With recent reports of Utah having the second highest pre-tax gas prices in the country, defending Big Oil companies has become slightly less socially-acceptable than selling Usana to family members and taking a summer internship with al-Qaida.
People feeling the pain at the pump dont want to be reasoned with. They dont want to hear that the market is complex or even that its a simple function of supply and demand. People want to be consoled. They want satisfaction, and they want revenge against those whom they perceive to have wronged them.
While its easy to blame Big Oil, corporate greed or even speculators for high gas prices, people recklessly throwing out these accusations make the mistake of being angry with those who charge the high price rather than those who cause them.
Is it really too hard to understand that with two burgeoning industrial powers, India and China, joining the market, the demand on the global oil supply would increase and drive up the price we pay at the station? Is it really too hard to understand that a country which has limited its domestic oil production, now feels increasingly dependent on foreign oil and the global market?
As the United States has limited domestic production, the price of crude oil has come to constitute an increasingly large amount of the price of gasoline, currently making up three-fourths of what we pay at the pump. The remainder funnels into transportation (six percent), refining (10 percent) and taxes (11 percent). When all is said and done, the oil industrys average profit only adds up to 8.3 cents on the dollar (7.5 in the previous quarter), barely surpassing the 7.8 percent Dow Jones Industrial average for major industries and nearly 15 percent less than the profits taken in by Big Soft Drink.
Of course, any pain-ridden customer/cynic knows that companies can manipulate their books to make their case more palatable to the public. Congressional Democrats along with dozens of local politicians have long-charged this and have even held investigations to force these companies to open their books in order to prove this. Yet every time this has happened, these good-intentioned politicians have never been able to produce one document proving malfeasance. But this matters little in winning the hearts and minds of voters. After years of headlines and soundbites condemning Big Oil, corporate greed has become more a matter of faith than reason a staple in riling the public to politicians side.
If talk of congressional hearings, profit margins and supply and demand doesnt appease average voters, Sen. Barack Obama will. He understands them. He wont bore Americans with uninteresting facts like Exxon Mobil investing more in future technology than it earns domestically. When voters cry out about obscene profits, he wont ask, as an economist might, obscene compared to what? The financial risk? The corporations expertise? Or the governments record gas tax revenue?
No, Obama knows that when people are feeling economic angst, they need emotional satisfaction more than financial relief.
And so Obama began his presidential campaign proposing a $300 dollar energy rebate meant to attenuate Americans pain at the pump. Obama is a fast-learner though and soon realized that while a rebate might provide some immediate relief, it fails to strike the heart of the matter, justice. It leaves the victims unsatisfied.
Enter the revised Obama energy plan: a $1,000 energy rebate given to every middle-income household to be paid out of the record profits of Big Oil.
Now that hits the spot.
Seizing a companys profits and redistributing its wealth will not get the country out of this energy crisis. Making it hardr for oil companies to produce oil will only decrease supply and drive up the price, which will then fuel more discussions of evil oil companies and eventually price controls.
A country cannot tax an industry without making it costlier for that industry to produce its goods, and therefore making these same products more expensive. No matter how much some of us dislike the thought of someone making money off our pain, it is that incentive to make money that puts gasoline in your tank more than can be said for profit-seizing government officials. Some politicians say we cant drill our way out of this energy crisis. The truth is, we cant redistribute our way out of this.
If the United States wishes to continue to grow its economy and lower energy costs, Americans must stop pointing their collective finger at those charging the high costs and focus on the politicians and interest groups who have done their best to limit energy exploration.
It may be less emotionally satisfying, but it will matter where it counts.