All Sorts of Things

Random posts on all sorts of things designed to inform and provoke.

Global Economy: The Oil Market Helps Almost Everyone

It’s truly a special time when market conditions coalesce in such a way so as to benefit a majority of a commodity’s market participants. Such is the case with the oil industry as record high oil prices continue to benefit members of the oil industry, the alternative energy industry, the automobile industry, and the global economy. The current market prices do hurt those with no connection to this industry but those are just the little people and no one cares about them so neither shall we.

Clearly, the biggest beneficiaries of this price increase are the countries that have the largest reserves of crude oil. While the world focuses on the revenue collected by Middle Eastern countries, let’s not forget nations such as Russia, Canada, Venezuela, and the United Kingdom – one of the factors noted for the recent rise in crude oil prices is thought to be the outages in the North Sea – who are benefiting from these prices. On the other hand, even if most of the revenue was being collected by Middle Eastern countries, it would still help the global economy since Arabs do not have a savings gene – witness the hotels around Mecca.

These prices are also a boon to the wider energy industry … even if the benefiting company in the industry does not belong to the oil sector. This is because investors see an opportunity in these prices and are looking for ways to generate profits from people’s desire for cheap gasoline. Therefore, companies and the Doc Browns of the world are finding it easy to get money for their harebrained projects. One look at the recent US election shows us that even the White House got snookered by such a company. Since there is such opportunity to make money in this industry at this moment in time, folks should go out there and get theirs.

My point that these prices help the automobile industry is a little counter-intuitive since generally car prices fall when oil prices rise but there are two reasons why this industry is benefiting from these prices. The first is that the industry has diversified its products enough that they can market this variety to consumers in all kinds of market condition – an example of how government intervention in an industry has helped that industry. The second reason is that consumers are idiots – they complain about high oil prices then buy cars with low mileages blaming everyone else for the high prices when they should look at themselves in the mirror and bang their head into said mirror. However, trying to argue that point with a consumer is like convincing a German to relax for a day i.e. something that will never happen.

So, as you can see, these high prices benefit everyone – well, everyone that matters. They aren’t that good for the poor middle-class individual whose budget has been decimated by the high oil and food prices or a regular person who is being forced to rely on government support because of things out of their control. However, the days of us worrying about those folks are over, unless they are a farmer with oil on their land or whose land is in the way of environment-destroying pipeline, then we care about enough to take over the land through eminent domain laws (Go Texas!) to quench the thirst of that redneck with the wide brimmed hat or that mother with the extra-larded ass who can only travel in a Hummer because the hat or the ass won’t fit in a regular seat.

2 comments on “Global Economy: The Oil Market Helps Almost Everyone

  1. stanito
    October 14, 2012

    Interesting 🙂
    Any thoughts on Chavez re-election and how it will affect Venezuelan crude?

    • wbwise
      October 21, 2012

      I would assume since he has been in power for a while, all those risks are already accounted for in the price points.

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