Friday, July 04, 2008

Peak Oil - Is this what we are seeing?

The last couple of months I've been watching the price of oil set new record highs almost daily. Sean Brodrick wrote a recent article that I think is right on point with what can happen in our current energy crisis situation and what I think will probably happen next.
I sent this link to some friends and clients. One of my former clients and friends Ken Botyos makes some great points and I feel like big oil does take advantage of the consumer.

It is scary, but a couple of things just p*ss me off about the crisis.

1. Call me stupid, but from what I recall, hurricanes have been around for a little while and some have been quite large and powerful. You're lived in Florida, so I am sure you may have heard of them. Prior to Katrina and Rita, I do not recall hurricanes (even those in the Gulf of Mexico) having a significant impact on the price of gasoline. Now, just the mention of a tropical storm or POSSIBLE hurricane (it could be off the coast of Africa) seems to increase the price of gas by 25 cents per gallon. This is especially troubling considering the fact that the gas that the station paid $3.50 per gallon for last week cost the consumer $3.89 per gallon yesterday, but since a storm developed overnight it costs the consumer $4.09 per gallon today, even though it is the same friggin' gas that the station paid $3.50 per gallon for last week!

2. Big Oil continues to have record profits, even though their industry is in a crisis and they claim their profits are justified. Horsesh*t! Outside of price gouging, there is absolutely no reason for so many of the largest companies in an industry in a crisis to continue to make such lucrative profits. Industries are going to fluctuate as should the general profitability of the companies within the industries. I could understand one or two of the industry leading companies putting a little distance between themselves and other companies in terms of profitability, if said companies had come up with some unique, innovative way to do business that the other companies had yet to discover. But in the case, all the industry leaders seem to be continually reporting lucrative profits. They claim their profits are justifiable because they are in line with profits of other companies in OTHER industries. Those OTHER industries are not in the middle of a friggin' crisis! Look at it from an IT perspective. Companies shelled out millions, even billions, of dollars in the late '90s preparing for Y2K. Vendors in the IT industry made very lucrative profits. In the early 2000's IT spending declined sharply because of the excessive spending in the late '90s, profits declined, some companies lost money for a period of time, and many companies did not survive. In the past few years, after a period in which IT spending was down and now with the arrival of disaster recovery, business continuity, virtualization, etc., IT spending has begun to increase again and vendors in that industry are becoming more profitable. It goes in cycles, as it should in the oil industry. When the industry declines, profits in general should as well.

Ken you are right on point, several in the industry have been sound alarm bells for years

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