Big Oil? Big Flipping deal

Oil. O-I-L. Awl. Black Gold. Texas Tea.

The following scene took place in the 1990s.

J.R. Ewing: “With Bobby back in the oil business, and your mom back at the ranch, you get to learn about the business from the greatest oilman in Texas.”

John Ross: “Gee dad, the way you talk it almost sounds like you planned it.”

J.R.: “You see John Ross. You’re learning already.”

Dun, dun dun, dun dun dun dun dun dun, dun dun dun, dun dun dun…dun dun dun, dun dun dun, dun dun dun, dun dun dun dun dun, dun dun…

Man I miss “Dallas.” From the opening credits with the gusher to the view of Texas Stadium and the Cowboys, Friday nights were about Larry Hagman wheeling, dealing and stealing in the world of oil.

“Let’s not waste any time. I’ve got a town to take back.”

Yet while art can imitate life, there is nothing glamorous for many people about the sky high price of oil, or as we in the business call it, the barrel of light, sweet crude.

First of awl, I mean all, I work with oil brokers. Yes, life is pretty d@ng sweet right now indeed.

Nevertheless, many are crying over the high prices of oil. While suffering is legitimate, profits are not equal to greed. High prices do not mean collusion, price gouging, or any illegality of any kind.

For those who think I am a shill for Shell, an excuse maker for Exxon, or a cheerful chirper for Chevron, hear me clearly. I am absolutely a rah rah cheerleader for letting legal business make as much money as possible legally.

There are several ways to bring down the price of oil, as if that must happen for all to be right with the world. The first way is to heed the wisdom of Sir Charles of Krauthammer.

“In its search for scapegoats, Congress seems unable to understand what the futures markets are for. It’s a place where risk is traded. If you are an airline or trucker and you want to know what the price of oil will be in a year or two because it fluctuates, you buy a contract so that you don’t have a risk. There’s somebody at the other end with a lot of money who can gamble who purchases that risk, so one side is acquiring certainty and the other is acquiring a risk and making a profit, but with a risk that he can actually lose if the price will decline.

The minute you intervene in the markets as the democrats and a few republicans as well want to do in the Congress you are going to create situations in which people will not be able to unload risk who need it and want, to which is insane…that’s why you have these markets and liquidity will dry up.

I think Congress are being unreasonable pikers here. If you want to bring down the price of oil, you do what you suggested at the top of the show. You abolish the law of supply and demand. Just repeal it. I mean who passed that law anyway?

I am sure democrats would insist on those making $20,000 per year. The House will pass a law repealing the law of supply. The Senate will give us a law repealing the law of demand, and they’ll get it done together in conference with a majority. I am sure that the President will not override…no, he will stand.”

Capitalist Pig Jonathan Hoenig offered his own tactless solution, another reason to like this guy.

“If you want to bring down the price of oil, just blow up Iran.”

For those who find this approach barbaric, sit down and sing Kumbaya while I explain the logic.

Iran is a terrorist nation run by terrorists. They are the ones who took American citizens as hostages for 444 days. President Armageddonijad was one of the hostage takers. These people refer to America as the Great Satan, and refer to us as imperialists.

They have no idea what imperialism is. We should show them imperialism. We should blow up the palaces where the Mullahs live, and simply seize the oil. That’s right. We should just take it.

Some will say that we cannot take it because it does not belong to us. So the heck what? They did not have to kidnap our soldiers. They have been at war with us for 30 years, and to the victors go the spoils.

Oil companies are not the enemy. The enemy is OPEC, and the various Arab Governments that allow these less than human beings blackmail the world. American oil companies are on our side.

Yes, we need to develop other energy sources. Yes, we should drill everywhere and anywhere, every second of the day. We should drill on the foreheads of teenagers and suck oil off of their faces if that works. We can drill holes in the heads of liberal members of Congress. We might find waste in there, which can be used to make fuel.

What we cannot and should not do is blame speculators for playing by the same rules as everybody else. Speculation did not begin in the 21st century. Supply and demand has been around forever. Speculation is as old as the hills.

Yes, greedy speculators are now the replacement for greedy bankers, greedy mortgage lenders, and every other person that has the nerve to get rich by being more enterprising than the person complaining from the sidelines.

For those who have a problem with speculators, I have several questions.

Do you own at least one share of stock? If so, liquidate it. You are a speculator, and have no right to own it.

Do you have an IRA or a 401k? Sell it. You are greedy.

Have you ever gone to Las Vegas, Atlantic City, or Gulfport, and played any casino games? If so, you must cease immediately.

