Posted on 09/08/2005 11:08:53 AM PDT by aynrandy
Gouging - even the word sounds frightening.
These days, there's been a near-unanimous call for the public to be outraged over price-gouging at gas pumps around Denver.
Well, I'm not outraged, and you shouldn't be either.
Here in Colorado, as elsewhere in the nation, high gas prices have generated hysterical, populist rhetoric from those who've forgotten the fundamental principles of supply and demand.
"Gas-price gouging is not illegal under Colorado law, and we think it should be," Colorado Speaker of the House Andrew Romanoff recently claimed.
I'm not sure what Romanoff meant by "we" - I would like to be excluded - but anyone who believes gouging is a concern will really have something to complain about if shortsighted price controls are implemented.
This week, Romanoff promised to pressure the state attorney general and the Public Utilities Commission to "investigate" the problem and "combat" gouging.
It's going to be difficult to "combat" the irrefutable fact that fuel supply is down and demand is up. And really there is nothing to investigate, unless you believe in conspiracy theories.
Hurricane Katrina destroyed 12 percent of the nation's refining capacity. This fact, coupled with rising demand from nations such as India and China, has put a tremendous demand on oil - a fungible global commodity.
Price controls bring lower fuel prices and increase demand. But when demand is outstripping supply, we can all look forward to shortages and lines.
Fact is, gouging is a myth. It's called making a profit.
"For many Americans outside of the Gulf Coast, the immediate impact of Hurricane Katrina isn't looting in the streets, it's looting at the pumps," says "Looting at the Pumps," a release by CoPIRG, a public-interest advocacy group.
I spoke to Rex Wilmouth, state director of CoPIRG.
So, was there gouging in Denver?
"We were seeing the prices go up in four or five days from 60 to 70 cents," Wilmouth explains. "Our take on it is this: We looked at how much money the oil industry was making and how much they were posting as profit; we were astounded that they felt the need to increase the price of gasoline in the time of a natural disaster."
Wilmouth, no doubt, is well-intentioned. He will apparently do anything to save us from the evils of Big
Oil - except actually learn about the oil business. "Last week, the stock prices of major U.S. oil producers ExxonMobil, ChevronTexaco and Conoco-Phillips have surged," he tells me as part of a long harangue about the success of Big Oil.
It took me a few minutes to comprehend that this was supposed to be bad news. Millions of Americans own oil stock - shouldn't we be happy for them?
I mean, higher gas prices mean increased stinginess on the part of the consumers at a time of low supply, right?
Isn't that positive?
Don't Americans have alternatives? A consumer can decide to travel less, take public transportation, or buy a fuel-efficient car or drive to a cheaper station.
Hybrids, Wilmouth understands. As you can imagine, he is very excited about hybrids.
Now, Romanoff and Wilmouth are entitled to espouse that government should have the authority to dictate the price of products in the free market.
But then, why stop at oil?
Today, for instance, a quick calculation revealed I had shelled out around 8 bucks a gallon for my bottled spring water.
But that's nothing. Last time I went to see a movie, I paid approximately $200,000 a gallon for soda - I'd need an infinity sign to calculate the per-pound price of popcorn.
Or how about this?
Why don't Colorado and the federal government cut or suspend the 40-50 cents we pay in taxes on each gallon, depending on where you live?
Funny, with all the concern for consumers, no one's proposed something that would actually help them.
David Harsanyi's column appears Monday and Thursday. Reach him at 303-820-1255 or dharsanyi@denverpost.com.
This is a conservative free-market columnist. Only one.
I'd like to ask all the little babies crying "price gouging" how they know what the stations paid for the gas and what their profit margins are. Most gas stations have a set profit margin and make the same amount on gas no matter what the price. The oil companies also have to pay for the oil they refine and sell. If you think the oil companies are making obscene profits, buy their stock, instead of listening to the economic ignorance of bill o'reilley and calling yourself a victim.
"Rare common sense from the Denver Post, the Front Range mouthpiece of the loony left."
