Tuesday, April 1, 2008

More on the Oil Congressional Hearings

You know, this whole Congress hearing business doesn’t make any sense to me at all. Here are a few things that were said:

1. Rep. Markey says: “On April Fool’s Day, the biggest joke of all is being played on American families by Big Oil”
2. Rep. Cleaver says: “The anger level [with oil company profits] is rising significantly”
3. Rep. Markey (again): “Why is Exxon resisting the renewable revolution”

There were other things said during the hearing but these really caught my attention.

First of all:

Congress holds hearings as the price of oil goes up. They did that in November 2005 when oil was at $60/barrel, then six months later when oil was around $75 and now today when oil is around $100.

The problem with all of this: oil companies, Big Oil, the largest 5 US oil companies do not control the price of oil and thus cannot lower the price. By the way, neither does Saudi Arabia nor any other oil producer for that matter. Oil, as we all know, is not priced merely on supply and demand. Geopolitics and market perceptions play a huge role and no one (big or small) can control that.


They keep repeating that for example, Exxon made over $40 billion in profit last year. Yes that’s a huge number but in fact Exxon’s profit margin is around 9% which is a lot less than other industries (Pharmaceuticals for example). Looking at numbers in absolute is plain silly in my mind


Exxon is being asked to increase their spending on renewables. I wonder whose budget is larger Exxon’s or the government? Exxon is a publicly traded oil company and thus they have to do what is in the best interest of their shareholders. Maybe in the long-term they need to increase their spending on renewables but that’s a choice they need to make. The government, rather than telling Exxon what to do with its profit maybe should spearhead the effort to find economically attractive renewable energy resources. I am sure if such alternatives exist, are scaleable and make money Exxon would be the first to jump on the bandwagon.

I don’t like the notion that oil companies need to find the alternative. Why not the local utility why not the car manufacturers? I don’t see anyone telling GM that they need to invest more in clean technology.

Yes climate change is an issue but a shame and blame game is not the way to solve it. Then again what do I know, I’m just a taxpayer…


jason h said...

Thanks for you thoughts. I agree that "Big Oil" is becoming an easy target.
When you're addicted to oil the dealers can charge whatever they want.
Gas prices rise and I continue to buy the same amount I always do.

Candide said...

I generally agree with what you are saying hacfred. Exxon may not be playing much of a role in "the solution" but nor did they ever say that they would, nor are they fully required to, and even still, part of the solution is, unfortunately, to keep pumping oil until we have alternatives.

I do believe, however, that people are also telling GM that they need to invest in clean technology. CAFE standards being just one example, but also emissions standards for both gasoline and diesel. Of course, GM makes the claim that the cheapest technology (and thus best for the consumer) is to convert to E85. But it becomes a chicken and egg dilemma, with car companies saying the oil companies need to provide the fuel first, and oil companies making the analogous claim.

In the end, I do think that some government regulations are necessary in the energy and transportation industries... but how far we should go is pretty open to discussion. Oil companies can definitely help with some of the alternatives, but so can utilities and car manufacturers.

TammyT said...

But then so can the American public by changing some of their habits. In the end it may not be entirely up to producers to change their products so that consumers can enjoy the exact same lifestyle with fewer negative environmental effects. Some of that responsibility has to fall on us. It's not just Exxon or GM's problem...