Posted on 05/25/2006 12:05:10 PM PDT by Mr. Silverback
The Democrats and Republicans continued their race to the bottom this week, and for a while they wish to run on the same track. Democrats spouted their annual pretended outrage at gas prices, and this time the GOP joined them, with Senate Leader Frist, Speaker Hastert and President Bush all rushing to call for another fruitless price gouging investigation. While we wait for the Beltway bloviators to call for repeal of the law of supply and demand, let’s look at eight facts they don’t seem willing to discuss.
1. The big oil companies recently posted record profits, but they also recently reported record sales. Funny how those two things go together, isn’t it?
2. Big Oil makes roughly 9 cents per gallon in profit these days. If gas is at $2.75, they’re pulling down a blistering 3.27 % profit margin. Now, ask yourself this: How secure would your job be if your employer had to operate on a 3% profit margin? Would they even stay in business? Would entrepreneurs get out of bed in the morning to make a 3% profit margin running a small business?
I don’t care how much money Big Oil is making, nobody makes 3.3% profit when price gouging.
3. Depending on the state, taxes are somewhere between 26 and 60 cents per gallon. Sure, roads need to be funded and gas taxes are a great way to do that because greater use of roads leads directly to more money for roadwork. Still, consider that a moratorium on Illinois and federal gas taxes would bring us gas somewhere in the area of $2.36 here in Freeport. A graph of Big Oil profits over the last 30 years looks like a roller coaster, while a graph of gas taxes shows a nice, steady climb that well exceeds inflation. Who’s gouging who?
4. Speaking of gouging, why hasn’t the anti-gouging chorus gone after the bottled water industry? Dasani, for example, is currently going for $1.06 per liter. That works out to $4.16 per gallon for something not much different than what comes out of your tap. What do you think the profit margin is on a gallon of Dasani? They’re not the worst, though. Check the per-gallon price on Pepto Bismol, Dom Perignon, Coca-Cola or “inexpensive” Testor model paints. Don’t get me started on the Alclad lacquer I dream of using on my model planes; at $6.96 per ounce the price works out to over $1,000 a gallon.
What could drive these businesses to offer their products at these insane prices? Could it be a little thing called “supply and demand?”
5. Despite Dick Durbin’s recent ludicrous proclamation that there’s “no end in sight” for oil prices, leading Democrats know that crude and pump prices will decline steadily for months before the election. To capitalize on high prices, they have to get the idea that the GOP is aiding and abetting Evil Oil cemented in the minds of voters while prices are still high.
Keep this in mind when the Dems demagogue this issue all summer: According to the April 28 Federalist Digest email newsletter, Senate Minority Leader Harry Reid has voted to raise fuel taxes 12 times and House Minority Leader Nancy Pelosi has voted to raise them 5 times so far.
6. While we’re addressing the Democrats, let’s remember who has opposed new refining facilities in the U.S. for 30 years or so, opposed new nuclear plants for about the same amount of time and been at the forefront of taking up refinery capacity with “boutique” gas mixes for certain major cities.
Each of these things has a consequence at the pump. America’s low refining capacity is a bottleneck that reduces supply and drives prices up, and the boutique fuels exacerbate that problem. Fewer nuclear plants mean more oil-fired plants, which means less crude going to gasoline production, and more pollution.
7. Here’s another good find from the Federalist Digest: Fuel supply coming out of the Gulf Coast is still down almost 20% because of damage from Hurricane Katrina. Gas demagogues aren’t going to tell you that, and they sure won’t be reminding us what happens to prices when demand rises and supply goes down.
8. These days, large American corporations are mainly owned by American wage earners and retirees. Sure, the fat cats in the limos are out there, but the bulk of the shares are owned by pension funds and other investment groups. In other words, Big Oil’s profits are helping Grandma stay retired now and Joe Lunchbox and Jane Teacher look forward to a properly funded retirement in 20 years.
The Beltway demagogues are counting on us to be economically ignorant and easily riled. They surely don’t deserve our help, so let’s not oblige them.
I'm surprised to see Pete Fitzgerald did something that stupid.
Thanks for the bumps. You're no chump.
While"Big Oil"might not be guilty of"Price Gouging",I have noticed that while gasoline prices can(and do)rise precipitously,they come down assisted by a very large PARACHUTE!!!!!!!!!!!!!!!!!!!!
Durbin is my Senator and he is opne of the most despicable human beings to ever walk free on this continent. I have to spend a great deal of energy resisting the urge to hate him.
The other condition, aside from price inelasticity of demand, that produces 'increased demand in the face of higher price' is entry into the marketplace of new demand -- comnsumption that simply did not exist beforehand. In the case of energy, this is represented by the vastly increased Asian demand over the past decade...and this is not going away any time soon.
Only in theoretical sense. Supply and demand ops in the real world often exhibit surprising trends. We have demand in oil (and to a lesser extent in gas) that is climbing for a number of reasons and the motivations behind that demand can outweigh price...especially when prices are not anywhere near the worst they've been.
If anyone is immune from the law -- in more ways than one -- it's the oil companies.
Elaborate and bring evidence, or go home.
That may be the oil companies taking advanage...or it may be that as prices go down at the barrel, they are already anticipating the next rise (with demand so high in the developing world it's inevitable) and milking us for the money to pay for it so we don't have $4 gass next time.
I'm not a Big Oil fan, I just think that the pols are insulting us, and that they had no concern for the jobs of American oil workers when oil prices were low and small companies were dying.
Let me add something to SAJ's comment. Get used to it. I saw a projection a few weeks ago that said Asia had about 55 million cars and light duty trucks (delivery type vehicles) as of 2003, and they will have 420 million by 2030.
