Jon Bon’s Money

Big Oil

Otherwise known as Exxon Mobil, Royal Dutch Shell, British Petroleum, Chevron, Conoco Phillips, and Total SA. First of all let’s talk about the name. This of course is the name that the press or politicians use when they are complaining and moaning about the price of gas which has nothing to do oil companies.

Newsflash: Oil companies have to be big. The reason for this? They have to be big to create the enormous economies of scale that allows them to produce gasoline at the price that you and I buy it for. There is nothing wrong with being a big company, it simply lets BP pump, refine, ship, and sell crude at lot sizes of 100,000 barrels per.  If there was a mom and pop oil company it would sell oil at $50 a gallon for premium!

If certain politicians, environmentalists, and celebrities had their way laws and taxes would make being “big oil” unprofitable and drive them out of business.  When did selling a product that people want to buy for a profit become faux pa? I hear chatter on the news about levying additional taxes on the oil industry.

80,000,000,000! Yes thats right eighty billion, and that is Billion, with a B.

 That is what big oil made in profits in 2007. Excessive? Maybe. Should we tax them more? Of course not! They already paid 40,000,000,000 in taxes!

                                                                Net Income        Income Tax

ExxonMobil (XOM)                              40,610,000       29,864,000 

RDS                                                         No Income Statement

BP (BP)                                                   21,169,000       10,442,000

Chevron Corporation (CVX)                18,688,000        13,479,000

ConocoPhillips (COP)                         11,891,000        11,381,000

Total S.A. (TOT)                                   19,935,702        19,994,618

Totals                                                    81,714,702      41,817,618

Coal Companies

            Lots of people (read: environmentalists) love to complain about coal companies. Now if we could economically run this country off of wind and solar power, that would be fantastic. I think the chances of that are even worse then the chances of me collecting social security. So I am not an anti-renewable energy guy, I am just a realist.

So back to coal. Do you know why we use so much coal?

It’s cheap.

It’s abundant.

It’s easy to transport.

And did I mention it’s cheap?

            Those reasons (mainly because it’s cheap) are why coal provides 51% of the electricity in this country. Solar and wind energies are too expensive to produce, political and environmental reasons keep us from building more nuclear power, and there is no where else to build hydroelectric dams.

            So we are stuck with coal. We can all either lower our electricity consumption by 50% and kiss our AC and plasma TV’s goodbye, or we can pay 5 to 10 times more for our electricity. It’s not the best situation, but coal is the most cost efficient power source that is available to us in large quantities.

            It was a 1995 movie that has a great plot and has developed a bit of a cult following. The movie starts out with a high profile robbery taking place. The police have no idea who committed the crimes, as a result they arrest the five usual suspects on trumped up charges and make them stand for a lineup.

            It’s a great flick with crazy plot lines and a dramatic ending–I highly recommend it. It got me thinking of the usual suspects in America when it comes to the news today.

Wal-Mart

Exxon and Company

Investment Banks

McDonalds

Coal Companies

            These ‘big five’ are constantly featured in the press usually with negative story lines. Many people advocate suing or taxing these companies back to the Stone Age. I will tell you why that is probably the worst idea that I have ever heard.

Part I: Wally World

           AKA Wal-Mart. It has any number of complaints about it, low wages, sexism, drives out local business, shady business dealings with suppliers. You name it, they have been sued for it.

            You don’t have to go to Wal-Mart folks. If you disagree with them for any of the above reasons don’t go there. But millions of people still do, and why is this? Wal-Mart is the Best I repeat BEST retailer that has ever existed. They have constantly maintained the lowest price on goods that can be found anywhere. If your local store goes out of business due to a Wal-Mart, it is just survival of the fittest; only the strong (best) survive.

            If you have not noticed Wal-Mart has single handedly lowered the cost of living for all Americans who shop there. The other big box retailers and groceries resort to loss leader tactics to get you in the store. They lose money on certain products in hopes that you will spend money on their high margin products.

            Wal-Mart does not do these, and I bet their everyday low price still is close to or beats their competitions’ loss leader prices. At the risk of sounding like an advertisement, I will end with one more point.

            You might be rich enough, or green enough, or snobby enough not to shop at Wal-Mart, but if you’re complaining about the cost of bread, or meat, or light bulbs get over yourself and go to Wal-Mart.