I’m sure all of us are aware of the outrageous price of fuel lately. Everyone I’ve talked to has a different opinion about the huge increase in prices. Most of the good ideas seem to come from people who are well connected with reality, such as well drillers and other independent businessmen who deal with simple concepts like supply and demand on a daily basis. On the other end of the scale is the U.S. Senate, which seems to be as connected to reality as the average coma victim.

The other day, I watched a dog-and-pony show as the Senate mugged the chief executives of the major oil companies, all for the purpose of pandering to the unwashed masses that keep electing them decade after decade. Hey, some of these guys are too old even to be Wal-Mart greeters.

The senators typically spent 15 minutes making inane statements, revealing their abysmal lack of knowledge of economics, and then followed them with rhetorical questions such as, “What are you going to do about it?”

I got to thinking what would I say if I were one of those executives, and (heaven forbid) they ever asked me what I thought about oil prices. It might go something like this:

Senator Balderdash: “Mr. Nash, can you explain the high price of oil so I can understand it?”

Mr. Nash (Overworked and underpaid CEO of Intergalactic Oil): “No, senator, I don’t think I can explain it so you can understand it, but since you dragged all those cameras in here, I can explain it to the American people who actually are paying those prices.

“Oil is priced in U.S. dollars. This the currency used whether you are buying it from yourself or the tinhorn dictator du jour. In order to keep prices down, we need a stable dollar. The Federal Reserve controls the buying power of the dollar. Let me explain how well they’ve done. In 1913, the year the Fed was formed, a $20 gold piece would buy a hand-tailored, three-piece suit of the finest materials. Today, a $20 gold piece still will buy the same thing – except that it takes about $1,000 paper dollars to buy the $20 gold piece. Neither the real money, nor the suit, has changed in value, but the paper dollar has. What, with the occasional bailout of their friends who make cars, airlines, steel mills, investment bankers, agri-biz and others in the same exclusive club, they’ve had to run the presses night and day. This makes the dollar’s buying power less and less. Maybe a word from your exalted position of power would do some good.

“Oil sales are an auction, plain and simple. If more people want a product, and are willing to pay more for it than the low bidder, they set the price. India and China are the two fastest growing economies in the world. They recently have discovered that livestock is not nearly as comfortable to transport as Toyotas. They’ve got plenty of dollars with which to bid for oil, since we buy an awful lot consumer good and electronics from them.

“Besides the Fed, there’s plenty of blame to go around. The unions have contributed by pricing themselves out of the market. Agri-biz is plowing up wheat to plant corn for the government-subsidized boondoggle called ethanol. This has raised the prices of two of the major food groups – pizza and beer.

“I’ve heard you say that we can’t drill our way out of this problem. Well, duh … you finally got one right. But what we can do is take the pressure off the futures market. An assured supply that is not subject to the ravings of some weird-beard probably would lower the price by a dollar or a dollar-and-a-half. In order to drill, you are going to have to get out of the way. Those who say they don’t want any rigs anywhere near Florida ’cause it would ruin the tourism industry should visit Padre Island, one of the most beautiful beaches in the world, despite plenty of rigs on the horizon. Plus, Padre Island has Texas watching its back.

“With the pressure off the futures market, we would have time to develop practical, economical and workable alternatives without the need for government subsidies. Most of the sources we look to save the children are impractical, uneconomical or unworkable. For instance, solar power currently produces about 0.1 percent of our energy. That’s one-tenth of 1 percent, and most of this goes for pool heating. If we built 10 times as many pools, maybe we could get this up to 1 percent.

“Before you start braying about obscene profits as though it were one word, consider where these profits go: 14 percent go to IRAs, 23 percent got to individual investors, 27 percent go to pension funds, 29.5 percent go to mutual funds, 5 percent go to other institutional investors and 1.5 percent goes to corporate management. Most of us have IRAs or retirement funds or pensions. Which of your friends and neighbors should we shortchange?

“A basic understanding of the difference between profit and profit margin would enhance your credibility. As a whole, the oil industry produces a profit margin of around 8.8 percent, depending on who you ask. My mother thinks oil is just out there free for the taking, and any higher price is gouging the little guy. Google posted a 30-percent profit recently, and Microsoft is around 40 percent, but I don’t see much squallering about it. Profit is necessary to stay in business. The Soviets tried the non-profit thing, and all they were able to produce were bread lines and cement bicycles.

“Of all the various costs of producing a gallon of fuel, most are studied and analyzed for maximum efficiency. The one exception is tax. The tax on a gallon of fuel is 13 percent. This is about 150 percent greater than profit, but that’s O.K. because it’s for our own good. The last good the government did for me was when Richard Nixon invited me to the late unpleasantness in Southeast Asia.

“Senator, if you really want to do something about oil prices, lower the tax, and quit spending money like a drunken sailor. You also could pass on to your organic, tofu-eating, tree-hugging constituents, that we’ve got to have more refineries. Thirty years is a bit long to neglect such an important part of our infrastructure. You should let us drill where the oil is. If your buddies don’t like it, let them walk to some pristine, worthless area and live however they choose.

“I hope this explains some of what can and can’t be done about oil prices.”

Senator Balderdash: “Sergeant-at-arms, throw that man in chains while we deliberate reinstituting burning at the stake!”