Apparently politicians think the way to win votes is to promise to take profits from large companies. The politicians have demonized these companies, implying they are solely to blame for the price of a gallon of gasoline. I’m not even going to touch the issues with speculation for now.
The latest mantra is that the big oil companies haven’t invested enough of their profits in alternative energy. Here’s an interesting little thought: Why don’t we let companies decide for themselves what to invest in? I personally think it would be a good idea, but my opinion is hardly law, and the same goes for potential Presidents. The reason I think it’s a good idea is because I’m a fan of capitalism and the free market. The reason they think it’s a good idea is because it may get them more votes, and apparently they’re willing to presume to tell companies how they should do business.
Oil is currently trading at over $130 per barrel, and gas is over $4 per gallon. I don’t think those prices are sustainable. Necessity is the mother of invention, and if those prices don’t come down, the push for alternative energy will gain enough momentum and brainpower to come up with something that eclipses oil. If that happens, companies who still rely on oil will find themselves obsolete and will fold, regardless of how many billions they made last year.
That is why the Saudis are now apparently willing to increase their supply in an attempt to bring prices down; they know that if prices don’t come down, people will find an alternative to oil, and their cash cow will die.
The big problem is when the government tries to step in and tell people how to innovate. The government is the last place I’d look if I wanted to find someone to come up with a new idea. They say ethanol is the future, but really they just jumped on the coattails of the first thing that came along and threw a bunch of money at it.
Oil companies are oil companies. They sell oil and oil products. It’s what they do. If they choose to remain oil companies (as opposed to energy companies) and not to spend any of their record profits on developing other means of turning a profit, that’s their poor business sense. If they do choose to innovate, that’s their choice as well. The government’s place is not to dictate which ventures a business undertakes.
Of course, what’s the motivation? IF they come up with something and make a ton of money, the government will try to slap a windfall profits tax on them and take it away. Way to encourage innovation!