Jon Henke
Bruce "McQ" McQuain
Dale Franks
Bryan Pick
Billy Hollis
Lance Paddock


Recent Posts
The Ayers Resurrection Tour
Special Friends Get Special Breaks
One Hour
The Hope and Change Express - stalled in the slow lane
Michael Steele New RNC Chairman
Things that make you go "hmmmm"...
Oh yeah, that "rule of law" thing ...
Putting Dollar Signs in Front Of The AGW Hoax
Moving toward a 60 vote majority?
Do As I Say ....
QandO Newsroom

Newsroom Home Page

US News

US National News

International News

Top World New
Iraq News
Mideast Conflict


Blogpulse Daily Highlights
Daypop Top 40 Links


Regional News


News Publications

Obama, Big Oil and fun with charts
Posted by: McQ on Wednesday, March 26, 2008

Since everyone has mostly been wrapped up in the Obama/Wright and Hillary/Bosnia things, we've missed a few actual issue oriented articles that have found their way into the news cycle.

One that caught my attention was headlined " Obama Eyes Active Role in Oil Markets" by Jeff Mason of Reuters. And, since I'm a shill for "big oil" I figured I'd take a look and see what Mr. Obama had in mind about his role in "oil markets".

Said Mason:
Democrat Barack Obama would take an active role in U.S. oil markets as president, tackling concerns about the dominance of large oil companies and eyeing the Strategic Petroleum Reserve as a potential weapon to combat high prices, his top energy adviser said.
The first obvious headshaker is the bit about the SPR and using it to "combat high prices". A) that's not its purpose at all and B) using it and depleting it for that purpose makes us strategically vulnerable to a cut-off or major disruption in supply. "B", of course, is why the SPR exists. So, given just that, you've probably figured out I'm less than impressed with Obama's idea to this point.

But what does he mean he's going to tackle "concerns about the dominance of large oil companies?" Jason Grumet, the Obama's key energy and environmental policy aide fills in the blanks.
Grumet, head of the Washington-based Bipartisan Policy Center in addition to advising the Obama campaign, said the oil industry had "concentrated incredible market power in a small number of companies" in a way that caused alarm.

"Senator Obama has a deep concern that the consolidation of the industry — these national mergers, you know, that were allowed under both Clinton and Bush administrations — are a cause for some concern," he said.

He said an Obama administration would examine "whether these mergers and consolidations have decreased competition in a way, concentrated market power in a way, that is undermining to consumers."

Grumet declined to identify specific companies and would not comment on whether Obama would seek to break up dominant players. Leading U.S. oil firms include ExxonMobil Corp., Chevron Corp., and ConocoPhillips.
Do these guys know anything about the oil market? Time for "fun with charts" and yes, they're from the American Petroleum Institute, but the data is all referenced, so calm down and consider what they depict.

First, let's talk about the "oil market":

77% of all known oil reserves belong to national entities and not independent oil companies (IOC). Another 11% is available to independent oil companies through negotiation, but those are normally lease deals with royalty payments.

In reality, IOCs, all of them throughout the world, actually own only 6% of the proven reserves out there.

Let me give you another example of what that means in reality, and not in an ivory tower think tank which is attempting to craft a populist message:

As you can see, the IOCs aren't the problem, but, as specifically targeted by Obama (ExxonMobil Corp., Chevron Corp., and ConocoPhillips) they are a possible target for breakup in an Obama administration. Look at the chart, folks, and tell me what real power they wield in the big oil picture, will you?

Another part of the Obama plan for "big oil companies" is to aggressively tax them:
With oil prices at record highs, Grumet said Obama would seek to tax the "windfall" profits that oil companies are making - a threat that Clinton has also made.
That brings us to the next chart. Tell me, after studying it, which industries are making more profit that the oil industry and why oil is the only one targeted?

