C-Span the Myron Ebell
Myron did a 40 minute interview on C-Span here:
At all costs, Ebell has got to stop people understanding the economics of this. The US produces a fraction of the oil supply in the world (having started early and burnt its way through most of it). If the sum of money proposed to continue developing the domestic supply in the US were not spent drilling oil, it would make a minute dent in the world supply, and therefore make no difference to the price. Suppose we spent this money on infrastructure that reduced the dependence on oil (eg electric mass transit). Then the price rises wouldn't be so important and damaging to consumers.
Myron Ebell does not want alternatives to oil to be developed, because that would cut into the oil companies' profits. Nothing else matters to him, no matter what its cost.
Q: Who controls the price of oil?So, to sum this up: Oil companies good, they can't ever make too much money. Governments bad, always causing crises by regulating things, there's never a crisis resulting from lack of regulation. I don't know any of the numbers, but it doesn't matter, because this is what I believe. Technology will continue to improve under the current economic system, even though it always seems that the economic system actively fights any attempt at improvement (by, for example, hiring Myron Ebell and getting him on the media where he systematically lies about everything under the sun). And we have to drill more oil in the United States, so these companies can make more money on the world price.
It's set on a world market. The OPEC cartel tries to control it, but they can't do it all.
Q: Do oil companies have any control over the price at all?
A little bit, depending on where they invest
Q: It was noted that oil company profits have quadrupled over the past six years. Given that, what are they doing about the price of oil?
The first thing is they're making a lot of money. That is a good thing. You have to remember they're very big companies, bigger than they used to be because there have been a lot of mergers. And if they weren't making these profits that would be a sign that they should be investing less or in something else.
[I thought profit was the income less the investment. If you don't make any investment, you can make a lot of profit, like the UK privitized railway did for 10 years until too many trains kept shattering the rails --MEC]
As they are making so much money that's a good sign that they should be investing more money into refineries and other oil infrastructure. Of course, Congress has put up lots of barriers to this investment.
Q: And what are those?
Congress has roped off 85% of our off-shore areas and the ANWR. So the oil companies are having a hard time investing in the US and they're having to invest most of it abroad.
Q: If there was more investing in US oil resources, then the price would come down?
That's a complicated question. The US supply would be added to the world supply and the world supply of oil is having a hard time keeping up with demand.
[This is probing the myth that drilling in the US has anything to do with the price of gas. It's merely cheaper to drill and transport for the oil companies, so their profits are higher because they charge the international price as though it was shipped from Iraq --MEC]
Q: Do US oil companies have any obligations to US consumers?
That's a peculiar question. The rate of return on the oil industry is a little bit above average of all companies in the US. You should ask Microsoft, which gets a much greater return, do they have an obligation to lower the price of their software? They need these profits for investment.
Profit is a good thing. It's a sign that a company is using its resources efficiently.
Q: Is the proposal that oil companies should invest 10% of their profits in renewable energy realistic?
No. Politicians have a terrible record with running businesses and telling them what to do, especially energy industries. The regulations brought in following the oil crises in the 1970s made a mess of things, only improved when Reagan came into office and reversed them in 1981.
[Our political system is not pro-active. Regulations tend to follow the crises, but I guess from 30 years away it looks like it's all the same time to us, so Ebell can lie that the regulations caused the crisis rather than the other way round --MEC]
Q: Companies have been investing 1% of their profit into alternative fuels. Is that adequate?
These biofuels are going to raise the price of gasoline, not lower it. (Rambles on about the crappiness of corn ethonol). The oil companies realize that the amount of energy that can be got from these sources is very limited, so they are deserving only of limited investment.
Q: What about the issue of Bush and Cheney's conflicts of interest with the oil industry when setting policy?
They came from the oil industry which means they know more than your average person how it would work. Their early policies were intended to increase the supply of oil, which would bring down prices. Lately they've reversed these good policies.
Q: Congress has voted to rescind $18billion in oil company tax breaks. Should Bush veto this?
Yes. Congress originally voted to lower corporate tax rates. Now it's trying to raise those tax rates up just for those 5 big oil companies. This is the kind of interference in the market that causes problems.
Q: (Caller question about the dollar currency, and Iran accepting payment in Euros)
I am not an expert in the political situation in Iran.
Q: (Call from a gulf war veteran about the wars for oil)
I am not an expert in the geopolitics of oil or the arab world.
Q: Maybe you should explain what the Competitive Enterprise Institute does.
We're a non-partisan, non-profit institute and we specialize in regulatory issues from a free market perspective.
[You lying Republican party stooge --MEC]
Q: (Caller asks how can you compare big oil to Microsoft?)
Right. We have some necessities, like transport. But the problem is not with the oil companies, it's with Congress where they complain about gas prices and then propose policies like cap-and-trade that increases these prices.
In Europe where they pursue these global warming policies they're paying $7 and $8 a gallon.
Q: Should consumers reduce the amount of gas they use?
As the price goes up they will have to, except for rich people who won't feel it, like Al Gore.
Q: (Caller who is a long time oil investor -- lost $10million in the 1980s during the bad times -- rambles on a bit. We rely on Ebell to speak up for our interests.)
