COMMENTARY | Chevron recently announced its 2011 first quarter profits. The number was more than $1.6 billion higher than the first quarter in 2010. After this announcement, much of the media began to criticize oil companies for profiting so much while the American people struggled to pay for gas while still reeling from the effects of the recession. However, some began to blame the Obama administration for its involvement. One article went so far as to say it was the administrations fault for not allowing more off-shore drilling, and that the administration “must allow the oil companies to spend their profits on drilling new wells.”
First, most people need to realize why the oil prices are climbing so drastically in the first place. What seemingly caused the gas price explosion was the turmoil in Libya. However, it may surprise you to learn that non-OPEC countries now import more oil to the U.S. than OPEC countries do, according to the Department of Energy. According to the U.S. Energy Information Administration’s import data, you’ll see that Libya isn’t even among the top 15 in the list of countries from which the U.S. gets its oil. The number one country we get our oil from is Canada. In fact, Canada gives us almost as much oil as the next three on the list combined.
How then, can political unrest push up the price of oil, if the unrest is in a region that doesn’t affect most of our oil? Like all commodities, when it looks like another source may expire, suddenly the amount in hand is more valuable. However, the skyrocketing prices are more a result of companies realizing that political unrest gives them an opportunity to raise prices than as a direct result of the scarcity of oil. For oil prices to raise 20 percent to 30 percent, there should be 20 percent to 30 percent less oil. However, the amount of oil the U.S. imported from Libya before annually has been less than 1 percent of its imports for the past five years in a row.
How then, can the prices be rising so quickly? The answer is the incredible profits that the oil companies are experiencing. They are the ones who raised the prices more than necessary, and they are the ones benefiting from the hardships we all face. The suggestion that we should allow them to spend their profits on digging wells that have already shown to be harmful in a number of ways is absurd. How about those companies lessen their profits by not charging so much for gas in the first place.
The idea that any of this is the fault of the Obama administration is laughable. If anything, the incredible tax breaks to these oil companies that are still in place create incentive for them to have higher profits. If anything should be done by the Obama administration, it should be to eliminate these tax breaks. This would take a small step towards making the oil company pay their fare share for the social harms they cause while helping to close the insane deficit that we have not yet found any reasonable solution to.
U.S. Imports by Country of Origin, Department of Energy
Crude Oil Imports (Top 15 Countries) Department of Energy
News Article, Yahoo News