The top two subjects for this blog turn out to be E10 and the election coverage. One of the little twists of the election is that come next year, E10 is going to become a huge part of the political landscape, for several reasons. One of those reasons will have to do with the outcome of the Presidential race, and how our elected representatives deal with those results. At this point, I’m going to labor under the presumption that the race will be between John McCain and Barak Obama. A sort of conservative and a blatant liberal.
This outcome will, of course, dictate the direction of the price of oil will take. Unfortunately, there are some serious misconceptions out there that are not making the situation any easier to cope with. Not to mention that a sound strategy is almost impossible to develop. Probably the biggest misconception is the liberal biased myth that the high prices exist solely for the purpose of feeding the bloated oil industry profiteers, all of them friends of Bush and Cheney. It would be an easy fix if that were true, but it’s not. But since much of the public has been led to believe it, Pelosi, Boxer & Co. have instituted a drive to place a windfall tax penalty on the oil companies.
Many economists suggest that this is a fatal plan. I’m not an economist, but I tend to agree with them. In the first place, even though the oil industry made some huge profits last year, they were not the industry with the highest profit margin. Even though the industry as a whole experienced an increase in profits, that is certainly no reason to punish them by slapping a windfall profits penalty on their income. Part of the reason for that is because that any business needs profit to sustain itself, as well as continue in its growth as a business.
The oil industry has a history of widely varied profit and loss, and while the last year may have been bumper crop years, some analysts feel as though that situation or pattern is unlikely to continue. Already we are seeing declines in usage, changing the supply and demand ratio which will ultimately lead to a stagnation, or more preferable, a drop in retail prices. As the spot price of oil continues to rise based on world demand, the profit margins will disappear. That would lead to a reduction in ability to develop new sources, exploration activities, distillation of crude and so on. basically, we would be stripping the US oil companies ability to compete in the world market, further solidifying our dependence on foreign sources for our energy needs.
But you say that their profit margin is sinful and that they should be giving back to the people by selling gas at a cheaper price? According to Yahoo, the profit for the major integrated oil and gas industry was 9.6% for 2007. The profit margin for REIT/Healthcare Facilities was a whopping 48.5% and an even greater 81.7% for Closed End Equity funds. Any chance of those industries being punished with a windfall profits tax penalty? Not on your life. The rise of Liberalism in the United States has led to a lessening of our standing in other nations around the world. We just don’t appear to be as strong a nation as we use to.
Because of this the value of the dollar is plummeting, and since most of the world oil trades are based on the US dollar, it is costing us more to purchase the oil. The value against the world currencies is changing as well. The newest standard world currency is the Euro, and here are the treasury rates;
Euro value to US $
So you can see where our US dollar value against just the Euro alone has declined about 23 cents in the last year, with the last three months taking the biggest hit. But as you can see, we just aren’t worth as much as we once were in the world market. That is the real issue that we should be addressing. When November gets here, remember that only by electing a strong President willing to be a world leader will we be able to see things turn around. Unfortunately, I don’t see one anywhere in the pack. Or should I say PAC.
Matthew 25:26-28 (King James Version)
27 Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury.
28 Take therefore the talent from him, and give it unto him which hath ten talents.