Is it really the oil companys’ fault?

Is the price you paid this morning to fill up your tank really the oil company just making, “obscene profits” off you and “benefiting from the unrest in the middle east?” Is the pump price just the oil companys’ attempt to “gouge” the American public. The answer is “no,” despite what many people are thinking and saying. More about that in a minute. But what if they are? So what? The oil companies are PRIVATE companies; really no different than a couple buddies that have a house painting business or a ‘mom and pop’ gas station- they’re just bigger! The goal of ANY business is to make money- as much money as it can! Nobody begrudges a couple of carpenters who make record profits from building homes following a tornado or a realtor who makes a bundle during a boom in the housing market. So, why is there so much animosity towards the oil companies? How are they any different aside from the size difference?

Let’s be honest. This so-called animosity is nothing more than ‘jealousy.’ Nobody that’s lucky enough to own mineral rights over an oilfield or own stock in an oil company, whether they are a Democrat or a Republican, is complaining! They’re smiling all the way to the bank, as they should be; and as ANYONE who is that lucky would be. If you’re one of the oil company ‘haters,’ and tomorrow you inherited 10 oil wells your long-lost uncle left to you, you’d switch sides in a second- smiling as you cashed your monthly check and cheering on the rising price of crude!

Some people believe that the oil companies make, “enough” and should lower prices; but would they ever ask, or expect, another business (like the painters, carpenters, realtors, etc.) to voluntarily cut their profits? NO.

The ONLY reason that we hear about people’s anger at the oil companies is because we need oil for EVERYTHING and we all feel a price increase. Businesses take advantages wherever they can to increase their profits and it is ALWAYS at the consumer’s expense- that’s the nature of commerce. Usually, though, price hikes on a particular product only effect a small percentage of the population- not enough to make it “news worthy.” If current events were spiking the profits on “Pop-Tarts” it would annoy the heck out of me and a few million other people that love them like I do, but it wouldn’t even get a mention on the local news.

It’s just not right to begrudge the oil company whatever profits they are able to make from what do. Any more than I should begrudge you for making as much as you can at what you do! If you don’t like the price of gas that much, don’t buy as much. If demand gets cut then the price will drop and oil companies’ profits will drop. Make your point that way. But don’t keep buying gas at the pump and then acting like the oil companies owe you a lower price- they don’t. And don’t let your government try to regulate what a company does, within the law, to make the most profit it can or the next company they come after may be yours or the one you work for!

Now, about who’s fault the price of gas is. Lets start by looking at what goes into a price of gas- some things you may not know about.
Did you know that $0.18 of every gallon you buy goes straight to the federal government, that does absolutely nothing to justify their getting the money. Also, the states take as much as $0.68 of each gallon you buy. So, for those who are mathematically challenged, that’s as much as $0.86 of the gallon price goes to your state and the federal government that doesn’t have a darn thing to do with getting the oil out of the ground, processing it into fuel or delivering it to your local gas station! That’s roughly 22% of the price of the average gallon of gas today; and it’s almost 35% of the price of a gallon of gas before it started it’s recent rise! Now who’s making obscene profits?

That leaves the “oil company” between 88% (today) and 65% of what you paid for that gallon of gas to make a profit from. Not bad, you say? WHOAH, boy!! Lets not forget the cost of exploring for oil, drilling for oil (rig and machinery costs as well as wages paid to workers), moving (building pipelines and/or shipping) that oil from the well to the refinery; not to mention the cost of building and operating the refinery! Then there’s the cost of getting the fuel to local distributors. ALL this has to be paid for by the oil company out of that 88%-65% of what YOU pay at the pump. Don’t forget taxes that the oil companies have to pay out of the profits that they do make!

I won’t argue that the oil companies are making a ton of money; but my point is that their profit margin is a lot more slim than most people realize! There are not many people that would jump into a business with do much overhead and such a slim profit margin. And keep in mind that while these are major corporations and conglomerates now, but they all started from a relatively small number of daring men in the early 1900’s who had the foresight to see that we would switch from coal to oil as an energy resource! Like it or not, big oil is the “American Dream” in action and what everyone who starts a business dreams about.

When most people hear about the price of oil (and the resulting fuel) going up, they assume that it is the oil companies setting the price. This is incorrect; at least partially. The price of oil is HUGELY effected by unbelievably complex financial markets and their “speculators.”. According to F. William Engdahl of the Centre for Research on Globalization (, “As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds.” Speculation is nothing more than a fancy name for legalized gambling where people ‘bet’ on the future price. In 2006 a Senate investigation claimed that $25 of the $60 barrel price (at that time) was the result of speculation. If you extrapolate that out to today’s oil price ($105/barrel), then $43.75 of today’s barrel price is based on speculators and SHOULD be selling at $61.25!

With all these ‘fingers in the till,’ when it comes to the price of oil and fuel, is it reasonable to direct your anger towards the oil companies? No reasonable person should think so! There’s plenty of reason to be angry (I sure am!) but let’s direct it towards the right parties- government and “speculation!” Gambling is illegal in most places, including in New York City and Chicago, where a lot of this “speculation” goes on but this particular form of gambling is not only tolerated but encouraged by banks, investors and to some degree the federal government! People argue about all of the negative social ramifications of traditional gambling but these finical gamblers are ruining our economy and pushing us towards financial collapse while hiding in the shadows of America’s misplaced anger at the oil companies! It’s time to wake up and redirect our anger at the appropriate folks before they destroy our economy and our way of life. This country was founded on hard work and making things better and faster than anyone else and it’s about to be brought to it’s knees by ‘money changers’ that don’t produce anything but spend their days playing a shell game that’s the equivalent of economic russian roulette!


