We Can Get Discouraged, or Get Prepared

Yesterday a Senate panel blamed the executives of 5 major energy companies, including Chevron and Exxon for high gas prices. As gas hit a record of $3.83 today, it’s expected that prices will keep climbing. News publications report the oil companies’ increasing revenue while consumers struggle to pay the price.

Revenues only tell part of the financial story, so let’s take a look at net profits. In the first quarter of 2008, Exxon made a net profit of 9.3%, which is similar to their profits from past years. Is that too high? We could compare it to the profits of other companies. In the same quarter Apple reported a net profit of 13.9%, eBay made 21%, and Nike reached 22.6%.

It may be hard to accept that a company makes money producing something we depend on, but why should they not receive a profit for their work, just like everyone else? Nobody has complained that iPods are too expensive, or Apple has profited too much from them. If you have any mutual funds in a 401(k) plan, you have profited from the higher oil prices as well, since most mutual funds hold Exxon stock.

We will never again see a gallon of gas at the prices it used to be. I am convinced that the politicians know it, but rather than display foresight, they make indignant sound bites designed to lure votes.  

  • They don’t mention how local, state, and federal taxes add an average of 45.9 cents per gallon. That doesn’t include the taxes that the oil companies have already paid the government. 
  • Those tax dollars are used to build more roads for cars, so we can be more dependent on oil, rather than investing in efficient public transportation. Efforts to generate alternative energy are stalled and rejected by legislation. 
  • No one on the Senate panel yesterday remembered the windfall profit tax (WPT) created in 1980 to tax domestic oil companies. Rather than helping consumers, it limited production and made us more dependent on foreign oil until it was repealed eight years later.

When oil is pumped out of a 10,000 foot hole in the desert and then transported 8,000 miles via an oil tanker before it is refined into gas, which is then transported to the gas station near your home, there are costs involved. Every other country in the world wants that oil too and is willing to pay up for it. Why did we ever expect that a gallon of gas should cost less than bottled water?

Instead of becoming discouraged, let’s prepare ourselves for it.  Not only will the cost of gas never go back to what it was in years’ past, but at some point we will face gas rationing and shortages.  I think we are in for a rough road ahead, and we need to be ready for the rising price of oil to have a permanent impact on our household budgets.

What can we do?

  • Get rid of debt to be able to withstand higher gas prices.
  • Learn about growing our own food, since food prices will rise as well.
  • Live closer to work to reduce commutes.
  • Choose efficient cars and household appliances.
  • Purchase higher-quality goods that will last, rather than disposable products.
With special thanks to my husband Doug for helping me write this post.
About Rachel

I write about practical tips that will help you simplify at home. Connect with me on Pinterest and Twitter.

Comments

  1. You go girl! Thank you for this post. (My husband and mom both work in the gasoline industry.)

    (Your blog is quickly becoming one of my faves!)

  2. You make so much sense. Thanks.

  3. It does seem like the gas companies aren’t “making” as much as other companies, but I wonder…the “net profits”….that’s everything that’s left after paying expenses. And the salaries of the big wig oil company people are high. Leaving less to the “net profit” figure.
    So what if they didn’t take as much of the profit. Oh, but wait, then they couldn’t afford to fill their tank!

    We live in the country. We’re smack dab between my dh’s job and “civilization”…..where are the stores are. My dh can’t not go into work (he’s a pediatrician and can’t “work from home”) so that means if we are to save gas, we have to cut out going into civilization. Which means less shopping. Which doesn’t help the economy. But it’ll help my pocketbook in a roundabout way.
    Ok, feeling snarky today!

  4. Wow. Excellent post. So glad I moved closer to work 2 years ago to alleviate commuting costs. I’ve gone from 80 miles a day to 18.
    And while I agree every individual is held accountable to make adjustments in lifestyle to face the rising costs of fuel, I do have an issue with private enterprise taking advantage of the general public. I DO complain about the cost of Apple’s iPhone…that’s why I don’t have one. There has to be a balance that meets the needs of the greater good. I think the energy companies and our federal & state governments need to be held accountable for assessing a better way for our society to better meet our capacity for energy consumption. Perhaps the systems we have in place are outdated…I don’t have an answer for this one. Nevertheless, your point is so very well-taken. Every one of us has to prepare for this, and not wait for the government to invent some form of “gas welfare.”

  5. smallnotebook says:

    Different viewpoints are totally welcome! This is a hard issue, and I really just want to open up a discussion about it, since I don’t see the other aspects covered in mainstream media. There are no easy answers for something like this.

  6. Great post, Rachel. I think most of us are just angry and we don’t even know who to be angry with. But you are so right – ultimately, each of us will have to find our own solutions because I agree that things are not going to go back to the way they were (at least not ANY time soon, but yeah, probably not ever).

  7. Excellent post. There are no “easy” answers to this – if we tap our own reserves in America and were to run out, then we’d be no better off, so in some ways, I understand not keeping our own oil. But some reports are showing that we should be prepared to spend upwards of $6 just by the end of the summer…so we are looking at ways to MAKE more money as well as SAVE more money. Honestly, for my husband’s business, this is good, but for the average American, it’s not good. Too many people are living above their means and driving and eating their retirements away – now they’ll be putting it into their tanks. We’ve got our work cut out for us, that’s for sure.

  8. Great post.

  9. There’s a lot of truth in what you wrote. Thanks for sharing!

  10. Excellent post – very good points!

  11. Enjoyed your post. I am currently enrolled in the DM economic class for salesmen. I am trying to achieve #1 status so things like this helps. Great job !

  12. I am 3 years behind on this but….
    I live in Sweden. Your cost for gas is about 1/2-2/3 of ours. I choose to live where we both can go by bike to work. We moved and I changed jobs so we could do that. We own one car. We use it once a week, max twice, when there’s no snow on the ground, every day when it is icy since our 7 year old is not allowed to bike on ice. We could live without a car AND without public transport if we planned a little bit better. It is a choice and most people can do it. It is not about the money, it is about the environment versus our convenience.