I appreciate the kind words, and I'm glad he's made a lot of money.
Q: (Caller talks about solar powered satellites.)
Well, there are lots of ideas out there. Things move on. My father farmed horses, and that technology has been superseded.
I believe that people who make the breakthroughs in the future will be people who have the incentives of the market.
We have the freest market in the world in the US, and we have the greatest technological innovation.
Our children and grandchildren will have a very different view of using our energy than we do now, but that doesn't solve the problem today, which is $3.30 gasoline.
Q: (Caller in says prices go up, and they don't come down, and the oil companies keep getting tax breaks.)
We should get rid of all mandates and tax subsidies, especially on ethanol, which is way higher than any subsidy given to the oil companies.
Q: (Caller asks how much of the gas price goes on drilling, refining, etc...)
The vast majority of crude supply nationalized by governments, not owned my oil companies, and they're not very competent.
Q: Can you break it down?
I don't have the figures right here. Current profit is 8%. Refiners are breaking even. Tax about 25c per gallon. It would be useful if gas stations were allowed to post the tax rate as well as the price on their pumps.
Q: How much do oil companies pay in tax per year?
They pay a lot in taxes. I can't tell you the sum, but they pay the same corporate tax as everyone else does. The investors who get the dividends then pay their own taxes on that. So you get a big tax burden throughout the system.
If you want to get a breakdown, go to the Department of Energy website. It has everything.
Q: (Caller: what does the government get from drilling on federal lands?)
The state gets half of the royalties. It's about 18%. The Federal government could raise a lot more money if they didn't close 85% of their off-shore waters
At all costs, Ebell has got to stop people understanding the economics of this. The US produces a fraction of the oil supply in the world (having started early and burnt its way through most of it). If the sum of money proposed to continue developing the domestic supply in the US were not spent drilling oil, it would make a minute dent in the world supply, and therefore make no difference to the price. Suppose we spent this money on infrastructure that reduced the dependence on oil (eg electric mass transit). Then the price rises wouldn't be so important and damaging to consumers.
Myron Ebell does not want alternatives to oil to be developed, because that would cut into the oil companies' profits. Nothing else matters to him, no matter what its cost.
posted by goatchurch Perma-link
3 Comments:
Although I share your opinion of Mr. Ebell, you've made a couple of technical mistakes here.
First: profits. Profits are definitely not "income less the investment".
Profits are revenues less the cost of sales (including administration, depreciation, interest, and taxes). If dividends are paid to stockholders, the retained profits are added to the capital account, out of which the company can make new investments in its operations. If the amount available for re-investment isn't adequate, then the company either sells new shares or borrows money by issuing bonds.
Second: it's not necessarily cheaper to drill and transport in the US. The offshore drilling that the oilcos are lusting after will be much more expensive than conventional production from most overseas concessions, including those that they might get in Iraq.
But you're right that it won't have any appreciable effect on price. It will just be a new profit source. And pollution source, too.
Many thanks for this informative intervention. I've not had any accountancy training, but when I do look at balance sheets I can almost hear Oliver Wendell Holmes say: "The US constitution is what I say it is".
Same may be true for "cost of sales" in any business more complex than retail.
I'm a little confused in the term "Non-profit" where sometimes they say "100% of the profits are put back into the organization", and I'm like: "Why are you telling me what you're doing with 100% of nothing?"
I'm also unclear of (and maybe you can sort this out) is when there is a tax on profits you sometimes hear there is a tax-relief on investment. It always seemed to me that if taxes are applied only on profit-taking from a business (income, minus cost of sales, minus re-investment, minus expense claims for that company sports car, and what is finally cashed out by the executives) then it should have no impact on the normal functioning of the business. Except a lower rate of tax will encourage the landlords to leech more funds out of the business.
Who knows?
There's so much deliberate malicious mis-information given out by the likes of Myron Ebell that we don't hear anything else at all. So he would suggest that the massive bonuses taken by financial industry players last year was the definitive evidence of a healthy business, when actually it felt more like a raid on all the cash registers. But you don't get to see that part. Only if you were able to go into the business and count all the stocks of money stashed away throughout the business before and after the event would you be able to tell what went on: legitimate profit-taking, or theft.
In this void of information, all that's left is opinion. Which is especially misinformed if they don't remind us of past events.
Regarding the oil shipping. Unlike, say, the meat industry in Britain where 100 thousand tonnes of frozen lamb are exported to Europe, and 100 thousand tonnes of frozen lamb are imported from New Zealand, I am lead to believe that the US oil supply is fed by Canada and Venezuela, and not so much by the middle east. At some point there's got to be some sanity in shipping nearby products to nearby places.
There's a lot more to oil than just the stock price. There's also security in terms of the business being able to mismanage its assets (play fast and loose) and then get a bail-out.
Perhaps it's imponderable, but following the recent overseas wars for oil, if I owned an oil well in the off-shore Pacific, I'd probably imagine on counting on more financial assistance from the Fed than one far away overseas where there may now be a lesser political appetite for protecting it.
This should be part of the cost of drilling (it's the risk), but maybe it's too hard or politically inconvenient to take account of.
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