Ugh! They are all wrong to some degree though at least they all agreed that subsidies for oil & gas companies should be ended. Neil Cavuto is simply off his rocker. He is against a windfall tax on oil company profits for fearing that that may lead to some arbitrary standard on taxing other companies’ exorbitant profits the same way. The difference between Apple and ExxonMobil should be obvious. One is an innovative technology company that is investing heavily in its R&D for an array products that run from essential to the non-essential. The second is a dinosaur in terms of its life-cycle. It does produce very essential products, a product that without which life as we know could not exist on this planet for the quantity of people now on it.
As I wrote yesterday, the oil companies are cash cows and for whatever reason many of them don’t seem interested in morphing into alternative energy companies. They seem to prefer to die a slow death. That’s their choice but it does not mean they have the right to take us with them. Chris Nelder is right that the oil companies do not control the price of oil. OPEC largely does based on supply & demand. It is not free market since a cartel does set production quotas that limit supply but the situation today is far different than it was in 1970s. Then the price was wholly artificial, today it is only partially artificial. Supply ain’t what it used to be. Indonesia is now a net-importer of oil (it still exports LNG) and Mexico is likely to be a net-importer of oil by 2012 or sooner. Norway’s luck should run out in 2030. As non-OPEC producers start to run out of excess for export then prices will really hit levels that will make us look back fondly on $100 a barrel (the fortnight that that lasted anyway).
Despite Chris Nelder’s accuracy, the oil companies are making enormous profits that are not being reinvested into energy research. As I noted yesterday, oil companies are cutting their capex. They need to be incentized into not doing that hence a windfall tax profit is a good idea. Get them to invest in alternative energy or we will do it for them. Light, sweet crude rose $1.69 to settle at $123.53 a barrel on the New York Mercantile Exchange so I am only -$1.47 from my forecast of $125.00 before the end of May. I may get there this week. And oil will continue to rise because what’s left is more expensive to produce. It’s deeper in the ground, farther in out of the way places, in harsh climates where unsavory men rule and there is less of it to go around to adequately supply nearly 7 billion people.
And Neil, update your metaphor. You’d probably love Russia, it’s a kleptocracy run by people just like you.