india fuels anti-profits
by Vincent Rooley
Published: June 5, 2008
India’s Prime Minister Manmohan Singh announced yesterday that gasoline and diesel prices would rise by 11% and 10%, respectively. This unfortunate announcement was prodded by unsustainable weekly losses of nearly $1 billion at state-run refineries (yes, I mean $1 billion as in $1,000,000,000 and it happens weekly, every seven days). To deflect the rage of a public that already faces inflation rates of 8.1%, (inflation in the U.S. is roughly 3.5%), the prime minister wisely put the blame on foreign oil producers:
“There are limits to which we can keep consumer prices unaffected by rising import prices… We remain dependent on imports. We are, therefore, vulnerable to global trends in oil prices.”
In a surprise response to the price increases, the various Communist parties that comprise a major voting bloc within the Indian government promised to spend the week striking, protesting and blocking railroads and highway traffic. The Communist Party of India called the price increase an “unjustified burden.”
In a free-market society, their reaction would make total sense. Last year I could fill my tank for $40 and now I’m pushing $56. As soon as I cross the $60 mark, I’m fairly certain it will make total sense for the proletariat to rise up and turn the administration of our energy supplies over to the federal government. Certainly greedy capitalists are at the root of my gasoline woes and if only a benevolent government would put itself in charge of taking from each according to his ability, it would then be able to distribute to each according to his need. Right?
Well, not in India. The benevolent government is already in place, it is setting prices and has an aggressive fuel subsidy program for the country’s poorest citizens. But not only are consumers getting jabbed at the pump, they can’t even shake their fists at record profits for the fuel ministry. The fuel ministry is helpless. I quote:
“We are helpless.” - petroleum minister, Murli Deora.
And he’s right. The government is taking out a $22 billion loan to help slow the bleeding during summer. Though that might be necessary, it still doesn’t explain where all the money is going. When oil companies the world over are seeing record profits, why the losses? Instead of offering an explanation, Mr. Singh curtly states that Indians must simply “learn to adjust.”
So what’s a Commie to do when the revolution has already occurred and no one in the worker’s paradise can buy fuel for their gas-powered stoves? Block railroad and highway traffic, I guess.
Meanwhile, in the Gulf of Mexico, Shell is installing an enormous oil rig that will pull 100,000 barrels of oil a day from the deep see. Historically it has not been cost effective for companies to commit large amounts of capital to deep see drilling. But when your raking in cash hand over fist, hey… why not?
And not only are producers in the black, but so are refiners, marketers and brokers. And though I’m sure the guy who owns your local pump isn’t rolling as deep as a Shell exec, he’s probably not sitting around wondering where his next meal is going to come from either.
So as Americans from New York to San Diego jointly feel the pain of their fellow gasoline consumers in India, we in America can at least comfort ourselves with the knowledge as to where all the money goes - Shell.
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June 6th, 2008 at 7:25 pm
Vincent, I liked your article but I think you could have made a stronger point than to say the money goes to Shell. For example, while we don’t like high gas prices, they make exploration and deep sea drilling cost effective. What’s more, they also make exploration into alternative energy sources profitable.
Subsidies, on the other hand are not cost effective at all: the government doesn’t have any money other than what it takes from its people, so Indian motorists pay at the pump and in increased taxes. Either way, they’re paying for the gas. Further, they’re also burdened by the costs of the resultant bureaucracy with its inefficiency and waste. There’s also the loss of productivity that profits inspire. Nor are the Indian people incentivized to conserve as they would be with higher prices at the pump.
So while Indian commies rant in the streets, free-market capitalists are working to increase our supply and looking for alternatives to reduce demand, both of which work to bring the price down. Who wants to bet that fuel prices will drop in America before India? And that without the government’s intervention, uh, I mean help.
June 6th, 2008 at 7:26 pm
Still, good article.