Have you ever gone to OTB, Aqueduct, or Belmont or Roosevelt Raceway? You must stop attending these places immediately.

Have you ever bet on a sporting event, such as football? If so, you are a greedy speculator trying to earn profits.

The above scenarios are all examples of taking risks. Taking risks is what this nation was founded upon.

Have you ever tried to start a small business? You are taking a risk.

The greater the risk, the greater the reward. Nobody is forced to take risks.

Ok. Fine, some people say. People have a right to make profits. They should just not make obscene profits. They should not make excessive profits. They should not make unreasonable profits.

Who the bloody hades has the right to decide that somebody else’s profits are too high?

Also, why is it that those who try to make this determination are often people who produce nothing, such as liberal members of Congress?

I think that Congressional salaries are unreasonably high. They should have to give back a certain amount over and above a certain level because I say so. I have never been a public servant, but I am arbitrarily deciding that I know better about a sector I have never partaken in.

That is what public servants do when they bully and harass the private sector for being successful. Make no mistake about it. For every noble person that truly loves public service, many members of Congress are public servants because they would not last five minutes in the private sector, also known as the real world.

Elections are popularity contests. Running a business demands actual results.

Now, as for these “speculators,” they have always existed.

Speculators bet for and against markets. They bet on prices moving upwards and downwards. They do not trends. They follow them. In the mid 1990s, speculators bet up the price of internet stocks. In the beginning of the 21st century, speculators switched sides, and the prices came crashing down. In both cases, and in all cases, speculators are reactive, not proactive. They see an investment in their favor, and they capitalize. They see an investment moving against them, and they bail to avoid further pain. This is rational behavior.

Yet since oil is a commodity that people use, and not a piece of paper, as is a stock, the rules should be different. No. The rules should not be different.

What about the emotional argument that it is costing more and more to fill up the gas tank?

So the heck what!

There are buses, trains, bicycles, and other options. More people are working from home. Teleconferencing is replacing face to face meetings. While I refuse to do so, other people are buying hybrid cars. I would consider buying one if the auto makers create one that is not ghastly looking. For those that do not care that the Prius is hideously ugly, they have that option.

I chose to work a few minutes from my home because I drive an old car. My previous job had an hour commute, and now I put almost no miles on my car. It will last longer.

If speculators were betting against oil, that the price would go down, would that be any different?

For those worried about the price of oil, a deeper question remains.

Why did you not join the speculators? Why did you not take a risk? Why did you not invest in oil?

The reason does not matter. People took high risks, and earned high rewards. Yes, I used the word earned.

Others chose to play it safe. This is necessary for some. People with a family to feed often have less ability to take risks. They put money in the bank, yet get hurt by inflation.

Therefore, not taking risks can be even riskier at times.

The bottom line is that there are not enough speculators in the world to override the will of the free market and the law of supply and demand. Oil at some point will have a violent pullback. I have no idea when. What I do know is that some people will decide to lock in profits. Others will get in, see it come down, and decide that they got in at the top. They will decide to cut losses. Either way, the reversal will be ruthless, as all reversals are.

Many people will see the price crashing, and they will have to determine if it is a pullback in a bull market, or if the market has entered bear territory. If the market develops a bearish trend, these same greedy speculators will bet on the price to go down. This may drive the price down further.

This would lead to cheaper gasoline prices. Will we then throw the speculators a ticker tape parade? Will we then forget about alternative sources of energy? Will our government give back the profits they seized from the oil companies?

Of course not.

Liberals will spend the next few years doing what they have done the last few years. They will refuse to drill. They will fight nuclear power. They will fight building more refineries. They will blame greedy speculators.

Maybe if they cared less about trees and animals and more about human beings, the price of oil would come down.

Yet bringing the price down is debated only in terms of how. It should be debated in terms of why.

Why not have oil prices right now? The market wants that. When the market wanbts them lower, they will be.

Big Oil? Big flipping deal.

I support big freedom. I do not want freedom lite. I want freedom in the form of a Texas sized gallon hat.

To quote the character that Larry Hagman mastered, complete with the grit eating grin, I say this.

Get in the oil business. If you do, you’re learning already.


15 Responses to “Big Oil? Big Flipping deal”

  1. The speculators would LOVE to see Iran bombed. What killing they”d make. Heck, they’re praying for it with what futures are costing these days. Bomb Iran and bango – $200 a barrel oil. More blood for profits.


  2. Micky 2 says:

    I would rather see the blood of ruthless murderous dictators get spilled than to see my family and country starve.
    I love Johnathan Hoenigs idea.
    Or we should simply ask the Iraqis to kick some oil down. They cant decide how much of what belongs to who right now anyway.