A strategic industry, vital to our commerce and national defense, which a presidential candidate is planning to attack because, apparently, he and his advisers think it is somehow a rapacious anomaly bent on unconscionable profits and engaged in gouging the American people. Yet the shoe industry makes more profit than the oil industry.

If you go to the link above, from the API, you'll see a number of other charts which explain where those profits go - to include huge corporate income taxes and exploration costs.

Should there be an Obama presidency and he carries out the stated plan, who will Obama actually be going after if he attacks the oil companies?


Last but not least - how, other than raiding the SPR and putting us in strategic danger or trying to tax, regulate and hound the oil companies to death could the price of gasoline be reduced by government?

The last chart, I'm going to put up shows what consumers are paying for at the gasoline pump:

Obviously government has total control over the right side of that chart - i.e taxes. So a reduction there would be an immediate reduction in the cost at the pump. But, if you think about it, you're actually being taxed twice at the pump. Because included in those oil, refining and retailing cost are corporate income taxes you pay for the oil companies. Their reduction or elimination would also result in lower prices at the pump.

So, given all of that you decide. Plundering the SPR? Breaking up minor players in the world oil markets? Attacking firms owned by millions upon millions of Americans? Taxing oil companies to the point that they must further raise prices to retailers?

Or real and immediate savings at the pump brought on by reduced taxes both at the pump and at the corporate level?

And if all of that doesn't frighten you enough:
Grumet said Obama supported a global carbon market and would seek to link a U.S. emissions trading system with the established European one "as soon as possible," though he would make establishing a U.S. program to fight warming and agreeing to an international climate change treaty his top priorities.

Linked by Caveat Bettor, Yes and Not Yes, Maggie's Farm, Coalition of the Swilling, Tigerhawk, Nobrainer's Think Tank, Liberty Peak Lodge, Coyote Blog, Found on the Web, Searchlight Crusade, The Thunder Run and RedStateEclectic - Thanks!
Return to Main Blog Page

Previous Comments to this Post 

Don’t forget there’s also the cost of regulatory compliance in their with all those costs as well.

I think someone needs to learn the law of supply and demand, as well as the law of holes...

But hey, on the job training is what the Presidency is for, right??
Written By: Keith_Indy
I think I need to send this page to the guy at work who was calling the oil companies’ profits "obscene".

It scares the pants off me that so many people have such a fragile grasp of even the most basics of economics that they buy into the claptrap politicians peddle to gain votes.
Written By: Robb Allen
It might not be as obvious as it was a couple of years ago,
but if you add up the profits of Intel and Microsoft, you
will find that for many years they had bigger profits than
all of the US "big oil" companies combined.
Written By: Neo
URL: http://
Obama is looking more and more like Jimmy Carter.
Written By: Neo
URL: http://
"Don’t forget there’s also the cost of regulatory compliance in their with all those costs as well."
What does not get produced in that pocket?

That cost is incalculable.
Written By: Billy Beck
URL: http://www.two—
Going after "Big Oil" does sound a lot sexier than going after Big Apparel And Leather Products.
Written By: the wolf
URL: http://
I can’t tell you how many times I’ve attempted with friends, relatives, whomever, to discuss the real issues with our high gas prices and why Big Oil has very little to do with it. I’ve given up - I’d now rather rectal surgery sans anesthesia than try and explain basic supply and demand to people who already know that the government should "do something".

Hey, if they want the government to "do something", I have an idea that wouldn’t cost me as Joe Taxpayer one thin dime: approve the building of more refineries and remove one of the chokes on our gasoline supply. We haven’t built a new one since 1973 [if I remember correctly], and it’s in America’s best interests. It may piss off environmentalists, but that seems rather silly if they’d think it through. Which is more efficient and "environmentally friendly"; a new refinery that takes 35 years of technical advancements and incorporates them, or plants that were built before Nixon was president? It’ll also piss off refiners, and with good reason: refining oil to gas holds their biggest profit margins at over 20%. This is also I think the reason you don’t see Big Oil tromping up the Hill ever month begging to build more refineries - too much profit there, on an already paid for asset.

