May 15, 2006

Oil Company or Consumer Greed?

Every so often I get an e-mail that goes something like, fight back against the biggest oil company, Exxon Mobil, don’t buy their gas next Monday or don’t buy their gas until they lower their price.

Gas is simply supply and demand. Yes, there are only a few oil companies (oligopoly), but they do not control prices. If they did, that would be a violation of anti-trust laws and they would (should) be in big trouble. OPEC on the other hand does impose quota’s on the amount of oil that it ships, however, the members of the OPEC organization routinely ignore those quotes and export more oil than they are technically authorized to export.

If OPEC exported more oil, would the price of gas in the U.S. drop? Probably, but demand would pick up, thereby decreasing the rate of drop in the price of gas, then stabilizing and then increasing as the U.S. (and world) demands more and more (consumer greed).

Yes, the oil companies made record profits last year and billions of dollars profit so far this year (greed). They have also received billions of dollars in tax cuts, but the government has not lost any tax revenue. How is this possible? The oil companies get their taxes cut, but the consumer gets their taxes raised. The government needs to eliminate those tax breaks that the oil companies received and eliminate/reduce the taxes the consumer has to pay. The price of gas is still market driven, so the price of gas for the consumer will drop (elimination or reduction of the tax) and the profit of the oil company will also drop due to higher (normal) taxes.

Yes, I know this scenario is very unlikely to happen because the oil companies are big supporters of political campaigns and are intense lobbyists. There are also many environmental restrictions that have been put into place by the other extreme liberal activists. They too play a part in increasing the cost of oil and doing business.

But what else can we do? If you have no control of the supply aspect, then we must focus on demand.

Drive by your local high school and check out the student parking lot. I’ll bet it is full. Wait! Don’t I pay school taxes to have busses pick up kids and take them to school? After you are done checking out the high school, sit back and watch some traffic. Count the number of fuel inefficient vehicles (SUV’s, giant monster trucks, etc) that only have one person in them. Then after school or on the weekends, listen for the A.T.V.’s out joy riding. Or else drive by your local racetrack; just be careful the fumes do not overwhelm you.

So what can we do to reduce demand without drastically reducing out lifestyle?

1. Have your kids ride the bus to school and only drive when absolutely necessary.
2. Don’t buy/drive ridiculously large vehicles, just because you like them.
3. Reduce your ATV joy riding. Buy a mountain bike. Ride the bike 5 hours a week and ride your ATV 2 hours a week or something.
4. Instead of running the kids all over town for dance lessons, softball practice, swimming, and karate. Stay home and play a game or catch some lightning bugs.
5. Make one day of trips instead of little trips everyday.
6. Walk to the restaurant at lunchtime.

So, are the oil companies greedy? Sure. Are consumers greedy as well? You bet! If everyone gives a little we will gain a lot! By the way, among developed nations the United States still has the lowest gas prices in the world! We are lucky!

1 comment:

Anonymous said...


A great article I completely agree I for one will walk more.