Posted on 03/17/2012 7:06:45 PM PDT by street_lawyer
It is all too easy to bellyache about the high price of oil and blame greedy big oil companies, with absolutely no proof. Shell oil earns about 2 cents and Exxon/Mobil earns about 5 cents per gallon at the pump. The fact that Exxon pays more in total taxes than it earns in profits makes them anything but greedy.
Oil companies do not set prices, market supply and demand does, and anyone who disputes that fact is simply ignorant of how the economy actually works. That is of course when government is not setting the prices for commodities. Many liberals/progressives are bellyachers , which includes a few conservatives, like Bill O’Reilly. with whom I mostly agree. They bellyache about how the oil companies are “gouging” the consumer. They are simply wrong.
There is also no proof that big oil or small oil is responsible for the increase in the price of crude. And if speculators are responsible then there should be excess supply, but that is not the case either. So the bellyachers are wrong on that also. It turns out that the Obama administration is probably going to release America’s strategic reserves. Increasing the supply will lower prices, just in time for the November election. No doubt at $5/gal, the U.S. will be facing a true national emergency, but it is one that might have been avoided, not by lowing oil company profits from 2 cents to 1 or from 5 cents to 4, but simply by allowing oil companies to do what they do best. Drill, refine and distribute oil products into the marketplace.
The price of a commodity is not based upon current circumstances. Price reflects what producers believe the demand will be in the future and set their prices accordingly. When Kuwait oil was threatened with an invasion by Iraq, the price of oil increased because knowledgeable people understood that demand would likely exceed supply in the near future.
The free market is brilliant in allocating supply where it is most needed; and where it is most needed, consumers will be willing to pay more. Some people might call this gouging, but then those people just do not understand the Austrian Theory of Free Market Economics.
Speculators are another favorite target of these bellyachers. But the fact is that speculators perform an important function. Instead of a precipitous increase in prices when supply is cut off, speculators who can earn a profit on marginally higher prices begin to release product, which adds to the supply and prices increase more gradually. In the final analysis, there is no real way to avoid higher prices when demand exceeds supply; this is a fundamental rule of economics.
Another popular fallacy is that cost of production plus a “reasonable” profit should set the price of gas at the pump – wrong. In fact price is set by?… correct! “Supply and Demand”. So for example if a retailer paid X for his supply of gas when the price was low at the time that it was pumped into his storage tank, bellyachers would insist that the retail price should be X plus a reasonable profit; however, the retailer will have to replace his supply and pay X plus the increase. So that in anticipation of his increased future replacement costs, the retailer increased his margin of “profit”, to compensate for his future increase in costs for the new supply. The problem seems to be that the bellyachers cannot, or will not grasp this more complex concept and end up articulating inane, fallacious reasons which are more easily understood my most people then the correct reason.
Just another case of pure projection on their part.
The govermnets profit margin on oil is 100%.
That’s much higher than any one else’s.
The single largest collection of 1%ers in any Industry is in Media.
End all tax breaks to Hollywood.
O'Reilly is conservative???
When did that happen?
Obambi and the corrupt media are doing a great job convincing the masses that none of this is his fault.
Rasmussen has his approval up to 50% today with a -10 daily strong/strong rating (his best in 10 months).
It’s amazing. Gas prices break all time records and his approval ratings go up.
If this were a Repub, every story every minute would be pounding him and his approval would be in the low 30s. Meanwhile Barry skates. Must be nice being the affirmative action hire.
I approve this message.
I’ve been standing up for big oil for years. And yes government makes more per gallon for doing NOTHING.
I hope Fox’s Bill O’Really reads this posting - his public attitude regarding petroleum and gasoline is almost the same as Chuck U Schumer’s.
Yeah, it’s greedy for the oil companies to want to make a profit for all their time and effort, but not greedy for the lefties to want to help themselves to that profit to fund their crackpot projects - right.....
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