Bill O’Reilly Demagogues Oil Companies

For an alleged “arch conservative” that attended Harvard BIll O’Reilly seems clueless as to why oil companies make record profits. How can he demagogue this issue as he does? Is he too much the populist? Is he really so clueless as to the underlying economic conditions no matter how many expert economists come on his show and explain it to him?

O’Reilly is not an “arch conservative.” He is surely conservative, but only to one who finds anyone left of Barack Obama to be too conservative for them would one think O’Reilly is a “John Bircher.” O’Reilly exhibits many populist positions. His whole schtick is populism – “The No Spin Zone.” “We’re lookin’ out for you.” “Culture Warrior.” “The folks.” That’s populism pure and simple. Not to say O’Reilly is necessarily wrong in any of his presentation or general positions, but this bugaboo he has about the oil companies does him no good. It displays either a pettiness, a clueless position or pure populist appeal.

It isn’t a big secret that when a company sells a product and they either sell more of the product or sell the product at a higher price than before, they make a higher dollar amount profit. The real and honest question is “Is the company in question making a typical, historical and reasonable profit margin?” “Is said company or industry price gouging?” “Are they creating shortages to drive up price?” “Manipulating price in any untoward or illegal manner?” If the answers are no then what is O’Reilly’s problem here? Simple…people are mad at high gas and he’s appealing to their emotions as well as the outstanding ignorance of many who don’t know better.

He whines about “record profits.” In times of inflation companies often run high profits because prices are higher. When the percentage of the profit is the same as before, a higher price will yield a higher dollar amount…it’s really just that simple. It is not rocket science. Typical oil industry profit margin is about 8.5% or so. Eight and one half percent profit on $1.00 is $.08.5 cents; profit on a gross of two dollars is going to be $0.17 cents. But the profit margin is the same. Now the question is should oil companies, or any industry, be required to lower their per unit price to draw the exact same dollar amount as before?

If retail gasoline were $3.00 per gallon, at 8.5% profit, that would be a profit in dollars of $.25.5 cents per gallon. The margin remains the same. Therefore, in times of normal or acceptable gasoline prices, if 8.5% profit is reasonable and proper, then why is the profit margin remaining the same any act of evil, collusion, or gouging? The clear and simple answer is it is not in any way! If oil companies sell the same number of gallons at a higher price they will make higher profits in dollar terms, but if the margin remains the historical same, no harm, no foul.

So if Exxon sells 10 billion gallons of gasoline per year, and now at a profit of $0.25.5 cents per gallon versus say $0.17 cents per gallon when gas was $2.00 a gallon, is Exxon really playing unfair? Clearly their profits in real dollar amounts go up based on the numbers even though the margins remain exactly the same. Not to be forgotten, if the oil companies costs are higher than before, and since oil went from about $50.00 per barrel to over $110.00 per barrel, clearly the oil companies are paying more for their product they then transport, refine, transport again and then sell at retail, so forces out of the oil company’s control are effecting this too.

It takes a fool or an agenda for one not to recognize some additional facts: until very recently a gallon of regular unleaded was cheaper than a gallon of milk; cheaper than a gallon of name brand bottled water…WATER mind you, WATER! Is anyone screaming Dasani is gouging anyone, when in fact they are making a huge profit on something that is so cheap as to be almost free in cost? Hell, some powdered drink mixes were almost as expensive as gasoline until gas skyrocketed recently.

And of course the most important fact of all this is our feckless leader, who has thrown up roadblock after roadblock to domestic oil and domestic energy in general, but he’s fine with lending $2 billion dollars to Brazil to get offshore oil and then promise them we, the US, will be their best customers for that oil. Now that seems problematic to me, but to his supporters any sacrifice is worth green stuff, even if breaking a nation is in the offing. Remember, it was Obama himself who bragged in a January 2008 interview “under my plan of a cap and trade bill, electricity rates will necessarily skyrocket.”(paraphrased) It was him who also gave an interview announcing “if somebody wants to build a coal powered plant they can; it’s just that it will bankrupt them….” referring to his desired cap and trade scheme.

Keep in mind also that if the US president announced we will explore, tap and drill every place we can on the continent and in the oceans, the price would plummet immediately. Every time a president has done such the world oil price dropped precipitously. Recall in 2008 Bush opened up offshore drilling and called for stepping up domestic production when oil reached $147.00 and the oil prices dropped IMMEDIATELY! Look it up!

It seems Harvard is not the be all and end all after all – O’Reilly went to Harvard….ya know, just like Obama did!