Friday, October 29, 2004

High Oil Prices are Good

As long as your name is Exxon or Shell. Both companies are producing record profits, with Exxon being up 56 percent over the 3rd Quarter of last year. It's good to know that someone profits when OPEC keeps the price of oil high. So what's the explanation? Are these companies cooking the books, or do they have lots of money invested in refining (remember, the price of refining remains the same per barrel no matter how much that barrel initially cost), or is this just an old school conspiracy/price-gouge? I'm not really feeling smart enough today to figure out this one, sorry.

I do have my theories, though, which I will naturally share with you. One is that everyone is making a last-minute run for their money, before all the oil dries up. Well, I guess it probably won't dry up, but it will become much less profitable to extract in a few years. And guess what comes when these huge oil companies become unprofitable? Bankruptcy? Har, har. That's for other countries' business firms. Here in the land of the free, our taxes go for...more government subsidies! Yay! That's right, YOU, in a few short years (okay, maybe 5-10) will be paying taxes to keep these bloated profiteers afloat when they're not making $5.6 billion a quarter (Exxon's 3Q profit) anymore.

"b...but...we didn't KNOW that sucking things out of the ground and selling them for enormous profit was unsustainable!"

Actually, what really pisses me off about this whole deal is the implications it has on alternative energy sources. I'm talking about the market fundamentalists, here. They claim that the market won't support other sources of energy. Well, no shit! How can ANYTHING other than oil possibly post profits of hundreds of billions of dollars a year? You're taking a non-renewable resource and treating it as capital (like you BUILT it or something) which will never run out. Just because you can't make the same amount of money on solar or wind power (because now you have to invest money in technologies to extract it, and that cost has already been paid for in the oil industry), means that the market won't allow it? I say phooey!

/end rant, only because I'm at work


Anonymous said...

Yo A-town:

I think I can shed some light on Exxon's recent profits - after spending four years listening to lectures from the market/fed worshipping assholes on the west bank.

First of all, OPEC keeps prices high for a reason - their best interests. I know its hard to believe. They have been known to disobey the laws of market equilibrium to manipulate the American oil markets. However, I think the current situation is just a case of market equilibrium reaching a higher price level due to increased demand and extra disposable income in pockets of most Americans. Ain't nuthin. but good 'ol fashion american inflation. Yeeehaaw!

As for oil reserves drying up, don't hold your breathe, man. According to the same ideas, as oil supplies decrease prices will continue to increase. Some say that oil will never run out, the price will simply increase until no one can afford to consume it. That's where renewable resources enter the picture. On the magical day when oil prices look like my college loan payments, it will actually be cheaper for SUV drivers on 394 to use a renewable resource. THAT'S when said jerks will get on board and the political power will exist to get serious about finding an alternative to evil, evil oil. Meanwhile, Honda's half-gas/half -electric Accord is commonly seen on the streets of Santa Cruz, CA, where environmentalist whackos have accumulated the capital necessary for hobbies like tree-saving.

On a total nonsequitur, since when is Minnesota a swing state? My homestate pride has always been based on the fact that we always vote Democrat. If Pawlenty, Grams and the other we-killed-Wellstoners take our state I'm burning my copy of Lake Wobegon Days.

Be in touch, homey. We should hit the CC 'round Christmas time.


Anonymous said...

And I almost forgot: THIS SITE IS HOTT. Keep up the good work, dogg.


antonymous said...

Yo dogg - good to hear from ya. I gotta say, my knowledge of how the market works isn't as based in economics as yours. I mean, I love my West Bank lectures, but that's mostly because I'm taking them from Geography professors instead of those Econ profs.

I totally agree with your first comment (I think)...I mean, current U.S. fiscal policy is to maintain a weak dollar, to keep out cheap imports, right? In my opinion, it's basically a protectionist policy that applies across-the-board instead of just raising tariffs for certain industries, which is frowned upon nowadays.

Of course one effect of this is that oil producers are pissed because they trade in dollars, and now those dollars ain't worth shit. Remember the good old days of the target price being $22-28 a barrel? Well 22 bucks just isn't worth what it used to be on the global market. Maybe OPEC will peg their prices to the Euro instead (or not).

Oh, and I wasn't saying that oil was really going to run out, though I did directly say it would "dry up". Damn, all these ex-agg-err-eh-tions are going to come and get me some day. I'm just saying that it's gonna be too expensive to extract and sell, and become less and less profitable to search for new reserves, let alone extract them. After I posted yesterday, I found an interesting resource from the Century Foundation:

As for Minny being a swing state? I laughed when I read that just goes to show the desperation that the media has around this race, I guess...remember in 2000 around this time, Bush was up 52 percent to Gore's 39 percent (nationwide), and Gore ended up winning the popular vote. I don't want to count my chickens before they hatch, but I'm calling a "near-landslide" victory for Kerry. it'll be much wider than the current poll numbers show.

Anyway, I've gotta get my halloween costume up-and-running - I've got a suit and some pirate stuff, so I'm going as a corporate raider, liquidating asses (or assets) all night!

Also, i'm assuming you'll do me a favor and proofread my paper on the East Asia economic crisis of 1997 (specifically focusing on South Korea)? I just started, but I think my angle is going to be how awesome selective protectionist policies were, and that their government should be worshipped for intervening in the market. I'll let you know when it's in draft mode.

Nice to hear from you, dogg!

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