I’m normally a fan of Fox News host Bill O’Reilly, but he is not a fan of oil companies. This is where he loses me.
It’s not that I’m a big fan of oil companies, or any particular company, really, except maybe Apple (can we get the new iPad already?). I rarely think about companies, let alone whole industries. But Bill does.
I don’t know O’Reilly’s politics, mostly because he’s all over the place. But his anger toward oil companies is misdirected and he ultimately misleads his audience.
Last week, Bill did one of his “Talking Points Memos” on high gas prices, blaming oil companies for the price at the pump. He opened up by paraphrasing Lou Dobbs, saying, “…because of the mild winter, there is plenty of oil and gas in the U.S.A. So supply and demand here should dictate lower prices. But of course, they are not lower. They are much higher because the oil companies are shipping their products overseas. Measured in dollars, oil products are now America's largest export worth $88 billion a year to the oil companies.”
That sounds great, and seems logical – more gasoline around means there should be lower prices, supply and demand. Only it isn’t that simple.
Were gasoline not manufactured, but pulled out of the ground ready to go, it would make sense. It would also make sense if for an iPad to cost $20 if they grew on trees and Apple simply picked them. Unfortunately on both accounts, it doesn’t work that way.
An iPad must be manufactured from countless parts, and the materials to make those parts cost money. Similarly, gasoline has to be refined from oil, and oil, particularly right now, is very expensive. And it’s costing more every day.
In other words, the amount of gasoline has no impact on the price at the pump. The cost of oil does. In fact, crude oil accounts for about 80 percent of the cost of fuels. As oil prices rise, gasoline prices rise. As gasoline prices rise, demand for gasoline drops, particularly in a sluggish economy. That’s why we have gasoline to export to the rest of the world, not some black helicopter conspiracy to drive up prices at the pump.
What O’Reilly doesn’t tell his audience is that exporting refined oil products is actually a good thing for our economy. When American manufacturers, like oil refiners, export their products, they create and sustain good-paying jobs, lower America’s trade deficit, and increase revenues for our Federal Treasury.