Oil companies don’t have to diversify…

I continue to see television commercials about the BIG BAD oil companies needing to diversify into all kinds of different energy sources.  Why?  Oil companies are experts at finding oil… why would they have to diversify?  If they choose to diversify… okay fine, but to stupidly suggest that “oil companies MUST deversify” just smacks of socialism.  Would anyone suggest GM start making helicopters?  After all, GM is in the transportation business, so why not demand they make helicopters?  It is the same argument, but the general public has once again been conditioned to say and think absurd things about “BIG OIL”… without these companies I would hate to think what this country would do to power its economy.  Oil is the backbone of our world.  Oil is even more fundemental than water.  Without oil, there is not the energy to pump water to our homes.  Sure oil companies make lots of money today, but what about 10 years ago.  Oil was under $10/barrel and not a single sole was saying “oil companies need to diversify”.  It is only now that the business cycle has shifted, that all the sudden everyone is outraged.   At $10/barrel most American production was being sold literally at a loss, but if the production ceased the company would lose the lease.  So oil was pumped into the market at a loss and it was subsidized by refining and snacks at the gas station.  Amoco learned 20 years ago that they could make more money selling twinkies than gasoline… and they pioneered the convenience store.  Of course today Amoco makes a fair return on its oil production, but refining margins are minimal.  Hell the government takes more money out of the value chain than the refiners.  So next time someone says: “Oil companies must diversify”… ask them why?  Why would we want these efficient and expert companies to start making wind mills or solar panels?  Why?

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