It really is common sense if you have taken the time to understand simple economics. The problem is that most people on this board have not, and thus they are working off zero knowledge about how an economy works and how prices are determined.
Yeah, in Atlanta, where there was a real fear of supply disruption and people were beating down the doors of the gas stations to buy gas.
If thats not price gouging I will pee in my gas tank.
It's called a demand shock. I feel sorry for your gas tank. There has been a spate of mergers in restraint of trade. in big oil Exom-Mobil being the most egregious.
They were forced to divest many stations. Still, once oil leaves the ground, it and its products are the most competitive markets there are. If not, you should get into the business, you can make a fortune. The Bush administration has turned a blind eye to the obvious anti trust violations.
How obvious were they?
They just posted record gross profits of 134.49B on revenues of 295.70B... What loon can conclude there is no price gouging with profits ringing up that high?
Because oil is split up into three distinct segments. Upstream which is finding, drilling, and producing. Midstream which is refining and moving in pipelines, and downstream which is selling at stations.
As an oil company, you can be in one or all of those segments. For example, Exxon is in all three. Deveon is in upstream and midstream. Kerr McGee is in upstream. Valero is I think just midstream and downstream.
They are seperate operations. Midstream and downstream margins are up, but those vast profits that you mention are for the most part from upstream operations.
Exxon could not use its upstream profits to subsidize its downstream operations or it would quickly go out of business and all of the upstream in the world would be owned by Saudi Aramco.
Definition of price gouging = paying more for something than you want to. Oh, wait, you mean that's NOT the definition???
susie
i did. it is an excellent hedge on higher prices. Also dont forget how many people own 401ks (large cap, s&P 500)
"you are so right. I expect this talk on lib sites but not here."
I wonder if these posters are DU trolls or if they really believe the evil oil company garbage.
Sorry everyone, I did a piss-poor job of quoting who I was posting to in the above post.
Exactly.
But I'm tired of hearing gas station owners say "We only make a penny per gallon!". Yeah, ok, sure, that's why yesterday your gas price was $3.35/gal and today it is $3.19/gal and two days ago it was $3.25/gal.
You mean I can't go to a competetors gas station and get a lower price?
They make more than a penny per gallon, although many price at a penny pre gallon to pull people into their stores to sell them coffee, etc. Anyway, if the gas stations just "control" the price of gas, we did the let it go down today as you allege? Are they dumb?
Anger should be directed at anti-trust and Nimby and the regs that prevent refineries.
It IS a supply and demand thing.
Do you know anything at all about the oil and gas industry? This kind of populist rhetoric appeals to the ignorant and consistently leads to damaging actions by public officials.
I agree with you in one regard--it would feel good to hurt someone when prices are high--just because it would. But that doesn't excuse me from the responsibility of using my brain before I punch the guy that owns the local gas station or the regional gas distributor or the president of Chevron.
What you propose is just as silly as punching the president of Chevron--it is a purely emotional response to a situation (the hurricane created refinery crisis), it has no benefits to anyone except to the extent some folks feel better if they hurt someone, and it hurts everyone by creating shortages of Gasoline.
"Anyway, if the gas stations just "control" the price of gas, we did the let it go down today as you allege? Are they dumb?"
Please don't overload these people with logic because it might bust their Marxist agenda of bashing the evil corporations.
It's not Marxist here. It is on DU. Here it is just gimme gimme gimme.
To all of you that believe supply and demand should always rule, please answer the following...
A nuclear device goes off in your city/town and you & yours have survived the initial blast. You need to get your family out, but the roads are gridlocked. Is it okay with you if when you go to the airport to evacuate, the airlines are charging $50,000. a ticket?
Supply and demand dictates that if they can load up the planes at that price, they should be able to do so. They would only have to lower the price when there were no more takers at $50,000., then $40,000, then $30,000., etc.
I ask again, would you be okay with that or would you be screaming at the government that you're being gouged?
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