Posted on 07/23/2007 6:17:52 AM PDT by Daffynition
The U.S. House of Representatives recently passed legislation instituting penalties of up to $150 million for companies and up to $2 million and 10 years' imprisonment for individuals found guilty of gasoline "price gouging."
But the real gouger driving up gasoline prices is not the private sector – it is our government.
To "gouge" means to extort, to take by force – something that oil companies and gas stations have no power to do. Unlike a government, which can forcibly take away its citizens' money and dictate their behavior, an oil company can only make us an offer to buy its products, which we are free to reject.
Because sellers must gain the voluntary consent of buyers, and because the market allows freedom of competition, oil and gasoline prices are set, not by the whim of companies, but by economic factors such as supply and demand.
If oil companies could set prices at will, surely they would have charged higher prices in the 1990s, when gasoline was under one dollar a gallon.
Because oil companies and gas stations cannot set their prices arbitrarily, they must make their profits by earning them – by efficiently producing something that we value and are eager to buy. In so doing, they assume great risks and expend enormous effort.
Over the decades, oil companies have created a huge infrastructure to produce and distribute gasoline by investing hundreds of billions of dollars in prospecting, drilling, transporting, stocking and refining oil.
In the absence of political factors like the 1973 OPEC oil embargo or the Gulf wars, the net effect of oil companies' pursuit of profit has been to drive the price of oil and gasoline, not up, but down.
The price of a gallon of gasoline (in 2006 dollars) fell from $3 in the early 1920s to $2.50 in the 1940s to $2 in the 1960s to under $1.50 in the 1990s.
This downward trend is all the more impressive because it required the discovery and exploration of previously inaccessible sources of oil and because it persisted despite massive taxation and increased government regulation of the oil industry.
When we see the price of gasoline today, we should not accuse oil companies of gouging but rather thank them that prices are not much higher.
The true culprit that we should condemn for driving up prices is the government, which has engaged – with popular support – in the gouging of both the producers and consumers of gasoline.
Federal and state governments have long viewed gasoline taxes as a cash cow. In 2003, for instance, when the average retail price for a gallon of gasoline was $1.56, federal and state taxes averaged about 40 cents a gallon – which amounts to a far higher tax rate, 34 percent, than we pay for almost any other product.
(Contrary to popular belief, gasoline taxes do not just pay for the roads we drive on; less than 60 percent of the gas tax-funded "Highway Trust Fund" goes toward highways.)
Along with high taxes, environmental regulations – justified in the name of protecting nature from human activity – have dramatically increased the production costs, and thus the price, of oil and gasoline.
The government, for example, has closed huge areas to oil drilling, including the uninhabited wilderness of ANWR and the out-of-sight waters over the Atlantic and Pacific continental shelves. This, of, course significantly reduces the domestic supply of oil.
The government also has passed onerous environmental regulations that make it uneconomical for many old refineries to keep producing (50 out of 194 refineries were shut down from 1990 to 2004) and discourage new refineries from being built (no major refinery has been built in the last 30 years).
Regulations such as these push the surviving refineries to operate at almost full capacity, creating a situation where any significant reduction in the production of some refineries (e.g., from a hurricane) cannot be compensated by increased production in others.
Exorbitant spikes in prices, which many attribute to oil companies' "gouging," are actually caused by government constraints.
If we want to stop the irrational forces that have been driving up the price of gasoline and our cost of living, we must demand that our elected officials eliminate the regulations and excessive taxes that restrict the producers of oil and gas.
It's past time to stop gouging oil companies – and ourselves.
You are probably paying over $30 a gallon for beer, which is somehow justified, and the beverage companies make approximately 40% profit margin, and that’s OK, (great, really, because I own stock in a few), but $3 a gallon gas made by a company earning 8-10% is gouging?
One again, your logic is not coming through very clearly.
Investing is smart money management.
On the way out the door to see this slander of my character. Tsk tsk. The viking kitties are warming up troll. I'll ask, just to see if you have ANY integrity, to post an apology. I'll check back in shortly, and just for the record, I'm going to have a drink in honor of my recently passed wife, the first drink I've had in years, hence my "walking" instead of driving. Wrap your feeble mind around that, troll. See what I mean about giving you enough rope? It's a tried and proven method here in FReeperville. You lefty's fall for it every time. Blackbird.
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They make less rate of return on their investment than most other industries. The numbers seem huge because the companies are huge.
All you're saying is that you're philosophically opposed to huge companies which is irrational.
C&B, b!
If they need to make a bigger margin, then maybe they should go into other products, with higher returns. The increase in huge profits are directly proportional to the higher pump price.
Yes, and huge losses are also proportional to that. The oil companies have plenty of them over the past 20 years.
You can’t be seriously suggesting that they get out of the oil business and into the bottled water business.
The mentality of some here that profits are bad is just marxist. Reconsider what you’re saying. Big companies SHOULD make big profits. Otherwise there is something wrong with them.
If you don’t like the concept of profits, there are a few, very few, countries on the planet where that’s the official policy.
FierceAllegiance, when you come to the point that you can’t even spell out what you want to say because it is all foulmouthed, perhaps you should refrain from posting at all.
I am not fierce allegiance, and wtfayta?
Have a nice day. ho. ho. ho.
This is also against forum rules, but it's ok if you do it, right?
Oops...missed pinging you. Look at my reply immediately above this one.
FALSE™ @ 79.
Copper. Ugh. [shiver down spine]
I understand using their site for the purpose of ridicule, but using them on this forum as a legitimate source for debate.....well, that I don't understand.
If you claim it is false, prove it.
I will second that. I have a friend who is an engineer at the BP Texas City refinery and he has complained for years about the lackadaisical management attitude towards maintenance and equipment reliability. They prefer to skimp on maintenance and then place blame on the engineering staff.
On the other hand take Exxon-Mobil. Before the merger, both had top-notch staffs at all refineries, especially Exxon. They never skimped on maintenance and bought top quality equipment. Several Exxon engineers were marketed by the company to teach equipment reliability to the rest of the industry and even other capital intensive industries, like electric utilities. They are the best are it shows as theri refineries rarely have big problems.
Your ignorance is simply amazing and apalling at the same time. You are using Public Citizen as a source for your ‘facts’ on FR????? That’s Socialist front organization. It’s a political group disguised as a non-profit’ consumer advocate” group. I trust NOTHING they put out as facts, as they are consistently anti-capitalist.
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