2010: Time to Arrest the Oil Extortionists? [View article]
If we follow the logic of this silly article, we would need to file anti-trust and gouging charges against many, if not most, of our corporations.
The author, and some commenters, are upset that the price we pay for oil greatly exceeds the cost of pulling it out of the ground at the world's cheapest wells. By this logic, how about the price we pay for cereal? Grains cost about $5 for a bushel (about 50 lbs). Most kids need to eat cereal, and their parents are forced to pay $4 for a box that contains 10 cents worth of grain. After adding some sugar, etc, the cost of the contents of a box of cereal is 20-25 cents, yet the poor consumer has to pay 15x-25x that cost. Should we haul the managements of the cereal companies off to jail?
How about clothes? People need underwear and socks, and our retailers sell them for 10x-20x what they pay the Chinese for them, so why don't we haul our retail executives off before the courts or the congress too?
How about tomato soup, or pasta, or soap, or toothpaste? Do you think the cost of ingredients in the package are commensurate with the price charged to the consumer? Should we sue their producers' executives too?
There are many other examples of necessities for which the consumers' final price greatly exceeds the basic cost of the goods or the raw material. This is natural, as there are many other components of cost, and if business cannot profit, it will not make the effort to develop a product and bring it to the consumer. However, the author's deficient logic implies that all these goods have to be subjected to price controls by the state. This is what centrally-planned (aka communist) economies have attempted, and the result was that production of all these necessities dropped, and so did their entire standard of living.
2010: Time to Arrest the Oil Extortionists? [View article]
Oil is too cheap. We waste too much of it unnecessarily, destroying our health by breathing pollution as a result. It is a finite resource, and its price will continue to trend inexorably upwards. We need to accept facts and plan accordingly, rather than bury our heads in the sand and blame cartels and manipulators.
We need to stimulate the economy by investing in jobs for energy efficiency, not by wasting money on pork. We can stimulate the auto industry by subsidizing smaller, fuel efficient cars and can create jobs building high-speed rail that reduces pollution, reduces highway and airport congestion, and reduces oil consumption. Ditto for nuclear and renewable energy.
If high oil prices are the only way to motivate us to implement such necessary changes to our economic model, then they are a blessing, even though those with limited vision are unable to see it as such.
The notion that if only the evil cartel were to pump out an extra 5m bbd then price will drop and all will be well forever is silly. This simply creates a greater crisis for our children and prevents us from implementing policies that create useful jobs that truly benefit our economy.
Oil stocks are a great buy for those with a 5-year investment horizon. Short-term, though, there could still be significant downside risk.
Regarding MRO in particular, it is now below half it's 2007 peak, but at about triple the last bear market's trough. So, it's now both cheap and expensive, depending on how you look at it.
2010: Time to Arrest the Oil Extortionists? [View article]
The author, and some commenters, are upset that the price we pay for oil greatly exceeds the cost of pulling it out of the ground at the world's cheapest wells. By this logic, how about the price we pay for cereal? Grains cost about $5 for a bushel (about 50 lbs). Most kids need to eat cereal, and their parents are forced to pay $4 for a box that contains 10 cents worth of grain. After adding some sugar, etc, the cost of the contents of a box of cereal is 20-25 cents, yet the poor consumer has to pay 15x-25x that cost. Should we haul the managements of the cereal companies off to jail?
How about clothes? People need underwear and socks, and our retailers sell them for 10x-20x what they pay the Chinese for them, so why don't we haul our retail executives off before the courts or the congress too?
How about tomato soup, or pasta, or soap, or toothpaste? Do you think the cost of ingredients in the package are commensurate with the price charged to the consumer? Should we sue their producers' executives too?
There are many other examples of necessities for which the consumers' final price greatly exceeds the basic cost of the goods or the raw material. This is natural, as there are many other components of cost, and if business cannot profit, it will not make the effort to develop a product and bring it to the consumer. However, the author's deficient logic implies that all these goods have to be subjected to price controls by the state. This is what centrally-planned (aka communist) economies have attempted, and the result was that production of all these necessities dropped, and so did their entire standard of living.
2010: Time to Arrest the Oil Extortionists? [View article]
We need to stimulate the economy by investing in jobs for energy efficiency, not by wasting money on pork. We can stimulate the auto industry by subsidizing smaller, fuel efficient cars and can create jobs building high-speed rail that reduces pollution, reduces highway and airport congestion, and reduces oil consumption. Ditto for nuclear and renewable energy.
If high oil prices are the only way to motivate us to implement such necessary changes to our economic model, then they are a blessing, even though those with limited vision are unable to see it as such.
The notion that if only the evil cartel were to pump out an extra 5m bbd then price will drop and all will be well forever is silly. This simply creates a greater crisis for our children and prevents us from implementing policies that create useful jobs that truly benefit our economy.
Marathon Oil's Grim Q4 Interim Update [View article]
Regarding MRO in particular, it is now below half it's 2007 peak, but at about triple the last bear market's trough. So, it's now both cheap and expensive, depending on how you look at it.