June 7th, 2008 at 3:48 am
Your preachin to the choir director man. People are up in arms at supposed obscene oil profits, but there’s no such thing as obscene profits. Well that’s not entirely true. Obscene profits are “profits that aren’t mine.” In other words, if Michael Moore were to be asked what the country should do about Big Oil, I’m sure he’d go on a socialist rant about poor people in Minnesota and rich executives at Chevron. But when asked about “obscene” profits earned by documantarians, I’m certain he’d assure you that such a phenomenon does not exists. Same thing goes for people who make fitness videos like Jane Fonda. Ask her about the obscene profits earned by over-the-hill actresses and she’d probably climb down off her vietcong anti-aircraft gun and tae bo you to death. Having said that, let me revise my definition of obscene profits to read, “profits made by conservatives.” There that makes sense.
Shell’s making a killing. Just like Mr. Moore. Just like Fonda. Just like Streisand. There’s nothing wrong with making a killing.
June 8th, 2008 at 12:25 am
I agree. Still, even in pulling down record profits, Big Oil’s return on investment is only 8.6%–only slightly better than average for American businesses. And where are the profits going? They’re going to Joe Average American whose retirement is firmly secured in mutual funds investing in Big Oil. Let me say for the record: I hate paying $4/gal., but at least in America Joe Average is getting his share of the profits.
June 8th, 2008 at 12:20 pm
Good point, Terrance! Where I’m feeling fanoogled is on my paycheck: paying FICA taxes to fund a system that everyone agrees is in crisis and likely to go bankrupt in the next decade or two. Joe Average pays more each month in FICA than gasoline, even with rising fuel costs. Being self-employed, I pay double in FICA. What a relief it is to know that my retirement is safe in Al Gore’s lock box! Maybe if I had the choice to invest that money instead, I could claim a bigger share of Big Oil’s profits.
June 10th, 2008 at 9:05 am
“In other words, if Michael Moore were to be asked what the country should do about Big Oil, I’m sure he’d go on a socialist rant about poor people in Minnesota and rich executives at Chevron. But when asked about “obscene” profits earned by documantarians, I’m certain he’d assure you that such a phenomenon does not exists.”
He probably would say that because compared to big oil, profits from documentarians basically DOESN’T EXIST!!!
June 10th, 2008 at 5:10 pm
Well the kicker hear is that nobody HAS to go see Michael Moore’s movies, or buy Jane Fonda’s work out video’s. Realistically American’s have next to no choice when it comes to buying gas. So for someone to make an obscene profit off of that is a little different.
That being said blaming Oil Companies for gas prices would be like blaming Orange farmers for a hurricane coming a long and whipping out half their crop. The only argument you can make is that either big oil has forced america to be dependent on foreign oil or they purposly are restricting the supply. Neither of which is true, although their lobbyists in washington aren’t helping.
June 11th, 2008 at 1:32 am
Justin,
In absolute terms your argument makes total sense. Yes documentarians profits are nominally insignificant next to Oil’s nominal profits. But making that comparison is pointless. In 2005 M. Moore had an estimated net worth of $50,000,000. (By the way, despite claiming to not own any stock, World Net Daily uncovered 2,000 Halliburton stock certificates with the Anti-Capitalist’s name on them) That’s a huge amount of cash and I can gaurantee you that he has an accountant who makes sure that he gives as little away to Uncle Sam as possible - just like Big Oil. If Moore and like-minded socialists really do believe in government their tax returns will prove it. If the Federal God-Mother really can make all of our problems go away than Moore and his croonies will be paying way more than their tax bracket requires. If France has it right, than Moore will give half of all of his earnings to the national government just like they do in France.
Yes documentarians can make huge jack. HUGE JACK. And when they pile up those coins, no matter what political idealogy they espouse, they give as little as possible to the IRS.
At least the people at Shell keep it real. I close with a quote from Abe Lincoln in honor of M. Moore:
“I should prefer emigrating to some country where they make no pretence of loving liberty — to Russia, for instance, where despotism can be taken pure, and without the base alloy of hypocracy.”