Here is my problem – oil company profits are based on selling less of the same product that they sold last year, the year before that and the year before that. It just so happens that their product is a basic ingredient in our society, so when there is less of it, we will pony up more money instead of doing without (at least up to a point.)

Oil companies are in a far better position than the rest of us to influence the market – they are professionally engaged, spend a lot of time researching and trying to predict the future and have the ear of many important influencers in capitals all around the world. Tacit agreements to restrain production are pretty simple to arrange.

If there are truly hard or soft technical limits on their ability to expand production to meet ever increasing demand, then why should we be happy about the fact that companies like ExxonMobil spend more money each year in marketing expenses to convince us to use more than they do in R&D to figure out how to develop new sources of energy? (According to XOM 2007 annual report, marketing expenses were about $1 billion, R&D was about $814 million.)

The word “windfall” is usually applied to accidental gains that did not result from effort by the receiver.

In this case, however, we have two choices. We can accept the oil company public line that they are simply victims or beneficiaries of the market so their profits are just a result of market conditions. In that case their profits are definitely a windfall that could be shared with others who fell on the wrong side of the market forces.

The other choice is oil company investor line that profits have been enhanced by management decisions that have included the “best practices” conservative investment strategy and the consolidation efforts that have resulted in record profits so the managers should be rewarded with huge salaries, perks, retirement plans (paid for out of the pension plan supposedly set aside for rank and file employees) and golden parachutes.

Those high profit management decisions simple dialed down the available supply of energy to less than what the market demands, thus moving the price curve to a more profitable point.

In that case, the managers are doing well for their stockholders at the expense of all of the rest of us and quite possibly coming close to violations of the laws regarding collusion and price fixing by working in concert to constrain supplies.

Yep, call me angry about greed and lack of leadership, but do not call me a left wing nut. Just think about all of those “left wing” chemical, auto, and airline executives who are trying to figure out how to deal with the market conditions their oil company friends helped to establish.

BTW – we do have a huge energy supply readily available, but oil company executive have not yet decided to invest much in nuclear power developments.