And that’s just one of the really simple cost effective things we could do. What about ending these special gas mixtures for California and other places of skepitical environmental value? And drilling in ANWR, or off the Florida shelf.

Dang it’s irritating how little common sense seems to be out there...
Written By: Warrior Needs Food Badly
URL: http://
This is a hopeful sign that Mr. Market is working all by hisself on this one.
Written By: CR
URL: http://
You’re missing the impact, here of taxes n all of this.
Some facts I posted recently:

According to CNN Money, Exxon total “profits” if you don’t count exploration costs, were $40BUSD, in 2007. Their taxes, however, were $100BUSD.

So, while your point about 15% being what the consumer pays in taxes at the pump...(Actualy, that’s only federal taxes, the state adds more, but I digress) the real story here is that the federal government is taking far more than this in taxes, which is added to the end cost long before it gets to the pump, and is thereby hidden from the consumer. Taxes, and regulatory costs are in fact, already the lion’s share of energy costs. That Obama is planning on adding to this would be comical were it not tragic.

Written By: Bithead
"And drilling in ANWR, or off the Florida shelf."
Don’t forget the California coast.

"Drill right now!
Drill today!
Drill all night!
Drill all the way!"

That’s what I always say.
Written By: Billy Beck
URL: http://www.two—
Obama is looking more and more like Jimmy Carter.

Now we know why Erb is so defensive on Obama.
Written By: Don
URL: http://
dangit i knew that the run up in the price of cigarettes in the last 10 years wasn’t all taxes.

I think the environmentalists and al gore warming fanatics should conduct an experiment to determine how long it would take and how much it would cost to become a non CO2 emitting world (not including breathing although that would achieve the same effect) and rebuild society on green energy vice fossil fuels. I would even give them a head start and say that they can use cars, trucks, windmills, solar panels, and heavy machinery already in existence to start with but they must produce all of these items using green energy as they break down. That includes raw materials such as metals, plastics, glass, etc. They wouldn’t get to purchase carbon credits or pay extra for green energy from the power company.

that should shut them up long enough to get the additional refineries and wells we need to cut the price of oil and gas.
Written By: mac
URL: http://
The oil companies don’t actually "own" any oil, the government does. The Gov’t leases it to the highest bidder paying the most cash down and offering to meet the royalty, usually 18.5% of gross selling market price. The oil company does all the exploration and development and pays all costs out of their share. See Prudhoe Bay and Gulf of Mexico.
Written By: Tee Jay
URL: http://
It just seems to me that when the price of oil increases 10%, the price of gas should only increase about 6%.

Doesn’t seem to happen that way.
Written By: jpm100
URL: http://
According to CNN Money, Exxon total “profits” if you don’t count exploration costs, were $40BUSD, in 2007. Their taxes, however, were $100BUSD.
Actually, that’s an even better counter to "big oil" rhetoric.

The government wants to after "Big Oil" and their "obscene profits", because they already get ~70% of "Big Oil’s" profits. Apparently, they’d like to see that number go up.

As always, follow the money... and as always, be sure you’re really following the money, not just letting someone razzle-dazzle you with some big numbers and lofty rhetoric.
Written By: Jeremy Bowers
It just seems to me that when the price of oil increases 10%, the price of gas should only increase about 6%.

