Price Gouging


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NCP24
October 11, 2005, 08:16 AM
http://www.wsjs.com/news/top_stories.shtml

Regional News - Tuesday, October 11, 2005

RALEIGH, N.C. (AP) - A lawsuit filed by the state attorney general claims an Alamance County gas distributor conspired to fix prices. The suit also says the company tried to force one gas station to raise its prices by 40 cents a gallon. The lawsuit was filed against McLeod Oil and Home Oil of Mebane and their manager, Wesley C. Mehring. An affidavit filed by Durham convenience store owner Steven Grover says McLeod Oil came to his store on September 28th and demanded that he immediately raise his prices because competing gas stations were angry about his low prices. Grover refused to change the prices and, after attending church that evening, he says he received a message telling him his pumps had been padlocked. The next week, a representative from McLeod asked Grover's wife to raise the prices, and when she declined, McLeod removed the gas from the underground tanks. The padlocks were to be removed and a supply of gasoline delivered Monday.

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Molon Labe
October 11, 2005, 08:40 AM
Assuming there's free-market competition, and assuming there's no collusion going on, there is no such thing as "price gouging." All prices are exactly what they should be.

NCP24
October 11, 2005, 09:16 AM
Assuming there's free-market competition, and assuming there's no collusion going on, there is no such thing as "price gouging." All prices are exactly what they should be. But what about during and in the wake of natural disasters?



Assessing Anti-Price-Gouging Statutes In The Wake of Hurricane Katrina:
Why They're Necessary in Emergencies, But Need to Be Rewritten
By ANITA RAMASASTRY
http://writ.news.findlaw.com/ramasastry/20050916.html

True price-gouging is very ugly: A fellow citizen jacks up prices to exploit fellow citizens' vulnerability - due to a natural disaster that has left them bereft of the necessities of life.

But allowing "price-gouging" does have some arguable benefits. For one thing, it will incentivize shopkeepers and homeowners to devote their back rooms and basements to stockpiling for a natural disaster - when they otherwise might not find it economical to do so. Knowing prices will go up in a disaster, incentivizes us to prepare by buying them at normal prices now.

For another thing, allowing "price-gouging" may prevent a run on stores when a disaster does occur. If prices stay low even in a disaster, then a store's neighbors may quickly buy it out - buying beyond their needs. And subsequent would-be store customers may find that, for them, necessities are not available at any price.

Moreover, allowing suppliers to charge high prices allows them to offset substantial costs, hazards or inconvenience to themselves. Some storekeepers will selflessly stay open, despite risk to themselves, out of loyalty to their customers or plain human decency. But human nature being what it is, others will need a financial incentive to do so.

For these reasons, many free market fans feel "price gouging" gets a bad rap (and should have a less pejorative name). In their view, such pricing practices are simply a system for quickly distributing scarce resources to those who need them most -- as evidenced by what they are willing to offer in exchange.

But when people are poor - as so many affected by Katrina were - ability to pay is a poor proxy for need. Those who cannot afford to pay inflated prices, may find themselves in desperate straits - without milk for babies, or the drinkable water, minimum food, or important medicine needed to stay alive. We have rightly decided, in our society, not to let people suffer this way. And in an emergency, those who are most vulnerable need to be priced in, not priced out. Otherwise, human suffering - as well as "looting" and panic - will ensue.

Access to money, too, can be affected by a hurricane: If ATMs are underwater, or electricity is down, it won't only be the poor who have limited cash. If health insurance companies can't be reached to confirm eligibility, few will have the cash on hand to pay for expensive and urgently needed prescription drugs.

On balance, then, price-gouging laws may serve an important public policy for a very limited period of time. But to make sure the benefits of such laws exceed their costs, we need to be clearer in defining "price-gouging" in our statutes - making clear that such laws apply only in very limited circumstances, during the aftermath of a natural disaster.

(It's important to note that generally, the most-affected residents of New Orleans did not own cars to flee Hurricane Katrina. Rather, they needed access to basic food and water in the days following the Hurricane. The rise in gas prices in states like California is a secondary effect of the Hurricane.)

jefnvk
October 11, 2005, 09:18 AM
I don't see why it is so hard for people to se the station/companies own the gas, and if you want it, you have to pay what they are asking. Just because there was some disaster, doesn't mean that the laws of economics should be suspended.

That said, this appears to be more contract dispute and harassment than anything.

