Oh boy am I sick of hearing about $3/gallon gasoline! What makes things worse is that the conversations we are having about gasoline are so useless. Case in point: Meet the Press.
As much as I enjoy this show, the discussion on $3 gasoline this week was worthless.
a panel of yes-men
Almost all the guests were either paid directly by oil or studied the status quo. The one "critic" of the current situation was a politician with his own suspect motives. Not surprisingly, the discussion avoided any hard questions, included a lot of justification arguments, and was generally uninformative.
missed opportunities
Who cares what gasoline costs? Not me. What I care about is our goals for burning gasoline and where the money from gasoline goes. This is an opportunity to take a closer look at our "addiction" and I dont see anyone doing so.
It is one thing to try to understand where we are and how we got here. It is something else to discuss where we ought to be heading. People seem so focused on blaming someone, they are missing out on all three issues.
global warming and why we ought to care
Global warming is a huge issue and unlike a lot of things, we all make a personal choice in whether want to contribute or reduce greenhouse gases through our decisions around cars. This isnt some abstract issue happening thousands of miles away; we vote at the pump every week.
And what we have been voting for is burning more and more gasoline (our consumption rate continues to increase), importing more gasoline (in 1979 we imported 30% of our gasoline; today it is 60%), and buying vehicles that are less and less efficient (average MPG has stayed flat or dropped since 1979 due our selfish love of SUV's).
understanding profits
The panel barely mentioned global warming, mentioned consumption rates, import rates, ethanol and biodeisel, as well as profits. But there was no soul searching here. The basic message was that things are fine and prices will drop again.
Even the discussion of profits was weak. The oil companies are saying their record profits (the highest in history - roughly $40B of PROFIT last year for Exxon-Mobile ) were inline with the average of all companies. No one questioned whether these profits are inline with the industry average. You cannot lump Microsoft and grocery stores together and get a meaningful average. If oil is a very low margin business, then getting the overall average is a huge windfall of profits that is not in line with historical returns.
The panel also failed to go into much detail on the structure of the oil business (exploration/drilling, refinement, distribution) and where all the profits are going to. If oil was $20/barrel 4 years ago and now it is $70/barrel -- who is getting that $50/barrel? The price of oil has tripled but the price of gasoline hasnt even doubled - what's that about?
the forces that shape prices
The price of gasoline in Europe has always been much more expensive than here but what people dont talk about is why. In those countries, the government is getting tax revenue from gasoline. Here the money all goes to private corporations not tax coffers. Is that a good thing?
Another aspect of the price of gasoline they totally missed was hedge funds. The guest kept talking about "supply and demand" as if that explained the huge run up in prices. IS there a lack of oil supply today? Are there lines at the gas pumps? Rationing? Those things happened in 1979 but they havent happened today. There is no shortage of oil. So why are prices rising?
One of the most interesting arguments I have heard recently (which wasnt on this show) is the interference of hedge funds who are speculating on oil futures. These huge piles of investor cash dont actually want the oil, they just want to drive up prices and extract profits from the people who actually need to oil to make things. Hedge fund speculation is a fascinating example of market forces changing the market itself and yet the guests didnt say a word about it.
The price of gasoline has a huge impact on our society and how we build our cities and suburbs. A change in prices shocks people to take notice. Sadly we are wasting this opportunity to examine our past decisions and what we ought to be doing as we move forward.