Doesn’t seem to happen that way.
Or, when demand decreases and supply increases, prices should go down. These are recent realities that have not manifested themselves proportionally (not at all in some instances) in lower gas prices. While refining capacity, Middle East instability, and a weak dollar are factors that are driving prices up, the fact that oil prices are not responding to market forces anymore indicates to me that speculation has created a bubble. This thing has to pop. Right? It may take more confidence in our economy to get people to move their money out of oil, but doesn’t it have to come? It would certainly help if our government would actually cut spending (remember when the GOP actually did this) to reduce the deficit and strengthen the dollar.
Written By: Is
URL: http://
I was referred to this site from Maggie’s Farm - I’m not a regular reader. It appears that you are associated in some way with the Oil industry. Can you explain to me - just the average taxpayer - who is behind the crude oil price spike, who is profiting from it, and what, if anything, can be done about it? Are ExxonMobile’s profits not connected with the huge increases in the price of a barrel of crude oil?


btw, my guess is the liberal Democrats are more incensed overvthe salaries of the oil company CEO’s than they are company profits. When it comes down to it, I think they will play the class warfare card before the evil corporation card.
Written By: JLP
URL: http://
I was referred to this site from Maggie’s Farm - I’m not a regular reader. It appears that you are associated in some way with the Oil industry. Can you explain to me - just the average taxpayer - who is behind the crude oil price spike, who is profiting from it, and what, if anything, can be done about it? Are ExxonMobile’s profits not connected with the huge increases in the price of a barrel of crude oil?
Actually JLP, I was being mildly sarcastic when I made that point - I have no affiliation except for a blogger trip I took on the API’s dime to see and hear about "Blind Faith", a billion dollar deep water drilling platform Chevron was getting ready to launch.

That said, I do think the Dems are barking up the wrong tree with their corporate and big oil attacks and I just wanted to get my argument out there.

As to the spike, several reasons - increased demand, some disruption and speculation come to mind as probably the big three.

Thanks very much for stopping by and don’t be a stranger.
Written By: McQ
If you were to redraw the last chart as a British Sterling Note rather than a dollar, you’d have to shift the lines around a bit.

In the UK we are currently paying over $7.50 per gallon at the pump, of which almost two-thirds is tax.
Written By: James Barlow
As others have elluded too, it seems contradictory to at one time rail against higher gas prices while at the same time complaining that it’s consumed too much. It’s a shame that people with a high school education don’t understand that putting caps on prices leads to increasing demand.
Written By: Allen
Please reload the graphs. The pictures are not working. Wait, they are. They are in .bmp format, and I’m on a Mac, which won’t open images in bitmap format.
Written By: chip
URL: http://
btw, you should really convert those to jpgs. it would cut down the bandwidth they use by 90% or so.
Written By: ChrisB
URL: http://
As far as I’m concerned, the entire oil industry is predicated on a national automotive transportation infrastructure. Eisenhower topped off decades of statism with the last of homage to Hitler and commissioned the government-financed Interstate Highway System, obliterating the private mass transit systems already in effect by massively subsidizing its substitute goods, the automobile, and subsequently its gasoline. There is nothing "market"-y about oil production and consumption – the natural market equilibrium is to tend towards dense living and mass transit, whereas only through intense manipulation of the market can you arrive at a point where "equilibrium" is arrived at by one mode of transportation overtaking all others (roads/trucks), and then stagnating and making little progress for decades.

America would be in a much better place ecologically, foreign policy-wise, and economically if it abandoned its Gosplan-style road building and maintenance campaigns, along with its zoning laws, and let the market take care of transportation and location. My guess is that you’d see more mass transit, fewer cars, denser housing, fewer suburbs, and more locally-produced goods once the cost of transportation is fully realized.
Written By: Stephen Smith

Add Your Comment
  NOTICE: While we don't wish to censor your thoughts, we do blacklist certain terms of profanity or obscenity. This is not to muzzle you, but to ensure that the blog remains work-safe for our readers. If you wish to use profanity, simply insert asterisks (*) where the vowels usually go. Your meaning will still be clear, but our readers will be able to view the blog without worrying that content monitoring will get them in trouble when reading it.
Comments for this entry are closed.
HTML Tools:
Bold Italic Blockquote Hyperlink
Vicious Capitalism


Buy Dale's Book!
Slackernomics by Dale Franks