This come from a blog on simple/frugal living
What is your opinion on the oil situation … with the massive profits by Big Oil, and so much of our money going to the Middle East so they can splurge it on palaces and mile high skyscrapers. Have you gotten to, or where would be, your breaking point for becoming more proactive on becoming less depending on using “oil”?
- Jeremy
First of all, I think the “massive Big Oil profits” are overblown. Those businesses are enormous. The investment from individual shareholders in all of the organization, equipment, and effort that it takes to get oil out of the ground, processed into petroleum and other goods, and transported to your local gas station is huge. If you look at the revenue of those large oil companies and then subtract out the unimaginably enormous costs, and then look at their profit as a percentage of the unimaginably huge revenue, oil companies don’t earn that much money. Businesses like McDonalds are far more profitable than Exxon and the like. The profit is huge, but the company is the size of Exxon is unbelievably enormous.
Let’s even compare Exxon and McDonalds. In the first quarter, Exxon brought in $116.854 billion in income, while McDonalds brought in $5.615 billion in income. That means, in terms of raw income, Exxon is the size of 20.81 McDonalds - so it would be reasonable to think that it should earn the profit of 20.81 McDonalds. Exxon reported a profit of $10.89 billion in the first quarter, while McDonalds brought in a profit of $946 million. Exxon only earned the profit of 11.51 Mcdonalds. Per dollar of revenue, McDonalds is almost doubly as profitable as Exxon - for every dollar in income, McDonalds profits 16.8 cents, while Exxon only profits 9.3 cents. Does that mean we should break up McDonalds?
Let’s say that we then put a windfall tax on Exxon and siphon away some of that profit, driving their profit down into the 4 cent range. Investors will look at Exxon and see something that they should pull their money out of. Very quickly, Exxon stops having the money necessary to get fuel to you at all. The infrastructure breaks down, no one has the capacity to pull off that large conversion of oil in the ground to gas at the pump, and gas goes ballistic in price. Since there’s no real alternative available, the United States would be hammered.
A windfall tax on the oil companies is basically foolishness. It’s not even a political question - it’s a dollars and cents question. I wouldn’t put my cash in a business that was only profiting four cents for every dollar of revenue - I’d take my cash to another business, as would most investors. If we did this, the oil companies would go away very quickly - and we don’t have the infrastructure in place to handle such a rapid shift. Imagine America if a year from now there was no gas to be had anywhere.
The solution is to put that support infrastructure in place right now. If you want to break up dependence on oil, look at individual consumer and political action. Buy highly fuel-efficient cars, or even look at all-electric options (yes, there are some). Use public transportation. Work politically to get people elected that will encourage such things - yes, even going so far as to support the Green Party, if need be. Don’t just focus on the presidential race, either - focus on the local race for Congress in your area and also for the state legislature. Who are the candidates and where do they stand on those issues? Work to support the greenest candidates by putting up signs and telling your neighbors. In other words, fight oil dependence at the revenue level, not at the profit level, while building a different transportation infrastructure.
I’m very serious about this. In fact, I’m strongly considering buying a Tesla Whitestar for our next car for most of our driving needs, even at the relatively high cost. Over a reasonable lifetime, no gas cost is potentially huge savings, as is the vastly reduced maintenance costs of having minimal moving parts in a vehicle. Pushing that curve is something that can bring about big change. If five million American families did that instead of griping about gas prices, profound changes would begin occurring very rapidly, as competitors would jump in and drive the price down, making electric cars compete in price with gas cars. When that happens, electric cars win in a landslide.



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