Because while those profits might seem outrageous - ExxonMobil (Research) earned over $36 billion last year - Big Oil makes its money by pumping oil out of the ground, not refining and selling it as gasoline. Of Exxon's mammoth haul, only a tiny fraction came from making and selling gas in the U.S.
The idea that prices are set by Big Oil, not the traders at the NYMEX and other global bourses, is a misconception that seems to come into vogue whenever energy prices start making new highs. And putting the blame on OPEC, let alone trying to subject a foreign cartel to U.S. laws, seems to be doing anything but dealing honestly with the problem of too much demand and too little supply here at home.
Kohl's bill, alas, won't do much to lower gas prices. The real problem here is the reluctance of Washington to make more than modest improvements in fuel-efficiency standards for cars and trucks. At the same time, politicians and other leaders seem unwilling to at least jawbone more Americans into giving up their SUVs and Hummers in favor of more fuel-efficient cars. Suing OPEC under U.S. anti-trust laws may be smart politics, but what about actually telling voters that they, too, have to take some responsibility for the problem?
Maybe I missed it all the other times this first fact was published, but I like that it's being stated here, suscintly: Oil companies sell oil, not gasoline.
Second point: Big oil companies do not set gas prices and more importantly do not set oil prices Shockingly true, but it's the American Stock Market, more specifically the American Futures Market, that sets the price of oil based on the belief of the American worth of that barrel at some point in the future. In fact, Big Oil companies make money because American's cry out that we need more oil. See, it works like this: Say today that an actual barrel of oil is selling for $40.00. But we know that the summer driving season is coming upon us and we're screaming at our legislators and local news companies that Oil costs too much because it's in short supply, which causes investors to believe that in the near future oil will cost more per barrel because of limited supply and a big need. So, the future price of that same barrel of oil goes up, to say $60 a barrel. BUT, and here's where the oil companies make a bundle, the government and OPEC come together to try to ease the burden of the poor American driver and so produce more oil. More oil means that the price per barrel should really be cheaper, but because this oil was sold on a future's market they get more money for the product. So, really, who you should be screaming at is... American investors.
The third point I disagree with. Because of this system of demand and price, the Government shouldn't have to legislate MPG statistics, the buying public should drive demand for better gas mileage cars. Two to three dollar per gallon gas is inconvenient and even a little painful, but people are managing. Price gas at $6.00 to $10.00 a gallon and you'll see SUV's sitting on car lots untouched and an upsurge in Hybrid and Alternative fuels, or masses of people will finally adopt public transportation, car-pooling, and less energy dense transportation methods like scooters and electic carts. This will send the clear and quick message that we demand better fuel economy to Detroit and Japan, not some Congressional legislation that will take 2 years to pass, 5 years to implement, and 10 years to statistically affect the amount of gas used by American Motorists.
Just thought I'd share.
3 comments:
I'm so glad to see that someone finally gets it. Big Oil doesn't set the prices, and yet they're the ones taking all the heat from the largely-misinformed American public.
Great post! I admittedly surf around the blogosphere without commenting much. Yet this post I feel compelled to add in my two cents. What upsets me is that our legislators are doing so little to actually help. Some are appeasing their constituents by entertaining a windfall profit tax on the oil companies (which would surely backfire and be picked up by us consumers). I'd rather see our legislators working toward legislation that might actually do some good for us when it comes to energy. Like open up exploration here in the US.
It is nice to hear someone looking at big oil without shouting "greed!"
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