“Evil Big Oil” Chevron makes 70% of ethanol, helps pension fund
Written by Brandon on May 21, 2007 – 3:17 pm - Welcome, if you're new here, you may want to subscribe to our RSS feed or subscribe to our email newsletter. Thanks for visiting!
That’s correct, according to a great piece published in the Seattle Times yesterday Chevron, one of the “big oil” companies often demonized by the liberal Democrats and climate alarmists “already produces 70 percent of the ethanol made in the United States.” Why does this even matter? It illuminates a dangerous cycle that is occuring (laid out below) and should shed some light on the subject for some of my liberal friends who love to “stick it to big oil”.
Any market, energy or otherwise, will always react. Companies are always looking to the future and working to build a sustained advantage. When oil companies see that they are drilling for a limited amount of product they will look for more and look farther into the future for new ways to supply energy, without governemnt intervention. The demonization of big oil and the legislation that results from it helps no one.
Here is the chain of events I find ironic and dangerous:
- 1. Oil companies provide a crucial product, excel at it, and make a reasonable profit
- 2. Liberals go apoplectic about pollution, even as it is spewing out of their tailpipes
- 3. Along with farm labor lobbyists, environmental hyperbolists like Mr.Gore convince us to sink huge amounts of tax revenue into subsidies for ethanol and other alternative fuels.
- 4. Oil companies, who are constantly spending a large portion of their profits on research and development, make 70% of US Ethanol.
- 5. Oil companies now have more money from useless subsidies, the taxpayer takes it in the chin, our market becomes more convoluted and our business environment less competitive.
This is even happening right here in Wisconsin as Governor Dismal Jim Doyle commits this latest act of hipocrisy:
At the same time as Doyle has railed against what he has called the “excessive” profits of major oil companies, Badger State retirees with holdings in the state’s pension fund have done well by those same firms’ success.
All totaled, gains from oil company stocks in the fund amount to nearly $400 million over the past four years.
A spokesman for Doyle, who has proposed taxing big oil, said the governor isn’t bothered by SWIB’s investments in those stocks.
Just let the market be! If you believe the global warming hype, vote with your dollars, buy E85 cars or hybrids and invest in ethanol development companies. Organize with like-minded believers and buy “green” energy, solar panels, etc. We cannot support an endless system of subsidies, higher taxes and regulations that decrease our nation’s status as a competitive global marketplace.
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Posted in Beyond the Facade, Dismal Doyle |
May 21st, 2007 at 4:30 pm
Good post.
I also think people need to realize that, as a percentage of revenue, most oil companies profits have remained pretty stable. Big oil revenues are up because the price of a barrel of oil is up, although not as high as the $77 per bbl (nominal) we saw last July/August 2006. And while oil is no doubt subject to the laws of supply-and-demand (which makes any sort of price manipulation pretty assinine), hedge funds and other speculative investors are dabbling in oil futures, which push up prices and create volatility.
The real reason we’re getting squeezed at the pump, besides the price of oil, is two-fold:
1. Lack of refining capacity in the US - this is a key point that all those “No Gas on May 15″ people don’t understand. If the price of oil is rising and if the refining process is bottlenecked due to weather, maintenance, or some other reason (like it is now), the price of gas will skyrocket (because afterall, there is only so much being produced while demand hasn’t slowed). It takes anywhere from 6 to 8 years to build a refinery and have it come online. Oil companies probably won’t build new refineries because the prospect of alternative fuels and better gas mileage on cars will reduce demand for gasoline.
2. Taxes - Chicago alone taxes each gallon of gas by 9% (we have the highest average price for a gallon of regular unleaded at $3.59 per gallon). Heaven forbid we reduce gas taxes when the price goes up - Dismal Jim Doyle would frown upon that because his coffers in Madison wouldn’t be flush. Same with Illinois.
I don’t complain about high gas prices because I feel I understand why they’re high. I don’t like that they’re high, but I don’t blame oil companies - they’re only a small part of the problem. I’ve adjusted how much I drive because of gas prices, and will eventually own a hybrid because it makes financial and environmental sense (yes, I am concerned about our environment). But I’m also getting tired of paying so much in gas taxes.
May 21st, 2007 at 5:26 pm
And remember its Governor Jim Doyle who wants to raise gas taxes… not just a flat rate, but progressively as the price of gas increases! Anyone with a brain knows that taxes on industry are passed to the consumer.
The problem with this mentality is that as in any industry, as ROI increases so does the healthiness of the industry and willingness to invest more into it. Because gas is more expensive, people want revenge and forget that environmentalist and heavy government regulation has prevented the construction of new refineries and other oil facilities essential in keeping gas prices at a consumer friendly rate. Now the United States imports 12% of its gasoline from Europe… And if any company were to begin construction today, it would take at least 7 years to bring up a new refinery to full operation…. thats if they get over the red tape in actually building one.
Who here mentions that the oil industry takes a dime (who does the drilling, refining, and transporting), while the government gets 50 cents per gallon– meanwhile the service station gets squat? There honestly should be a demand to lower the tax rather than raise it but its always the evil oil companies.
May 21st, 2007 at 5:44 pm
I had to post this classic from the Right Brothers:
Big Oil
We use it, we need it almost as much as air
Dependent on the Middle East and no one seems to care
That billions of barrels of oil are in the ground
And the “freakenvironmentalists†won’t let us get it out
Chorus
So before you go and point your finger covered in gasoline
And whine about their record profits
Remember things aren’t what they seem
Try and educate yourself with the facts or just admit you’re spoiled
If you don’t like it don’t buy it
It’s not the fault of “Big Oilâ€
We want it, they sell it, what’s not to understand
It’s simple as the law of supply and demand
They’re making just pennies per gallon at the pump /
While the government gets double and the roads still suck
Repeat Chorus
If you wanna keep the price down
But wanna keep the oil in the ground
You can’t have it both ways
That’s economics 101
Class dismissed go have fun
Repeat Chorus
http://www.therightbrothers.com/
May 22nd, 2007 at 10:27 pm
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May 25th, 2007 at 12:55 am
I tried to post the following comment several days ago. Here goes again:
I suggest you look at the Renewable Fuels Association’s webpage on ethanol plants before taking the word of somebody like Chevron’s CEO, David O’Reilly.
The 70% figure that Mr. O’Reilly refers to presumably is the share of ethanol-gasoline blends that is either blended by the company or distributed by its filling stations. If that is a correct figure, it is surprising.
The production of ethanol itself is dominated by two companies, Archer Daniels Midland (ADM) and POET, each accounting for 1/6th of current capacity. Other, medium-sized firms, such as Aventine Renewable Energy, US BioEnergy Corporation and VeraSun Energy Corporation account collectively for another 1/6th. A competitive fringe of smaller companies make up the bulk of the remaining capacity.
In any case, it sounds as if Mr. O’Reilly needs to do some homework on ethanol also. Here’s what he says about calls for even greater ethanol use: “U.S. farmers cannot currently produce enough corn to make more than 15 billion gallons of fuel. Producing 36 billion gallons would require huge corn imports or a massive overhaul of the U.S. agricultural economy.” Um, if it gets to that point, Mr. O’Reilly, the price of imported corn would be even higher than what domestic corn fetches today. The only reason ethanol is produced from corn in the USA in the first place is because of large subsidies that favor it, and high import tariffs that discourage imports of sugarcane-derived ethanol from Brazil.
No, if government policy insists on the USA using 36 billion gallons of ethanol (I thought the target was 35 billion gallons by 2017), meeting that challenge will more likely involve imports of ethanol, not of corn, and especially not corn to make ethanol.