Defending the Evil Oil Empires
by savage on Monday 24 April 2006
A response to a chain-letter e-mailed to me stating that the solution to gas prices is to boycott buying from the two largest oil companies Exxon and Mobil, and e-mail this strategy to 10 people I know so they can do the same.
Keep in mind the chain e-mail does not suggest that we drive less or consume less oil, just that by purchasing gas from the next biggest gas companies the price of gas will drop to "the $1.30 range." It states that by getting the chain e-mail out to 300 million people and getting all 300 million to purchases gas from companies other than Exxon and Mobil will reduce the cost of gas down to $1.30.
Basically, my general hatred of chain letters and chain e-mails inspired a defense for the oil companies who have, in many ways, been unfairly attacked. So, okay, in their defense:
First, since it comes up pretty quickly, Exxon's CEO's retirement package, $400 million, is a lot of money, more than I need in almost any given week, but, then again, how much is this guy's efforts worth? He made them what, over a trillion dollars? If anyone wants to make me a trillion dollars, I'll be even more generous and give her or him a cool half billion.
Second, adjusting for inflation, we still haven't hit the cost of gas in 1981 (a time where I personally did not purchase a single gallon of gas, which, I'm sure, was in direct protest to the prices). That might mean little, but it does establish a recent standard to compare to.
Third, the prices went down then (and briefly after they hit their high a few months back) because people did drive less. The purchasing SUVs instead of four-cylinder, easy-to-park, environmentally friendlier vehicles helped to drive prices up and keep them high.
Fourth, barrels of oil are traded on a world scale. India and China are in the process of going from crazy poor to crazy car owner and industrialized states. Unlike the 80s, there probably won’t be a quick drop off in consumption of crude oil globally. There is major demand and a growing market. Oil prices are high because their is a high demand for it. And though America uses about one-third of the world’s oil, not all of that is paid for at the pump. Almost everything we use (including the computer I’m typing at and you’ re reading this at) is made in part from oil. The oil used in asphalt alone is between 3% and 6% of American consumption (conservative estimates).
Fifth, it's not just the oil companies’ fault that prices for gasoline goes up. The coming summer months will bring an extra increase because the Government will force the gas companies to use ethanol (by not protecting them from methyl tertiary butyl ether, or MTBE lawsuits). It's more expensive but better for the environment (I approve).
Sixth, just buy from the cheapest gas station. Supply and demand. If that strategy works then by simply buying from the cheapest, the competition will lower their prices until they are making the bare minimum profit for survival (since businesses need to make profit to exist).
Seventh, in the last 10 - 15 years or so, the profit margin for oil companies was around half of the national average. Yes, there was still a lot of money to be had, but their profit margins aren't crazy, they just deal with large numbers. Exxon’s profit margins are currently at or around 10.7%. Again, not unreasonable for a company (Intel earned over 20% and Yahoo! was over 30%).
Eighth, it is probably safe to say that there are not 300 million people who purchases gas from Exxon and/or Mobil, have e-mail addresses, read English and haven’t already received the chain letter multiple times.
Finally, in my opinion, to really do something productive against paying out three or four bucks a gallon (which is still cheaper than most countries around the world), contact your local, state and national Government representatives and tell them to focus more on alternatives to oil. Demand it. Right now oil is extremely convenient, cost effective, reasonably priced (seeing as how we’re still paying for it without making drastic changes in our driving patterns), incredibly efficient, and the standard energy source this nation is addicted to. Changes won’t happen over night. But the solution is reasonable conservation with long term plans.
- Savage
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