It's All A Game

So the Saudi's are now going to increase oil production to offset what they say are "abnormal" oil prices, as in abnormally high. Hmm. If the price of oil is set by the laws of supply and demand, as we're continually told by OPEC and our own fearless leaders, than how can the price be abnormally high? Isn't the price exactly what it should be based on market forces?

Guess not. I guess the price of oil really is regularly manipulated to maintain profits. The Saudi's don't like the fact that the world, especially America has finally started reducing oil consumption as a result of the skyrocketing prices. Sure, China may now be a bigger importer of oil but make no mistake, the U.S. is still the consumer economy most people care about. Our citizens have more discretionary funds, and more comfort living beyond our means, than any other nation in the world. The OPEC nations talked tough just a couple months ago when the U.S. asked them to increase production. They said, in effect, that it wasn't their responsibility to keep oil cheap in America.

What's changed since then? Well, back then, despite the price hikes, Americans' consumption really hadn't changed all that much. Now it has. American oil consumption has actually declined for the first time in a long while. People are trading in, or trying to trade in, trucks and SUV's for smaller, more efficient vehicles. Gas has finally crossed some psychological milestone price that is making people change their behavior. Now the Saudi's are worried. If America really continues to move full-steam ahead into alternative fuel vehicles and consumption reducing technologies, the Kingdom loses revenue. A lot of it. They also lose power. The less we depend on oil, the less we have to bow to the wishes of these countries. We may actually get to the point where we can start calling out the incredible human rights abuses in Saudi Arabia.

But that probably won't happen because, let's be blunt, Americans by and large are somewhat ignorant. The Saudi's will increase oil production, gas prices will level off or even drop, and people will start using more gas again. Sure, some people will permanently adopt their conservationist ways but knowing the American appetite for all things large and overdone, a significant proportion of the population will again give into excess. Car makers will feel less pressure to get newer, more efficient vehicles to market and in a couple years we'll be right back to where we are now. It is the nature of people to change only when faced with a crisis. Remove the crisis and you remove the motivation to improve.

BTW, aren't American car companies funny? Back when Toyota and Honda first put of hybrids, the Small 3 American car companies said it was too expensive to develop hybrid technology, that they would have to do a lot of research before making hybrids, etc. Yet what is fascinating to me is how quickly most of them have been able to market hybrid SUVs. Most American companies still don't have any reliable hybrid compact cars but I see commercials marketing their hybrid trucks all the time. Why were they able to develop hybrid trucks first? Oh, I don't know. Do you think it has anything to do with the average $10,000 profit they make on SUVs? This is why I have no faith in traditional American corporations. Even when they finally embrace something like hybrid technology, they still do so in the same pigheaded, shortsighted way they do everything else. It's all about the quick buck today rather than long-term profits and benefits to society that may actually help them gain market share.

So, the news from the Saudi's is not surprising, nor is it anything to get excited about. Oil remains a finite resource and no matter how it is manipulated, there will always be a piper to pay at some point. Better to continue the pain now and make some substantive changes than cover the problem with a cheap coat of paint.