The Current Oil Problem and Why It Exists
Author: Erick, Patriot Fire founder (U.S.) April 27, 2008
It always strikes me odd when politicians and citizens want the U.S. government to “lower gas prices”. The problem is not rooted in government inaction; the oil crisis exists because of government's involvement. The average person feels that oil executives are “gouging” the nation and raking in excessive profits. What exactly is excessive profit? No one has a clue.
The entire reasoning behind capitalism, which our economy is based on, is to make a profit from the exchange of goods and/or services. If oil companies do not make a profit relative to their expenditures, they can not invest in further production, research, refinery upkeep, wages, or give earnings to shareholders. American oil companies are taxed higher than all other corporations in the U.S. Liberals tout the “fairness for all” banner, yet, they are the ones leading the charge for more unjustifiable corporate taxes on energy companies. Taxes for each gallon of gasoline exceed the profits for each gallon that an Exxon or Chevron makes. The government is the one responsible for any “gouging”. Another mistaken notion is that these oil execs are profiting beyond imagination. However, their overall profit is only six to ten percent from the total revenue. Most U.S. businesses and corporations have anywhere from 12 to 20 percent profit. How's that for fairness?
With the outrageous amount of taxation and red tape, it's no wonder why new companies don't spring forth. If this part of the economy could be opened to free market principles, new American oil companies would emerge. More competition leads to better competitive pricing. It's simple economics. Liberals fail to grasp this concept.
If the onerous taxes which stifle competition isn't enough, environmentalists block future exploration and development of crude oil. There are numerous prospects in the U.S. and along the coast that are capable of producing hundreds of billions of barrels of oil. ANWAR, the Gulf of Mexico, Florida, and California to name a few. Not only would newly formed refineries boost the national economy, it would reduce our consumption of foreign oil significantly. Certain oil producing countries such as Saudi Arabia directly fund terrorism with money from their oil revenue.
Whether wacko environmentalists know it or not, they aid terrorists due to their strong influence in Congress. These environmentalists compound the energy problem by preventing oil reserves from being exploited as well as hindering alternative fuel sources such as nuclear energy. France is almost completely energy independent as a result of nuclear energy without any mishaps. If we cannot produce enough of our own oil due to restrictive energy policies, high corporate taxes, environmentalists, and left-wingers, than nuclear energy is the only reliable, most efficient, and safest alternative the U.S. has for now. Other “green” energy alternatives are too costly, inefficient, or not technologically ready for mass use.
If oil reserves could be tapped, that would certainly help America's energy pinch and lower the price per gallon within the U.S. However, I must remind everyone that the overall price of oil is controlled by the global market. Prices at the pump would not drop to that of the 1950s. Why? Several factors are involved but inflation is the biggest culprit (all costs go up, with wages trailing behind some). Also, OPEC (Organization of Petroleum Exporting Countries) has considerable influence over the price of oil which the U.S. has no say in. OPEC members include: Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, Venezuela, and Ecuador. The blame for high prices around the world can almost be entirely blamed upon these countries because they intentionally restrict their production so demand increases (this makes prices skyrocket). Iran's gallon per gas is only .33 cents (U.S. dollar), Saudi Arabia is up by only .45 cents, Venezuela has a lowly .17 cents per gallon, .38 cents for Nigeria, .78 for Kuwait, and so on. They are the real gougers.
Here's my plan for economic longevity (although far from perfect).
Tax U.S. oil corporations just like any other corporation. This will allow more money to be invested in more research and development.
Remove unnecessary red-tape and high entry fees so more competitors will be attracted to this area of the market to improve competition.
Encourage more exploration and development of untapped oil deposits and new refineries.
Begin development of nuclear energy facilities. This provides a cleaner fuel and will eventually lead to an incremental decrease of oil dependence.
Cut funding of all OPEC countries involved in terror sponsoring; but only when the U.S. could withstand an oil embargo if that should occur. This might help lower prices for all countries worldwide, but not certain.