Posted on 05/24/2007 5:21:39 PM PDT by K-oneTexas
Strangling Oil By INVESTOR'S BUSINESS DAILY
Thursday, May 24, 2007
Energy: As Americans get ever-angrier about soaring gasoline prices, Congress wants to do something, anything. So this week, the House passed a bill seeking to end "price-gouging." Fair enough — now, what is that?
In the Senate, New York's Charles Schumer wants to break up big oil companies on the notion that more small companies would foster competition and cut prices. Others, including New York's other senator, Hillary Clinton, want to tax oil companies' "windfall" profits.
Such measures, and others like them, demonstrate a woeful ignorance of basic economics. But then, when has that not been true of congressional leaders? As any economist will tell you, "price-gouging" pe se doesn't exist. There is only supply and demand. If demand grows but supply is held back, prices will rise. That — and not "gouging" — is what's happening now.
The world economy is booming. Two new markets, China and India, representing more than a third of the world's people, have opened their economies as never before and are sucking up energy in record quantities. The U.S. is also booming, and in need of more energy.
That's the demand side.
Meanwhile, geopolitical instability has made overseas sources of oil and gasoline less reliable, also driving up the price. To add more dependable sources, the U.S. should be developing oil in the Alaskan National Wilderness Reserve and on the continental shelf, where literally billions of barrels of oil await. But we aren't.
That's the supply side.
So here we are: Not enough fuel, with growing demand (estimated to be 30% greater by 2030) and higher prices. And Congress proposes imposing price caps and breaking up Big Oil.
But it's all been tried. In the 1970s, Presidents Nixon, Ford and Carter all kept price controls on oil. As a result, drillers had no incentive to find new supplies, and prices — along with OPEC control over our energy future — increased.
On entering office in 1981, President Reagan got rid of controls. Virtually overnight, oil began to flow in abundance. In eight years, a per-barrel price that stood at $39 in 1981 plunged by two-thirds, breaking the back of the inflation that plagued the '70s.
Yet today, Congress is repeating the same mistakes. We hear talk of "obscene profits" and "unreasonable prices." But oil profits of 13 cents on every gallon of gas don't seem so obscene. For obscene, consider the average 45 cents that federal, state and local governments collect.
Oil firms earned a record $119 billion in 2005, it's true. They also set records in capital spending ($133 billion) and exploration and production ($131 billion). They are ramping up as fast as they can.
Last year, pressured by Congress, the industry agreed to boost refining capacity by about 10% over five years. This year, they were undercut when Congress imposed new ethanol and biofuel mandates. So now, some refinery investments won't be made.
Since the '70s, some 30 investigations of oil-industry practices have been undertaken, and all have hit dry holes. Meanwhile, Congress gets away with one hare-brained, socialist-inspired energy scheme after another, the effects of which have been to push up prices and ruin what remains of our market economy.
Maybe it's time someone investigated them.
I saw what breaking up big companies did when they broke up Ma Bell. I havent had decent telephone service since.
I dont go along entirely with the supply and demand scenarion,but basically its right. The oil companies did make record breaking profits, Profits mind you not net. With profits that large they are taking maybe a bit more than what they should,but thats the American way.
As for Hillary deciding to take away those profits and do what she likes with them> Whats to stop her from taking away profits from Microsoft,or Walmart or Sears roebuck. Where doesit stop. take away profit and you defeat Capitolism. Wait> maybe thats the plan.
They should take the profits they can. No one makes us drive.
Both.
Maybe everybody should just stop driving.
But wait how are we going to get to work?
If we don’t work what will happen to this country?
How will we get food? Will there be food?
Maybe we should just stop eating?
So we stop driving and eating.
Problem solved.
You can an A+ for dramatic.
I was just expounding on your point.
If you think driving is simply a matter of choice that we can say no to whenever we want.
bump
Does anyone besides me who was president when Exxon merged with Mobil?
When BP merged with Amoco? When BP Amoco merged with Arco?
As I remember, when those mergers took place the administration launched an anti-trust prosecution of, lets see, who was it, maybe it was Microsoft.
So even if we have plenty of our own oil the price of that oil will still be determined by OPEC?
How would that work?
bump for later reading.
I think when they report profits, those are new profits.
With profits that large they are taking maybe a bit more than what they should
And what should they take? Who do you think knows the norm?
A good start would be the numbskull voters who keep sending these clymers back to Washington.
Its not up to me to set what they take. I would say its up to their conscience,but i am sure they dont have one.
I am sure they take what they feel the traffic will bear.
Whatever they take it isnt up to Hillary to decide,any more than its up to me.
We also have to remember that places like Venezuala who steal from the oil companies by nationalising them,take a large share of those profits away. Capitolism thrives on not telling people what their profit should be I can just state an opinion , Mine is that they may be taking a bit more than they should,but if you dont want to pay it, dont drive.
“If you don’t want to pay it, don’t drive”
Do you really think we drive around simply because we want to?
Do you honestly think we could just stop driving if we wanted to?
What do you think would happen if everybody just stopped driving because they “don’t want to pay the price”?
Old saying:
A government powerful enough to give you everything you want...is powerful enough to take away everything you have
The price of anything is determined by supply and demand. Do you really believe BIG OIL is going to cut you a deal and sell to you cheaper than to the Chinese. OPEC will still control the price. Our only out would be to bomb China and India back into the stone age. Also that would help our poison control center.
barbra ann
If we were energy independent the oil co’s would be making all the money from oil to refined products instead of buying the crude. They would make a lot more money. OPEC will not control the price of oil we drill on our own. OPEC’s stranglehold on the price will be over. I don’t see how you can say OPEC will still control the price. Their only leverage now is that they have something the rest of the world needs. We have over one trillion barrels of shale oil that is produceable at 30/bbl. The technology is there. We have over 100 billion barrels of crude available if we just drill it.
IF we could eliminate the suicidal environmental restrictions oil would be 30/bbl and gas would be under 1.50 and OPEC would be something for the history books and terrorist funding as well as the wahabi’s would be largely defunded.
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