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Important questions remain on oil, economy, Iraq

As I See It

Time for a quiz.

Can you name of the worlds largest manufacturing company?
The answer is Exxon Mobil Corporation. In fact, according to the June 2004 issue of Industry Week magazine, the three top manufacturing companies are all oil companies. Further, of the 10 largest manufacturers, eight are either oil or automobile makers. The revenue of these behemoths exceeds the total budget of many countries.

How have the oil companies faired over the past year? Very, very well. Better than you have I would guess.
For the four largest oil companies (Exxon Mobil, Royal Dutch/Shell, BP and Chevron/Texaco), revenues increased an average of 26% over the prior year while profit margins remained healthy at nearly 6%. Most business owners would be pleased with that kind of revenue growth, particularly during the early stages of an economic recovery.

These statistics sort of puts the lie to the claims that higher oil prices are of little benefit to the oil companies.
Bear in mind that we’re talking about oil companies and not the independent local gas station. The profit mark-up on gasoline remains pretty constant at the pump. When prices go up, the cost to the gas station goes up by about the same amount.

How much influence do the huge oil companies and the automakers exert over political decisions? Well, the revenues of the eight largest oil companies and automakers was $1.5 trillion last year. How much influence do you think that kind of clout would get you? Certainly, more than the average citizen.

For the most part, automobiles burn gasoline and demand for new automobiles turns on the price of gasoline. Cheap gas sells cars, particularly those overgrown SUV monsters currently in vogue here in the U.S. Continuing high prices for gasoline will put the squeeze on the automakers and, as we can see from the Industry Week statistics, they have the clout to make their displeasure known.

‘Oil’ and ‘No oil’

Is there any evidence that oil was a significant factor in the war on Iraq? In other words, was the primary motivation for the war to free the Iraqi people from an evil dictator or to secure the steady flow of cheap Iraqi oil? Not being privy to the inner courts of government policymakers, one can only speculate.

If our motives are really as pure as a mountain stream, why just Iraq? What about the genocide plaguing parts of Africa everyday? What about the suffering and privation of the North Korean people and the very real threat that the country is developing nuclear capability?

Recently a commentator was asked why we were at war in Iraq. His answer — oil. When asked why we were largely ignoring North Korea, a country believed to be more volatile and a greater direct threat to the U.S. than Iraq, he answered — no oil.
When put in context of importance to the largest manufacturing companies, it appears that oil is the currency that drives our national interests.

Make no mistake. I am fully aware the Saddam Hussein is an evil human being who inflicted murder and torture on his own people and his neighbors. Eventually, I believe that the Iraqi people will be much better off without him, though I suspect that the voyage to happiness is going to be long and arduous. However, the North Korean dictator is equally as evil as Saddam Hussein and has likewise inflicted murder, torture and starvation on his own people.

Our economy needs the financial successes enjoyed by the largest manufacturing companies. They employ tens of thousands of folks and create wealth upon which our economy thrives. However, I worry that these economic giants enjoy an unhealthy level of influence on setting national and foreign policy.

Is this a call for campaign funding limitations? No, it’s not.

To this point, I haven’t been able to envision limiting political campaign contributions without stepping on the right to free speech. I wish that politics was less expensive and that groups seeking to influence national policy would just argue the merits of their issues without resorting to buying politicians to plead their case.

Pollyanna is alive and well and living in Mississippi.

Thought for the Moment— Make it your ambition to lead a quiet life, to mind your own business and to work with your hands, just as we told you, so that your daily life may win the respect of outsiders and so that you will not be dependent on anybody.
— 1 Thessalonians 4:11

Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at cpajones@msbusiness.com.


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