Thursday, June 12, 2008

Big Oil - Are They Really The Problem?

Who is to blame for the high energy costs that we are facing?

1. Oil companies that are reaping huge profits?
2. Those politicians and regulators and eco-protectionists who have done everything to prevent the exploration and cultivation of new sources of oil and energy supplies?
3. "The Arabs" or other countries who are just not pumping enough of the goo out of the ground to satisfy a growing need across the globe and here at home?
4. The falling dollar; printing more money causes inflation and pushes up the price of fuel.
5. Something else.

Why should Oil companies be punished for trying to make a profit? If government got out of the way and there were a true open energy market there would be competition to drive the prices down. But that's not happening. Instead we get threats from politicians to steal profits and/or force companies to spend profits the way the government wants them spent. We have members of Congress, like Maxine Waters, actually threatening nationalization and takeover of corporations in the name of "protecting the consumer". Like that will solve the problem without creating a lot of even bigger problems.

Consider this: You are a businessman and are in business to make some money. The government decides you are making too much and tells you what to do with that profit. How is that right? Do we not own the fruits of our labor? Should Barack Obama give a portion of his book sales to another author whose book perhaps isn't selling as well, just to make things fair? Wealth re-distribution is un-American. Price gouging is also not morally right - but that is usually corrected by market forces. If there is choice in the market place then the lower priced item will be the more favorable seller. I see that in my own home town - gas stations with lower prices do more business and sell more. It's simple economics.

But I digress...

The development of new energy sources has become a painful and sluggish march.

Yes, we are seeing hybrid vehicles and there are a few advances here and there coming to the market, but we still need oil through this transition period. It will take a while to establish a wide variety of energy choices; but eventually that's where we need to be - hybrid cars, electric cars, hydrogen fueled cars and more.

And as for ethanol:
Overall, the economy has also worsened with the diversion of farmland being used to produce ethanol, which takes more energy to produce than it is supposed to save. The diversion of more of our corn crop to produce energy has also pushed up the price of everything that depends on corn syrup. The price of corn products has also shot up and that includes everything from taco chips to theater popcorn.

Nationalizing the oil industry is not going to solve the problem.
Rationing is not going to solve the problem.
Conservation is not going to solve the problem.
Punishing the oil producers is not going to solve the problem.

And as far as I am concerned the problem doesn't even really come from "those greedy capitalistic oil barons" or that dastardly Middle eastern oil cartel. We import more oil from Canada then we do from Saudi Arabia. In fact, only 16% of our imported oil comes from the Persian Gulf countries.

The problems that we are seeing comes from smaller supply and a growing worldwide consumption and need for energy as countries are technologically emerging.

Here at home we are choking off our own supply of energy.
We have abandoned nuclear power plants - which by the way are being built all over Europe.
We have abandoned or prevented new oil drilling.
We have not invested in new refineries.
We have not done enough to allow for the development of new energy sources.

With all that nature offers us here at home in the form of geothermal, solar, wind, hydropower, biofuels, oil, coal, nuclear and more, it is incredible that we are squabbling over foreign resources and seeking to control them. I have come to believe that this energy crisis is fabricated and self inflicted solely for political interest and to instill fear and uncertainty.

But let's not solely blame the capitalists. If we didn't have capitalists and entrepreneurs looking to make a buck, we wouldn't have had financial incentives to make the technological advances in the manner that we have. So I won't blame them, and right now there are plenty of those capitalists out there trying to develop new energy solutions. We just have to get government out of the way and allow market competition to let them do it.

Required reading: Atlas Shrugged - Ayn Rand.