Sunday, July 13, 2008

Letter to the Editor: Liberals like Walz will hurt the price of oil

Published Saturday, July 12, 2008

Please refer to our 1st District Congressman Tim Walz’s article printed in our Tribune on June 26 titled “Why isn’t Big Oil using leases it already has?”

A question such as his only indicates his lack of knowledge on the economics of the oil industry. If his proposals become law, we will be paying much more than $4 per gallon for gasoline. Yes, the oil companies do own the rights to drill on federal land. However, most of this land does not contain “proven” petroleum reserves, and it would be prohibitively expensive to drill on at this time. There is only so much capital available to explore for new sources of oil and that capital must be spent where the best chances of recovery can be found. With modern exploratory techniques, finding new reserves is much more scientific than it was 20 years ago. Why drill where there are chances of finding a small amount of oil when that capital can be better used in finding larger, and less expensive, quantities in the Gulf of Mexico and Alaska?

Rep. Walz accuses “Big Oil” of price gouging. Just who is “Big Oil?” It’s a group of common stockholders who have pooled their resources in an effort to bring energy to the marketplace. To do this is a very expensive operation with a high degree of risk. If we were to eliminate the total profits of the major oil companies, we would still be paying about $3.70 per gallon rather than the current $4. Of this approximately 30 cents per gallon gross profit, only about 13 cents is distributed in dividends and the other 17 cents goes toward the exploration for additional petroleum reserves. The final “yield” (dividend) to the stockholder averages about 3 percent in today’s marketplace. To discourage further investment in the oil industry by threatening the real producers of energy is highly counterproductive. If you want higher gasoline prices, follow the advice of our current Congressman Tim Walz, who advocates killing the goose who has been laying the golden egg since the discovery of oil at Titusville, Penn., in 1859.

Not only are Tim Walz and his fellow liberals in Congress attempting to discourage development of the cheapest and most available sources of energy, they also want to subsidize sources that are not economically viable at this time. Tim should better educate himself on the subject of energy before he attempts to sell a counterproductive policy to his constituents. No time in our country’s history have we needed better leadership on the subject of energy.

Charles Foster
Albert Lea

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