100 dollar check from the Exxon guy with 3 chins, because it would be satisfying to contribute that money to Veteran support organizations or hurricane relief.

But these bandaid measures only represent election year shenanigans and won't address the root issue here, which seems to be an overall void of ethics at the top of the big energy corporations and the inability of the elected government to restrain them.
We certainly have some sticky questions to deal with regarding free markets and the energy sector after Enron, the California power debacle and this latest net earnings spike while troops are fighting.

Maybe Franklin was onto something when he said, "Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters." In other words, the best form of restraint for democracies and free markets comes from each and every individual involved in the process.

MORE 4/27/06

The Oil Drum has an explanation of the tangled web known as the oil business. The point of this post was not to delve into raw economics, rather it was to suggest that the image of record profits juxtaposed with current world events doesn't register right with most people. And of course to make fun of the nonsensical knee jerk from Congress.

What a lot of folks don't get is, 1) why the price of gas can fluctuate wildly both up and down rather than steadily rising like other commodities, and 2) the lack of any visible attempt at public releations, which suggests a raw arrogance. Years ago when the Valdez crashed in Alaska (due to negligence on the part of Exxon's captain) they blamed a subsequent oil price increase on the accident. The concept of supply disruption is one of the easiest to understand, but so is the concept of decency. It's precisely that "because we can" attitude that angers people, something the oil companies could certainly improve with a better PR department--if they wanted to.

THIS... 4/30/06

Summarizes the situation rather fairly.