Well, if you handled the volume they do, you'd be able to do that. My point was not to say, "The poor starving oil execs," but merely to point out that they have problems and advantages almost no other business has.
All the more reason to summarily execute all the NIMBYs, BANANAs, neo-Luddites, no-nuke nuts and other assorted envirototalitarians. There is a point past which ''catch-up'' can no longer be played, and we're coming up onto that point right quickly.
I brought that up because after studying the issue, it appears the futures traders have pushed up prices anywhere between $10-$25 a barrel depending on which way the wind blows. That fear premium packs a mighty wallop at the pump.
I'm a big fan of the Oil industry. After a career in the military, I am almost humbled by massive logistical miracle they pull off 24/7/365.
Good point---have you seen Ben Stein's essay on the subject?
You make model planes?
Yep. I'm on a ship jag now because I promised my wife I'd work throw the stash my grandad left me before I buy more, but here's the list of planes coming up shortly:
F-4E in "chico the Gunfighter markings
F-105
2 Massachusetts Air Guard F-15s that scrambled on 9/11
KC-135 in 1/72 scale
B-52 in 1/144 scale and forest fire "firebomber" markings.
Right now I'm working on the riverboat Robert E. Lee.
The government also uses the oil companies as a branch of the IRS. Exxon/Mobil might have made $36 billion last year,,,but they paid more than DOUBLE THAT AMOUNT in taxes!! No one ever mentions that fact.
The government (Fed, state and local) makes about 50 cents/gallon and the oil companies make about 10 cents/gallon. The government prices gouges us for gas--and the oil companies get the blame. Go figure.
My reference was to your accusation that the Congress was trying to violate the Law of Supply and Demand. I thought I'd point out that gasoline seems to defy that law at will.
The vertical monopoly, the price-fixing and collusion, the artificially inflated prices -- all are examples of legal violations practiced daily by the oil companies. That in no way means that they are PROSECUTED as such. But the fact that they get away with it doesn't make it legal.
And whether it's legal or not, there is -- or should be -- some moral dimension to the marketplace too. Which is a laughable concept in the world of global mega-corporations.
Care you cite your sources for these charges? I'm sure the DOJ would be interested in any proof or corroboration you have. Heck, I'm sure that most here would like to see the sources too. I know I sure would!
Or you do always make false, baseless, totally unprovable, and completely bogus and uncorroborated charges?
Whoa dude, I feel a chorus of kum-bai-yah coming on. Damn those evil global mega-corporations.
What's laughable is that you're talking about morals at the same time you accuse people of crimes without any evidence. Let's look at your charges:
Violating the laws of supply and demand? As SAJ pointed out, you are operating on the assumption that demand is elastic in the energy market, and it isn't.
Vertical monopoly? Bummer. Electricity generation and distribution is a one-company vertical monopoly in most locations; they don't even let a franchise owner in like the oil companies do. The energy market is characterized by massive infrastructure, it's not like selling yo-yos.
Price-fixing and collusion? Yeah, sure. Post your evidence here and I'll alert the FTC.
Artificially inflated prices?
1. See above answer.
2.Demand has nearly quadrupled in the last half-century with almost no change in supply, and you're not expecting the price to go up? Like I said in the article, Dasani costs $4.16 a gallon, where's your crusade against them?
3. Take your complaints to the commodity traders and OPEC, not the oil companies.
Like I said, bring evidence ofr go home.
At least you are the first of the oil-industry sack-swingers to admit that demand for fuel is not elastic! Unfortunately, that also defeats your "free trade" argument. Since fuel has a fixed demand, it is the classic example of a captive consumer. Given that market, cost of production does nothing but supply a downside limit. Upside HAS no limit, since demand will not decline whatever the price does. So you have a commodity where demand is fixed, and supply is regulated completely by the people who stand to make the profit. By even HINTING that supply will be lessened, they can drive profits significantly higher. Since it's all about the money, there is nothing to stop them from doing so. And that is exactly what is happening.
Vertical monopoly? Bummer. Electricity generation and distribution is a one-company vertical monopoly in most locations; they don't even let a franchise owner in like the oil companies do. The energy market is characterized by massive infrastructure, it's not like selling yo-yos.
Murder? Bummer. Jeffrey Dahmer was a murderer too. So since the crime has already been committed elsewhere, why is everybody singling out poor Jeff for condemnation?
Do you realize how paltry that defense is?
Cable TV is another example of a monopoly. Know a lot of people who would be happy if their cable bill tripled in a couple of years? Or do you suppose they would be squawking to high heaven? Oh, that's right. Nobody HAS to buy cable TV ...
Price-fixing and collusion? Yeah, sure. Post your evidence here and I'll alert the FTC.
Ever heard of OPEC? Ever heard of OPEC meeting to discuss the supply and price of crude? If that isn't the definition of price-fixing, what is?
Artificially inflated prices?
2.Demand has nearly quadrupled in the last half-century with almost no change in supply, and you're not expecting the price to go up?
Demand hasn't quadrupled in the last 2 years. But the price has at least tripled. How does that obey the law of supply and demand?
Like I said in the article, Dasani costs $4.16 a gallon, where's your crusade against them?
Anyone who pays $4.16 for a gallon of water is a certifiable idiot. I don't mount a crusade against Dasani because that is an ELECTIVE market; nobody HAS to buy pretentious bottled water.
3. Take your complaints to the commodity traders and OPEC, not the oil companies.
Maybe I should have said "oil INDUSTRY" then. No, it's not JUST the producers and refiners. It's the whole stinking nest of vipers.
Like I said, bring evidence ofr go home.
I am home.
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