2 Responses to “Is it really the oil companys’ fault?”

  1. Mark Mason PhD Says:

    “The oil companies are PRIVATE companies; really no different than a couple buddies that have a house painting business or a ‘mom and pop’ gas station- they’re just bigger!’

    You believe that? Are you serious? You think bigger is not different? How much money did your neighborhood house painter spend on DC lobbyists? How much money did your house painter donate to any US Senatorial campaign?

    “Nobody begrudges a couple of carpenters who make record profits from building homes following a tornado or a realtor who makes a bundle during a boom in the housing market.”

    Seriously? Are you joking? If carpenters charge exorbitant monopoly rates, that’s okay? If a realtor makes a bundle from fraudulent mortgages, that’s okay?

    You’re a nice guy. You’re sincere. That’s appealing. You try hard to understand the world in a sincere manner but you’re missing the problems of scale, and the problems of institutional structure. A house painter doesn’t spend millions of dollars on lobbyists in DC and doesn’t donate millions of dollars for election campaigns. Think about it. Money talks and as long as the Supreme Court says money is speech, we’re no longer created equal. Bigger is more powerful and corrupting. Also, the house painter isn’t a corporation. Corporations are tyrannies run by a few rich people for the purpose exploiting the employees, the market, and the resource base.

    You’re a nice guy. Think about how the world works outside the house painting business. It’s different.

    • I don’t disagree that lobbyists are evil and I’m 100% in support of ending the practice of lobbying. I think one of the best things we could do for this country, aside from term limits for politicians, is to make organized “lobbying” illegal – for EVERY organization. The only people that should be able to lobby is the individual. One person, one voice. However, I don’t blame a corporation for lobbying any more than I blame a union, the NRA or any other organizations for using a system that has been in place- I blame they system (government) for ALLOWING the practice in the first place. It’s legalized bribery, plain and simple, no matter whether you agree with the particular cause or not. Blaming companies (or unions, for that matter) for lobbying, though, is like blaming a drug company for making oxycontin because people abuse it – the blame is misplaced.

      As for corporations being tyrannies. That’s just plain ridiculous. Sure, there may be some companies out there like that but very few. To make a blanket statement like that is as ridiculous as me saying that every union is corrupt and crooked. I used to own a corporation. I owned a tattoo studio and I incorporated it to protect myself and my family in case there were ever any problems. The guys that worked there were like family and every one of them is still friends with me. I am neither rich (by anyone’s standards) nor did I exploit the people that worked for me. Nobody forces anyone to work for anyone else. If someone thinks they’re being taken advantage of at the company they are working for, they leave and find a job somewhere else. If enough people feel that way the company either changes it’s ways or they go under because they can’t keep a workforce. This is 2011 not 1900. People have the freedom and opportunity to choose where they work or move. I don’t have a PhD or any other fancy letters after my name and I’ve always worked blue-collar jobs and I’ve moved and lived all over the country in a variety of different jobs. So, anyone that says they are “stuck” somewhere is either lying, lazy or totally incompetent.

      I used the painter analogy as an example – I could have used ANY industry and I stand by the comparison. I think that you are missing the point and buying into the rhetoric of this anti-capitalism hypocrisy. Lets suppose a guy is dirt-poor and comes up with an invention that he starts selling out of his garage. Now, imagine that people really like what he’s selling and start buying it so me makes some money and begins expanding, hiring people and building better versions of his product- eventually creating a company. At what point do you think he went from being a good guy with a good idea that should be rewarded for his hard work and innovation to being a rich tyrant that. “exploits the employees and market and resource base?” I’m just curious what amount of wealth, in your mind, transforms a person from a good guy to an evil corporate tyrant? Is that number universal? I mean, does every company or corporate executive fit that bill? I’m asking because it seems like people who share your opinion of the evils of “corporations” really is only talking about companies that they have a personal agenda against; and the oil companies (like the tobacco companies 20 years ago) are a favorite target. I wonder if you would put Steve Jobs and Apple, Inc. into that same box? EVERY single complaint that I hear people make about the practices of the oil companies can be made against Steve Jobs and Apple, Inc. For some reason, though, most people will give him and Apple a ‘pass’ because they happen to like their products. Jobs and Apple spent millions lobbying every year, they exploit the consumer with the highest priced products on the market, limit 3rd party access to software, etc. Identical parallels can be drawn between Apple and any oil company yet people are so willing to give Apple a pass. This totally invalidates the “evil corporation” argument. The same goes for movie stars, producers, studios, rock stars, production companies. All are run by a few rich people who make a ton of money for basically doing “not much” and exploiting the consumer at an ever-increasing rate. Yet, because they espouse left-leaning or socialist philosophies (publicly) they are also given a “pass.” Why? Dollar for dollar they are exploiting people FAR worse than any oil company.

      I’m not sure where your comment about “fraudulent mortgages” and “exorbitant rates” (for carpenters) came from – I wasn’t talking about illegal activity, which that is. I was talking about people making good earnings during good times, obviously by LEGAL means. You drew that connection/conclusion out of thin air and it was incorrect.

      Obviously there are some differences between a company with 20,000 employees and, say, a 10-man painting company; but my point is that there isn’t as much difference between them as people make them out to be. The problem is not the companies but rather the government that has created loopholes and special advantages as a means to grant favors and get lobbying money and campaign funds – something that BOTH parties exploit equally. For this, though, I blame the politicians and government for creating the situation – not the companies for taking advantage of them. To do otherwise would be like blaming SS recipients for the approaching insolvency of Social Security instead of blaming Washington for it’s mismanagement and overspending.

      I appreciate your reply and that you were more polite than most; but I disagree with your analysis.

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