Misunderstood Oil

Congress is the problem.  The fact we have no energy policy, no long term plan from our government is disturbing.  More serious though is the fact that the government is acting to ensure any near term elements of an energy  solution cannot happen.  Let's think about how we got here.  

In the late 70's and early 80's, as part of a set of crazy government market interventions like price controls, we had a severe oil shortage.  As things work, the price of oil went up.  Then the oil companies started pumping all the oil they could.  Congress was outraged and imposed a windfall profits tax, a very popular idea, since we all hate oil companies.  The consequence was predictable.  Oil companies started closing down wells in the US, stopped looking for oil here.  They could import it and make more profit on every barrel because even the US Congress can't tax foreign ventures.  There were a lot of shenanigans to be sure most of the oil we used came from outside the US, outside the power of Congress to tax it with an arbitrary tax.  Yes arbitrary.  I will get to that later.  

So the markets did what markets do, adapted.  We all know we import 60% of our oil (actually less than this, and declining, but let's save that for later).  Before the windfall profits tax began discouraging domestic oil production, we imported about 10% of our oil.  Coincident to this tax policy driven change, we also imposed on ourselves bans on domestic oil exploration (let's save the environmentals for another post, shall we?).  The Federal government has declared virtually all of our coasts off limits, most of new Alaskan oil fields and 279 million acres of BLM land.  It is almost impossible to get at oil locked up in of our domestic resources.  This is in complete denial of the reality that we can get at oil without destroying the environment.  

So lets review :  We "hate-tax" the only entities that supply oil, we encourage them to get oil from foreign governments, we send money to foreign governments to pay for oil, we won't tap our own resources, we defend our national interests by sending our troops to the oil producing regions we now rely on, and we capitalize on the cost of oil with political pandering.  Are we a suicidal society?  Or are our leader just grossly incompetent?  Or are we so constipated by conflicting interests we have locked ourselves into a dance of decline?  

Now on to those windfall profits.  Windfall profits are those you get from circumstances outside your control, basically anytime the navy brings a ship to your port and your taco stand does well, or anytime the government gives customers a refund check and  they spend part of it in your store, or anytime the weather turns suddenly rainy and you sell more umbrellas.  Of course those are poor examples, cause they don't represent how much horrible filthy lucre the oil companies make.  So lets look at that with a nice game I found at the Motley Fool website.

Happy fact :  The US has reduced it's oil usage!  Barrels of oil used per $1000 of GDP has gone from about 1.5 to .8 since 1980.  The US is using less and less oil to produce the greatest society and economy in the world.  And our actual consumption of oil is about what it was in 1977- that is 18 million barrels per day.  In this timeframe, our economy has doubled.  These happy facts are reflected in an article by Carol Hoyos in the Financial Times.