Big Oil firms aren't the bandits here
NEIL REYNOLDS
reynolds.globe@gmail.com
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May 16, 2008
OTTAWA -- Question: Is the U.S. quickly running out of oil?
Answer: Not really. The U.S. possesses enormous oil reserves. It prefers, for environmental reasons, not to market them. Peter Robertson, vice-chairman of Chevron, told U.S. columnist Cal Thomas the other day that the U.S. has plenty of oil but noted: "Eighty-five per cent of [U.S.] offshore oil is off limits." This, despite the fact that advanced technology for offshore drilling ensures little environmental risk: "During hurricanes Katrina and Rita," Mr. Robertson said, "more than 1,000 offshore wells were destroyed [in the Gulf of Mexico] but not one of them leaked." The U.S. has 30 billion barrels of proved reserves and another 112 billion barrels unproved but deemed recoverable - enough to run the U.S. economy for decades. Further, it has supplementary fossil fuel resources (coal and shale) almost beyond calculation - enough to run the U.S. economy for centuries. Ironically, the U.S. no-drilling policy ensures that the U.S. will ultimately - and inadvertently - possess the largest strategic crude oil reserve in the world.
Well, the world is quickly running out of oil, right?
Not really. The U.S. Energy Information Administration calculates that the world's proven reserves of oil will last for 50 years at current rates of production but notes that proven reserves are still increasing year over year - as they have for more than 25 years. In the early 1980s, the world's proven reserves would have lasted for only 30 years at the 1980s rate of production.
Surely you will concede that the big multinational oil companies are global oligopolists engaged in a criminal conspiracy to rip off the people of the world?
Not really. Look at the oil reserves that the nine biggest oil companies control. Add them up. There's Exxon Mobil, Chevron, ConocoPhillips and Occidental from the U.S. There's BP from Britain and Total from France. There's Shell from Holland and Statoil from Norway. There's Eni from Italy. Together, they control only 4 per cent of the world's oil reserves. Incidentally, the people who own Big Oil are mostly regular folk. Corporate insiders own 1 per cent of the shares; and big institutional investors own 5 per cent. Mutual funds own 30 per cent; pension funds own 27 per cent; individuals own 37 per cent - with most of the shares held in retirement accounts.
Surely you will concede, though, that the Big Oil companies routinely fix prices at the pump?
Not really. In a literal sense, many prices are "fixed." Someone "fixes" the fee that hospitals charge for beds. Someone "fixes" the price of milk, eggs and butter. But there is far more intense competition between oil companies than there is between public hospitals or between dairy farmers. Gas companies are uniquely competitive and motorists are uniquely competitive. The shopping experience for gas is far more intense than for other goods. It is almost athletic. Many people will drive across town - speed across town - to save a penny a litre. The higher the price, the more competitive the market. This is why oil companies are reporting declines in earnings this year even though pump prices have never been higher.
But surely you will concede that the oil companies have made off like bandits in the past couple of years.
Not really. Oil companies fared well in 2005 and 2006, at the height of the business cycle - a period when all businesses fared well. In the U.S., the oil companies earned a return on investment of 22.5 per cent in 2005 compared with a return of 21.0 per cent for the S&P industrials. But they had earned a return of only 9.9 per cent a year, on average, during the past 25 years - when the S&P industrials earned 12.0 per cent a year. In 2001, by the way, these companies got 14.3 per cent of the pump price for distribution, marketing and margin; so far in 2008, they are getting 9.2 per cent.
Whatever. Most people still think the government should do something.
Precisely. Here at home, the federal government alone collects an extra $100-million in windfall revenue from every 10-cent increase in gas prices. As the Canadian Taxpayers Federation observed earlier this week, in observance of its Gas Tax Honesty Day, one of the biggest costs in filling our tanks is the cost of government. Taxes account for 28 per cent of pump prices. Strip out the taxes (32.6 cents a litre) and you get back to the real price of gas: 86 cents a litre. All by itself, this honest-to-God price proves that there's no scarcity of oil. Which is obvious when you think about it. When - anywhere in the world - have we ever run out of gas?
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History repeats itself - I'm surprised that the older guys in here are talking as if they were asleep during the 70s. Let's go back to 55mph!
We’re goin’ to hell in a hand-basket! Phuckin’ A ! BB57…. You got an extra room that I can rent?!?!? 
Diesel is $4.19 now in Tampa at the cheapest stations. 
6.0 liter diesel 53K miles. Will sell for the balance at ford of $22,780. 
It really is a good deal for a Lariat fully loaded. 13 to 15 MPG in the city. 
! I just don't think the USA & its Big Oil Co are big enough to control the world prices. Right now it looks like the price has been driven because even at these high prices no one has the reserve capacity to pump enough out of the ground to meet the current demand. Yes it is down there but a lot of inept Gov't around the world that don't have a real good hand on securing it all.
