2005-12-05

Oil Conspiracy can't prevent price drop.

Oil conspiracy to increase prices, eh? Here oil exec's meet and lament prospect of drastic price drops.
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8 comments:

Paul Hue said...

One of the evil Chevron officials said: "High prices tend to attract higher production and higher supplies." Let me get this straight: if you have a low supply and charge high prices, this will lead to a large supply and low prices? Isn't that GOUGING?

8:53 AM
Anonymous said...

Here's a related article from George Will...

http://www.townhall.com/print/print_story.php?sid=177708&loc=/opinion/columns/georgewill/2005/12/04/177708.html

I just posted this on my blog as well.

9:38 AM
Tom Philpott said...

Sorry, boys. I never said the oil execs conspired to boost the price of oil. I only said that a hike in the price of oil is hardly evidence that securing oil contracts the chief motivation for sacking Iraq, as per that fellow over at Hoover.

Oil execs and Opec types get itchy palms when oil climbs too high; high prices encourage conservation and the search for alternatives, There is a sweet spot wherein the oil barons make out like bandits and consumers blithely fill up their SUVs: it's probably around $40-$45 per barrel. Typically, when the price gets too an itchy level--today it surpassed $60 on speculation of a cold winter ahead--the Opec barons open their taps, flood the market, and bring the price down. Now, however, most industry watchers concur that Opec is producing at or near capacity. Meaning that oil prices above the sweet spot looks to be the norm for a while. This has nothing directly to do with Iraq (which is still producing at a bit below pre-war capacity, but not much). It has do with China's exponentially growing demand for oil, coupled with the U.S.'s shockingly voracious demand for same. Now, keeping that oil out of China's hand might well have had something to do with Iraq.

11:47 AM
Tom Philpott said...

Oops. Second sentence above should read:

I only said that a hike in the price of oil is hardly evidence that securing oil contracts wasn't the chief motivation for sacking Iraq, as per that fellow over at Hoover.

11:49 AM
Paul Hue said...

George Will shouldn't have to reveal to us the obvious facts, such as:

- The oil companies have large net profits, against the same profit margin -- 10% -- as before the "windfall".
- American homeowners have been getting well more than 10% annual returns on their housing investment; should they pay a "windfall profits tax"? Should they be forced to tithe to the poor?
- And what of other companies with annual profits in excess of 10? Like Cocacola, or Apple?
- The oil company profits that translate into share-holder dividends get taxed as income for the shareholders. A tax on these profits will reduce the amount paid to shareholders (including people of modest means!), and thus reduce the tax revenues coming from their regular profits.
- Reducing these profits will also scale-back reinvestment that would offset future shortages.

Tom, why is it that you seem to nut understand economics? Well, many economists seem to share your views.

11:49 AM
Paul Hue said...

Tom: Why would Bush and the "oil barrons" want to keep oil out of the hands of China? The best way to accomplish that would have been to impose the Pat Buchannon/Tom Philpott protectionist measures to keep US consumers and corporations (like evil Walmart!) from purchasing the goods for which China needs that oil!

And speaking of the "oil barrons": Do you think that the money that these people make goes into their matresses? Or are you aware that they either spend this money in ways that translate into salaries and wages for, say, the people who purchase Maverick Farms produce (or B&B nights), or they put this money into banks, which help hold down interest rates, so that people spend less on their mortgags and more on Maverick Farms produce? Are you also aware of the many ordinary people, like your virgin mother, who hold stock in these companies?

11:55 AM
Tom Philpott said...

When did I ever call for a windfall profits tax or any of that stuff? Or even call their "record profits" (my word) a windfall? I wrote several articles on the oil companies while a reporter on Wall Street, and understand their economics pretty well.

My main question: should we be running our foreign policy on their behalf?

I say, no.

Should our executive branch look exclusively to the oil industry as a guide to setting energy policy? Again, no.

in the decades ahead, these will be key questions.

5:33 PM
Tom Philpott said...

As for China, if we stopped buying from them, who would finance the war in Iraq? The game isn't about stopping China from getting oil. The game is about making sure the US industry can profit when China buys oil. Remember when that one oil company, who's name I can't remember, put itself up for sale a few months ago and the highest bid came from a Chinese firm? The GOP-controlled Congress stepped in and nixed the deal; a US company got the prize, at a lower price (so much for the shareholders). I didn't hear a lot of huffing and puffing from over Hoover way about this brazen violation of the free market; but such "capital controls" in the quote-unquote Third World are considered taboo among IMF-style globalizers and Hoover hatchetmen.

8:05 AM

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