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From The Corrupting Influence Of Oil Money:
Since 2001, gasoline prices have more than doubled, and oil companies have made more than half a trillion dollars in profits. The price of oil has surged from below $30 a barrel to over $125, a fourfold increase. The Big Five oil companies could make a "projected $168 billion in profits" this year alone. The United States has only two percent of the world's oil reserves but consumes 25 percent of the world's oil. "At current oil prices," conservative oil man T. Boone Pickens argued, "we will send $700 billion dollars out of the country this year alone." If we continue on the same path for the next ten years, "the cost will be $10 trillion -- it will be the greatest transfer of wealth in the history of mankind," he added.
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Exchanging money for goods is *not* a wealth transfer. Wealth transfer almost always means redistributing wealth outside of exchanges -- such as through taxes or through estate planning.
In a free exchange, as occurs with the sale of oil, both sides gain. If not, then it's silly to highlight oil. Pickens could just as easily talk about the $750 billion or so in "wealth transfers" used to pay for food every year in the United States.
Pickens is engaging in silly economic populism here. And, of course, it turns out Pickens has a huge financial stake in the solutions he's proposing (he's got a lot tied to a Texas wind farm plan).
Mr. Carnell:
I’m no expert on this, however, I believe you are technically correct about the term “wealth transfer.” It is still a great deal of money, and it is flowing out the United
States and enriching oil-rich countries. And you are correct when you say that both sides gain. At this point, given the strife and conflict in the Middle East, I believe that many are wondering how equitable those gains are. Does it become “wealth transfer” when the money gained from the sale of oil is then used to buy a stake in a company such as Citigroup?
I need to know more about what Pickens is up to before I would agree that he “is engaging in silly economic populism.” I do agree with the rest of what you wrote about Pickens. I am extremely skeptical of his plan, just because it comes from him.
Thank you for your comment. You gave me some things to think about. I always appreciate that from my readers.
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