  3. War makes some people a lot of money, Micky. That’s why many of our Founding Fathers strongly urged us to avoid foreign entanglements, and that’s why we never maintained a large standing military in times of peace all through our history until, unfortunately, after WWII. I feel sorry for the sould that would gladly kill to make their life a little easier. What a terrible karma to have.


  4. Micky 2 says:

    Its not about making life “a lttle easier”
    Its about our entire finacial structure avoiding collapse.
    The souls of the Iranian leadership can rot in hell for all I care. Never mind the karma they will take with them for being instrumental in the deaths of hundreds of our soldiers past and present.

    Yes Jersey, the Iranian leadership would definitly find better karma if they listened to you.
    The problem is that they as you said “gladly kill”.
    We kill out of neccesity.

  5. If our great republic is such that it could “collapse” lest we go around bombing the Third World, I would suggest that perhaps we’d better get our priorities straight. With all due respect, you Neocons are wrecking this nation.


  6. Micky 2 says:

    Here we go again
    I’m not gonna argue this with you all over again.
    You want to deviate from this to that , fine.

    We Neocons are ones keeping this country and your butt in one piece.
    Since the left looses 3 out of ten elections it seems we have been assigned the job of keeping us in one piece by the people often enough so that any normal person could see that we are better at it.
    Right now we are putting everything back together that the left has neglected and wrecked in the past.

    Its like Iraq, we were given just cause to go in and the collteral benefit was that we could establish a needed presence in the middle east.
    Iran is a threat to world peace which would give us just cause to go in take what the new leadership may well give us out of gratitude for ousting the mullahs, clerics and Amadingdong.
    The may just sell it ti us at bargain rates.
    Get it right.
    Iran is not a third world nation. Far from it. It is the largest state sponsor of terrorism . It is on the verge of producing a nuke. It has massive oil reserves and it kills Americans and attacks our allies on a daily basis.

  7. Micky 2 says:

    I’m not as keen on the subject as eric , but I have a feeling that once other options are seriously explored and show potential for actually being able to contribute our energy supply the bets on oil would come down.
    Unfotunatly anytime previous to an election is when we will here alot of what we want to hear and what we need to do instead of how to actually get the ball rolling.

  8. barnhartblog says:

    Eric, thanks for responding to my Blog-mail. You are correct in saying that your Blog today matches upo well with what I sent you. Interestuing how you tied in Iran on this. That is interesting and very correct. Isn’t interesting how our problems now can be related by to Peanut Man Jimmy Carter. Good Grief!


  9. timbudd says:

    Jimmy Carter is gonna feel real comfy in the enxt year or so I think, the economy is going to look real similar to the one he gave us, I fear.
    We are the Saudi Arabia of coal. Even France had enough sense to shoo their woodchuck tree-huggers to the side and build nuke plants by the dozens. A practical electric car is right around the bend folks – the plug-in kind that McCain won’t have to pay 300 million for – and we do not have to get any of the electirc from anyone else but us.

  10. blacktygrrrr says:

    I added a link in this post just now to a very serious energy policy conference.

    Although the Republican Jewish Coalition is one of the groups promoting it, this is not a pep rally. It is an energy conference by two scholars on the issue of moving America away from oil.


  11. Norm says:

    Step 1. Capture Plains Georgia and one inhabitant.

    Step 2. Harvest all the peanuts (peanuts have oil).

    Step 3. In order to get the oil from the peanuts you need a catalyst to get things statred. Take all the peanuts and place them in one huge tank. Then add catalyst (identified in step 1 as inhabitant)

    Step 4. Mix above ingredients well and let ferment.

    Step 5. After fermentation place mixture in wine press. And press hard.
    Voila! Oil

    Step 6. Remove one inhabitant’s name from Plains phone book. James C. Carter

  12. Micky 2 says:

    Thanks for the link Eric.
    Sometimes it sucks to be 3000 miles out in the middle of the pacific.

    Although I hold Carter responsable for introducing ethanol like no one else ever did I dont think its his fault we see a repeat of his mistakes being played out today.
    Its an organic mentall illness that seems to transcend to new generations of liberals. This is why they are always repeating historical mistakes.
    We just went through this with the appeasment thing and Carter.
    30 + years later and even he is repeating his old mistakes
    Its like Bill Murray in groundhog day.
    Except they’re all liberals and not just one guy.
    It took him about 20 trys before he got it right.

  13. Norm says:

    Excuse my error…That’s James E. Carter

  14. Eric, c’mon man. Do you really expect sentient human beings to believe that demand for all thsoe commodities have risen by those percentages in those periods of time? C’mon.


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