Shocking Oil News

In the movie Casablanca (one of the truly classic films), Captain Renault (Claude Rains) is ordered by a German officer to close Rick's Cafe. Rick (Humphrey Bogart) asks on what grounds Renault is closing the cafe. Renault responds that he is shocked to find gambling occurring at the establishment. At that very moment Emil the croupier (Marcel Dalio) hands a wad of cash to Renault and says, "Your winnings, sir." Renault thanks Emil and continues to clear out the cafe.

A similar moment keeps occurring in the media and in the halls of Congress. Media pundits and Congressmen are shocked that oil executives are making record profits. I am not thrilled with high gas prices, but I am not surprised that oil companies are making money. To my knowledge there are no oil companies that have filed declarations that they are non-profit organizations. The executives of oil companies have one job - to make money for their share holders. If they cannot accomplish that mission, then they will lose their jobs. So, as the demand for oil increases and the supply diminishes, the cost of oil is going to increase and those who deal in it will make a profit. That is basic economics.

Before joining campaigns against oil companies, there are few facts that should be kept in mind. One barrel of oil does not equal a barrel of gas. Oil is used to create a variety of products - motor oil, home heating oil, plastics and other synthetic products. That is why selected boycotts of gasoline are silly. The boycotts hurt the station owners who are often struggling to survive, but have no effect on oil executives. The oil companies are too diversified to be hurt by any gas boycotts.

One further thought - home heating oil also comes from those expensive barrels of oil. This is an issue primarily for the Northeast. In all the condemnation of SUVs, why hasn't anyone brought up the issue of home heating oil? How efficient are the heating systems that use oil? What is their carbon footprint? Why not electric heat instead of oil? If the use of home heating oil was reduced, what impact would that have on the production of gas? One reason these questions are not asked is because there are many influential politicians who are in the home heating oil business. While the media is quick to point their fingers at the connection between Bush, Cheney and the oil companies, they are slow to point out the connection between the Kennedys and the heating oil business.

New solutions are needed to the oil crisis. The truth is, though, that government will not provide the solution. The closet socialists, feigning shock that a corporation in a market economy is making a profit, want to play Robin Hood. The only real solution that will emerge will come from inventors and entrepreneurs (for example - electricity replaced gaslight).