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Yes, I think we are on the same wavelength on this point. Oil (as well as toilet paper) is a consumable, whereas the stuff Microsoft sells would be considered a durable good. By definition, one consumes consumables, and one keeps durable goods for an extended length of time. As such, the economics of the two categories are markedly different and cannot be directly compared.
Furthermore, when one goes out to buy a new PC, one is shopping, in the true sense of the word (i.e., comparing features vs prices, etc). However, in the case of a high fungible commodity like gasoline or home heating oil, there is essentially zero shopping because each supplier's product is exactly the same, and the price differential within a given market area is probably less than one or two percent. So, when you fill up your car, you are not actually 'shopping' for gasoline, but rather you are paying what the market will bear for a basic commodity that is essential for your very existence, only a fews steps below drinking water.
The only consumer decision to be made with regard to buying gasoline is
confined to how much discretionary driving you choose to do, or not do. Which is not much different from the decisions one makes in using public utilities (e.g., to keep your lights burning all night or not, or to water your
lawn this weekend or not).
(Though the decision as to how generously one uses toilet paper may be similar, I am not about to suggest that toilet paper also be regulated as a public utility, because you actually buy that product in a store and can choose between cheap but rough or soft but expensive.)
Also, most of the crude that is produced in the US these days comes from land owned by either federal or state governments, so the public gets money in probably 7 different ways on each sale of a gallon of gasoline (lease bonus, royalty, severance tax, property tax, income tax, gasoline tax, sales tax). I an a personal believer in high taxation of petroleum, but let's not kid ourselves here - the government take in the US is on probably on average about 50% of the cost of each gallon of gasoline.
Also, I don't have the number right in front of me, but I would submit that the average return on investment for the entire universe of publically traded oil companies between 1985 and 2004 would be well below 10% and certainly in the range of many utilities, but without the same regulatory protection of a utility.
Moreover, I would submit, that at least in the US, that oil and oil products (gasoline etc) are dirt cheap and that we as a nation just waste our endowment because they are so cheap. Even at $3.00 per gallon or $0.20/cup, gasoline is cheaper in the US than almost any industrialized country on earth.
So what again is the complaint? That these companies who invested hundreds of billions of investor dollars in extremely risky projects are actually making a reasonable return on their investment. Or is it your problem that the public is not getting a big enough share of this bounty? If you want more energy you have to make it worthwhile for investors to sink their money into the venture. The reason why solar, wind, and other renewable sources have not taken off as major viable alternatives to fossil fuels is that no one can figure out how to make money on a big scale using these technologies.
There is the truth staring us in the face.
What we need is:
"Throw out that old sustainable stuff. Girls with our In-for-Fall pink tint solar panels and our sexy turbines in that sleek chrome finish the guys will be all over your energy systems!" <g>
Would it also be safe to say that the cost to the oil companies of producing and distributing the domestic fraction of our oil did not appreciably increase in lock-step with the run-up in prices on the open world oil markets? Why should it, as the oil companies who pump this domestic oil out of their own wells did not buy this oil, as they already own it. So then, unless I am seeing something wrong, the domestic fraction of US oil production is sort of getting a free ride due to the sharp price increases on the global markets.
Regarding profits: Of course the oil companies are entitled to a reasonable return on their investment. But what I find puzzling is that in other businesses, when the cost of raw materials for their product goes up, the business usually suffers rather than prospers, as they get squeezed between what it costs them to produce the product and what they can sell it for.
However, in the case of big oil, it seems that the worse the raw material supply situation gets, the more money they make. Why is that? I supspect the reason, as I expressed in an earlier post, is that on the consumer level we don't really have a true market operating for refined products. It is more like an unregulated utility in which the supplier of the utility has far more control over the price of the product than does the consumer of the product. So, I don't think this is solely a matter of supply and demand and the workings of an 'efficient' market, but rather a reflection of the degree to which our vital resources are in the hands of a very powerful oligopoly.
As far as gasoline at $3.00/gal being so 'cheap', as I pointed out earlier the true price of that gasoline is much higher, largely because of free subsidies to the oil companies (such as the military costs of securing the oil supply) that is not included in the price at the pump but rather shows up elsewhere, i.e., the
taxes we pay. I'd like to see the price even higher .... IF the oil companies were made to pay for these subsidies themselves and our taxes lowered accordingly. (This will of course never happen.)
Then we have the other question: how much of the huge pile of cash the oil companies are now happily sitting on is likely to be invested in new capital for energy production, or alternative energy? I suspect the answer is: very little, as most of it will probably go toward more attractive investments, such as buying back stock, acquiring other businesses, or a variety of other ventures. For that reason, I am very skeptical of the private sector being willing to provide the enormous capital required get alternative energy going in any significant way.
Actually, Joule,
Expect "them" who sit at the top of the oil-wealth harvesting pyramid to provide enormous capital for brainwashing people into believing that alternative energy will not work.
Why?
Well if you were sitting at the top of the pyramid with all that money funneling in from the gas-guzzling suckers below up to your position at the top of the pyramid, what would you do? Tell them to find alternatives?
Today's Energy Stocks May Well Be Tomorrow's www.nytimes.com/2005/11/0...06oil.html
Global investment in renewable energy hit a record $30 billion last year, accounting for 20-25 percent of all investment in the power industry, and with solar power the fastest-growing energy technology, a Worldwatch Institute report released on Sunday said.
The Worldwatch Institute, a Washington-based organisation working for environmental sustainability, said the renewables sector was growing as a result of government support and increasing private sector investment.
"Policies to promote renewables have mushroomed over the past few years. At least 48 countries worldwide now have some type of renewable energy promotion policy, including 14 developing countries," the report said.
Most countries with renewable energy policies are targetting 5 to 30 percent of their electricity production by 2012, the end of the first phase of the Kyoto Protocol on reducing emissions of greenhouse gases.
While people in Big Oil talk about planning for the future, I think most of that talk is just lip service. Example: How much did Big Oil invest in new refining capacity over the last 30 years?
There is also a time-scale problem inherent in the running of any corporation. The mentality of management at Big Oil is not appreciably different from that at any other major corporation: concentrate all your efforts on having a good next couple of Quarters so that your stock options increase in value. And as far as the long-term problems are concerned: the current management expects to be long retired by the time the proverbial sh*t hits the fan.
No, I don't trust Big Oil to do the right thing when it comes to planning for the future.
Shifting taxes from income to fuel was part of my SinceSlicedBread proposal for exactly that reason.
On the electrified railroads concept, I think we can do better than merely returning to 19th century technology. Surely there must be a way electro-magnetize our roadways in a safe way rather than forcing all vehicles into a single guage format (a single roadway width that accepts only one kind of wheel and wheel format).
Keep up the good work.
A freeway has a capacity 1500 to 2000 vehicles per hour per lane. A single "lane" of rail moving at 55 MPH with 5 foot separation could move 3400 80-foot semi-trucks per hour or 11,600 20-foot cars per hour. I think that would keep us long enough to invent and test some ideas for the thing to replace it.