Big Oil is Too Big

A guy named Derrick left an odd comment that I can't quite decipher. Apparently, he thinks that one of the advantages of Obama's profit tax is that it would force big oil companies to invest more in alternative fuels. That is, to avoid the profits tax, the oil companies would sink their money in alternative fuel as a tax shelter.

I disagree with this idea on many levels. The main reason is that I think that the big oil companies are big enough. I would rather see the wealth from the windfall profits distributed by dividends or as increased stock value. The private investors would then invest the profits in small alternative fuel companies.

The last thing I would want to see is the big oil companies dominating the new alternative fuel business.

Nuclear aside, almost all alternative fuel investments are best made on a small scale. The small bio-diesel operation that transforms excess crop and cooking oil from the county is a highly efficient and targeted concern.

An artificially subsidized regional bio-diesel refinery will not produce much more fuel than it consumes in transporting crop to the plant.

Alternative fuels are primarily about efficiency.

The cost of transmitting energy means that solar panels and windmills are best when distributed near the point of consumption.

Alternative fuel is largely about replacing big energy with small energy.

By their nature Federal subsidies for alternative energy or special tax constructs will end up favoring the big, inefficient solutions of the past.

Derrick's second claim seems to be that there was no investment in alternative energy in the Bush years. I watch the markets. Alternative energy is booming. Alternative energy stocks have been booming.

It is a risky investment. No-one knows which company will be the big thing. It is probably best to invest in alternative energy funds or ETFs. The other big risk of alternative energy is that governments control oil supplies. Since governments are driven by lust for power, they end up creating false markets by flooding the market with oil to drive small firms under. They then crimp the market.

For that matter, the history of big oil is quite disgusting. Monopolists would flood the market to drive out competition, then jack up prices. The Standard Oil Monopoly was as evil as the OPEC cartel is today.

The last thing this world needs is for big oil to buy a dominant role in alternative energy.