Well, it’s once again that time of year again, where you start to see the “Boycott gas on May 19th (or May 15th, depending on which version of the email you get) and inflict harm on the oil companies for charging too much…”

This is, of course, on the heels of the dems going after the oil companies for making too much money in profits. You have people like Hillary claiming that they will go after the oil company’s profits and take them away and use the money for alternative energy research. You also have people like Governor Doyle here in Wisconsin who want to impose taxes on oil companies and prohibit them from passing the tax on to consumers (effectively harming profits).

So what’s the deal here? It makes me wonder how much these morons know about economics and just how the real world works. Why don’t we require our politicians to study economics before trying to impose policies that will impact the economy? Of course, that wouldn’t help with the brain trust liberals who come up with these boycott ideas, but maybe if the politicians weren’t going down this path, their minions wouldn’t be trying to follow.

So let’s first debunk the boycott plan. The proprietors of this email claim that:
“IT HAS BEEN CALCULATED THAT IF EVERYONE IN THE UNITED STATES DID NOT PURCHASE A DROP OF GASOLINE FOR ONE DAY AND ALL AT THE SAME TIME, THE OIL COMPANIES WOULD CHOKE ON THEIR STOCKPILES. AT THE SAME TIME IT WOULD HIT THE ENTIRE INDUSTRY WITH A NET LOSS OF OVER 4.6 BILLION DOLLARS WHICH AFFECTS THE BOTTOM LINES OF THE OIL COMPANIES.”

So let’s think about this for a minute. By the time the gas reaches the gas stations, it has already been purchased, and the oil companies have already gotten their money. Boycotting gasoline for a day would only affect the local owners and operators of gas stations. Then again, if you don’t buy your gas one day, but do it another day, will it really have much bearing on the gas station? Their tanks are already filled, and it doesn’t matter what day they sell that gas, so long as it’s sold eventually. Also, if you think you can make the gas station lower the prices, you’re wrong, because the gas stations have to set their prices based on what THEY pay for a gallon of gas from the refineries.

So what about this inventory thing? Guess again. There is plenty of surplus storage capacity. Besides, once again, you’re affecting the local gas stations, not the refineries. You’re just keeping their inventories higher, while the oil companies continue to fill their own storage facilities. Besides, it’s not as if refineries refill individual station’s tanks every day. Large stations can have weeks (or more) worth of supply, so it’s not as if a one-day boycott will mean that there are tanker trucks sitting idle all over the country. The tanks will still be filled and topped off.

So let’s go on to the money aspects of things. The email claims a $4.6B hit to oil companies. So far as anybody can tell, that number was pulled out of nowhere because the costs of the gas at the pump are spread all over the place. In fact, you can probably assume that the biggest loss would be the federal, state and local taxes lost due to lost sales. Otherwise, what percentage of the total price per gallon actually makes it back to the oil companies (and would force them to lower their prices)? I mean, of the total price, you have to split it up into taxes, gas station overhead, transportation and distribution, crude refining, local refining, local mixing and belnding, price per barrel of oil… So who’s getting hurt by the boycott? Where is this $4.6B supposed to hit?

That much aside, I want to also tackle basic economics here, and stick it to the Hillary Clintons and Jim Doyles out there, who think that the oil companies are somehow scamming everybody, and hence driving these silly boycott ideas.

We always hear about oil company profits, and how many billions of dollars they make… And my GOD! Those evil companies are making too much in profits.

Guess again.

Those of us who play the market and understand economics and business finances know what the numbers mean. Actually, you can go to any decent financial website and learn the basics through their tutorials and articles, but regardless… One of the important numbers we look at is profit margin. This is different from profit, which is what the democrats and their angry supporters are using as their ammo against these companies. According to Investopedia.com, profit margin is defined as:
“A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings… Profit margin is displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales.”

So let’s look at some oil company profit margins:

• Exxon Mobile: 11.65%
• Chevron: 9.49%
• BP: 8.09%
• Total SA: 8.87%

So let’s see here. For BP, one of the “worst offenders” according to the democrats, actually makes 8.09 cents on every dollar they make. Exxon, the highest on the list, makes only 11.65 cents on the dollar. So where’s the great evil conspiracy for the oil companies to make money off the consumer? Maybe if expenses stayed the same and the companies started to make a 50% profit margin, we could start asking questions. But that’s not the case, is it? In fact, the only reason the oil companies make billions in profit is because they make billions in sales. They make their money on volume, not on high profit margins. So why do the dems keep claiming that the companies are making too much in profit? Why don’t the go after some of the companies that DO make a great deal of money off of profits? Look at a couple of companies that are very representative of industries with high profit margins:

• Diana Shipping (dry bulk): 54.28%
• US Bank (banking): 36.26%

So, by the rules set forth by the democrats, they should be going after shipping and banking companies for price gouging and making too much profit… But they don’t. It’s not as if high shipping prices or banking issues don’t affect prices for goods. Instead they chose to go after the oil companies because it makes them feel good and PC to do it since oil companies are supposedly evil corporations that are destroying the planet and gouging the consumers.

So, with all of this being said… Let me just finish with this. One of these days I want to hear a great big “pop” as people pull their heads from their asses and start paying a little bit more attention to all of the facts instead of running with these knee-jerk reactions to issues that aren’t really issues at all. If we can’t be smarter than the politicians who are trying to steer this country into the ground, then who will be? I may not like spending $3/gallon at the pump, but going after the oil companies or local gas stations when gas prices rise is pure ignorance at its worst!