On that same day, the Exxon Mobil Corporation announced record second quarter profits of 11.68 billion (yeah, million but with a “B”!) dollars. This is the largest profit ever recorded by an US corporation, a profit margin surpassing their own previously astonishing record.
Let's really think about that and offer some perspective: These profits do not reflect a calendar, fiscal or even astrological year, but are a reflection of a mere three months of operations. And yet, this still did not meet Wall Street's earnings expectations resulting in Exxon stock shares actually falling.
It's like living in some fantastical economic twilight zone.
Former Democratic presidential candidate John Edwards always spoke of there being “two Americas.” It seems even deeper and more profound than that -- more like two alternate galaxies.
In one galaxy the inhabitants are ruled by the gods of speculation, and Wall Street provides the entrance to the diamond encrusted gates where the streets truly are paved with gold. The royalty here (commonly referred to as corporate CEO's and the like) make millions as their kingdoms collapse around them - Modern day Neros. In this corner of the universe, the one known as Phil Gramm, a former US Senator, economist and BFF (teenspeak for "best friend forever") of John McCain, informs us that all of our economic pain is just in our heads. We are just a nation of “whiners” experiencing a “mental recession.” Yes, this is a scary place, made even more frightening by the insane amount of power the inhabitants here use and abuse.
Meanwhile back in the galaxy that I inhabit, many middle class and even upper middle class families who once enjoyed vacations and weekend getaways, now shop for groceries at the food bank . Turn off notices, foreclosure statements, pink slips and medical bills have replaced pay checks. In fact, this is where living pay check to pay check has become an accomplishment, because it means you actually have the money to keep going. As that venerable poet and stark observer of the human condition Marvin Gaye sang to us, “this ain't living.”
So given all of this, it is not a big leap to understand why ordinary folks just can't wrap their heads around any one business, not even a sovereign nation, making 11.68 billion dollars in three months. No matter how we intellectualize it, explain it and explore it, it just hits us in the gut.
And at the center of all this madness – oil.
Oil dominates our lives and the lives of others all over the world. In fact, even the immense humanitarian crisis in Darfur region of The Sudan is steeped in the politics of oil. In particular, China remains hush hush as atrocities against black Africans continue to abound in the region. The Chinese government has reaped billions in profits as they have become The Sudan's number one trading partner. According to an NPR report, The Bank of Sudan estimates that the country sells well more than 80 percent of its crude to Beijing.
The US has appropriately called the hell in Darfur genocide, but even with the limited US sanctions that have been implemented against the government, there seems to be a hesitance in taking China to task -- due to oil access and more -- even though the Chinese government has the most leverage to affect change. It is not the first time that a barrels of oil seem to trump human lives.
So what gives?
There seems to be a collective frustration when reason after reason is given for the remarkable rise in energy costs. Is it purely supply and demand? Are we being manipulated by the manipulators?
Even the so-called facts are relative based on the ideological bent of the messenger. With the media infected with sound bite-itis, it's hard to get the facts. It seems even more impossible in an election year. What happened to the “Straight Talk Express? ” It feels kinda twisted to me. Democrat or Republican, conservative or liberal, just give us that elusive thing called the truth.
Maybe I am setting the bar too high.
We hear terms that we only sorta understand. This is what I have been able to infer so far: “Windfall profit tax” – good. “Big oil” - bad. “Renewable energy” - good. “Offshore drilling” – Bad (I think). What does it all mean? One thing we do know is that there are a group of people getting unbelievably wealthy and wealthier in the midst of our confusion.
My ignorance in these matters frustrates me, so I have been doing my own research. One thing I have been able to ascertain is that offshore drilling is actually – not good. It is not the great panacea we are being lead to believe. It will take years to impact the price at the pump. The environmental implications are dire, and according to many experts, we don't even have the hardware out there for immediate implementation. Yet still, according to a Rasmussen report this past June, 67% of voters believe that drilling should be allowed off the coasts of California, Florida and other states. Only 18% disagree and 15% are undecided. Sixty-four percent (64%) of voters believe it is at least somewhat likely that gas prices will go down if offshore oil drilling is allowed, although 27% don’t believe it will have an affect.
OK, I get it.
When people are suffering, they will support almost anything just for some relief, no matter the long term implications (let's say it all together now - “Bush tax cuts”). That being said, I was proud of my American sisters and brothers when they didn't seem to be swayed by the pandering proclamations of a “gas tax holiday” pushed by the Clinton and McCain campaigns during the presidential primaries.
Alas, you can bet that gimmick will be back.
The other truth is that our dependence on oil is chilling. Gasoline, home heating oil, kerosene, asphalt and road oil, aviation fuel, lubricants, still gas and even more stuff is produced from one barrel of crude oil. The US imports around 50% of our oil, with 50% of that coming from OPEC nations. According to a Time magazine article published this past May, oil imports now account for most of the U.S. trade deficit, which was running at an annualized pace of $717 billion, or 5.05% of GDP, in the first quarter of 2008. Our addiction to oil is costing us in a big way.
There are alternatives, but it requires investment of resources by the government and patience from the electorate. There are no quick fixes. Even T. Boone Pickens, the oil billionaire and financier of the Swift Boat smear campaign that was instrumental in derailing the presidential hopes of Senator John Kerry in 2004, has embraced renewable energy by investing his gazillions in wind power (see, told you it is like the twilight zone...). Isn't this investment something our government should be doing?
Other forms of renewable energy such as tidal power, solar power, geothermal power, hydropower, as well as biomass (using living or recently dead biological material like hemp and corn and converting it into fuel) are also options. Something tells me that those oil lobbyist types aren't feeling so warm and fuzzy about these choices and will pull the big guns out (Hah! Too many easy jokes to make here) to slow the process of implementation.
One of the greatest advantages in using renewable energy is obviously the reduction of greenhouse gases produced by our massive usage of fossil fuel. That being so, one of the greatest disadvantages at the micro level is that it is often prohibitively costly for everyday folks to embrace alternative energy choices. Although most of us would love to convert our homes into bastions of solar efficiency, we don't have the big dollars to do so. It seems the people that can least afford to pay the exorbitant costs of installing solar panels and backyard windmills, are the ones who would benefit the greatest from the energy savings. Yet another dilemma.
Businesses are also in distress. Due to the high costs of energy, tightened access to credit, and housing troubles, employers seriously restricted hiring in July. The Labor Department released a report on August 7 reporting that the national unemployment rate unexpectedly hit its highest level in more than six years. No jobs means no consumer spending. No spending means the economy falters even more. But Mr. Gramm told us it is all in our heads, so why worry?
In this atmosphere where people are hurting on so many levels, and gloom and doom is thrown at us “every weeknight at 5 and 11,” there seems something obsessively obscene about energy companies enjoying record profits, at a time when many of us feel like we are on a sinking ship, with the lifeboats already occupied by oil executives making sure their bonus checks don't get wet.
Jeesh, it is just so easy to get discouraged by the unfairness of it all. That unfortunate helpless feeling starts nagging and it seems that no matter what we do, things just won't change. Well, that's not so true. There is one thing we can all do – VOTE.
Friday, August 8, 2008