Come to think about it, many here seem to be stockpiling ammo and food in case the SHTF, because it will be worth its weight in gold. Can't see how that is any different.

Kjervin
October 11, 2005, 09:36 AM
this seems to me to be all about collusion:
1) everyone raises their prices but one guy
2) the customer go to his store
3) the guys who raised their prices complain to the gas distributor
4) gas distributer tries to coerce (padlock his pumps :what: )lone holdout to get with the program (here's the problem)
5) guy refuses and distributor backs down.

I have no problem with the other guys raising their prices, but when they try to go "goodfellas" on the guy who doesn't, a line has been crossed, IMHO. You should be able to charge whatever you want at your store (and face the economic consequences) but trying to get your competitors to go along by coercion or agreement is not "free- market competition"

Kj

NCP24
October 11, 2005, 09:41 AM
You should be able to charge whatever you want at your store (and face the economic consequences) but trying to get your competitors to go along by coercion or agreement is not "free- market competition"Good point.

Waitone
October 11, 2005, 10:09 AM
I think the convenience store operator ought to be required to post the gross margin he makes on gasoline (both in absolute dollars and % of sales price)

RIGHT ALONG SIDE THE MARGIN HE MAKES ON CHEESE DOODLES, DORITOS, diet coke, and lotto tickets.

We can then get the attorney general to launch an investigation into price gouging by the manufacturer of cheese doodles.

If you gonna bellyache about price gouging, lets crack down on all of it. :evil:

wingman
October 11, 2005, 10:36 AM
[QUOTE]Assuming there's free-market competitionQuote:

Where is the "free market" for gas, can I go someplace else for fuel, where is
the competition?

The American consumer is being raped on fuel , oil companies are pulling
in huge profits, spin it anyway you like the economy is going to be hurt
in coming months.

petrel800
October 11, 2005, 10:45 AM
Price gouging is nothing more than a term used by politicians to grand stand and buy votes.

Collusion on the other hand is and should be illegal.

"The American consumer is being raped on fuel , oil companies are pulling
in huge profits, spin it anyway you like the economy is going to be hurt
in coming months."

Wrong, the American consumer has chosen gasoline engines as its primary mode of transportation. There are plenty of alternatives availible to the american consumer. If you don't like the prices do something else. There is nothing wrong with a company making huge profits. Nobody goes into work in the morning for free.

If the economy fails it will only be because of government interference. Call your congress critter and tell him to vote through measures to allow for more refineries and drilling in Alaska. Increasing supply or decreasing demand are the only two ways to lower prices.

You can decrease demand by buying a car that runs on an alternative fuel, or you can tell government to get out of the way which will lead to more supply. Both of those options are better than sitting around complaining about the big bad oil companies.

Camp David
October 11, 2005, 10:49 AM
Assuming there's free-market competition, and assuming there's no collusion going on, there is no such thing as "price gouging." All prices are exactly what they should be.

It goes way beyond "free market competition" and involves much more than "free trade"! It is price gouging, pure and simple!

On my way to work there are four (4) seperate Exxon Mobil filling stations... this morning gas prices on unleaded "regular" ranged from $2.99 to $3.15 per gallon, each station different, even though they all sport the Exxon Mobil name. Why?

Now you might think that it is just fine and dandy that local vendors charge what they want per gallon, but what about vendors that service them? Do you know cigarettes are highly regulated by FEDERAL GOVERNMENT? Thus company that delivers cigarettes to gas stations is required to charge a basic rate which cannot change as stated by State and Feds, YET GAS station can charge what they wish for gas with no regulation? Why is that?

Molon Labe
October 11, 2005, 11:06 AM
On my way to work there are four (4) seperate Exxon Mobil filling stations... this morning gas prices on unleaded "regular" ranged from $2.99 to $3.15 per gallon, each station different, even though they all sport the Exxon Mobil name. Why?Each station sets the price according to the supply and demand relationship at its own store. This is a good thing, and ultimately means a lower price or better service for the consumer.

If you want to claim "price gouging" is occurring in a certain market, you must prove one of the following:

1. There is no competition (monopoly).
2. There is collusion.

If you cannot prove #1 or #2, then you have absolutely no basis for claiming "price gouging" is occurring.

For more information, read an introductory book on economics.

NCP24
October 11, 2005, 11:17 AM
Each station sets the price according to the supply and demand relationship at its own store. This is a good thing, and ultimately means a lower price for the consumer. In theory.

Thus company that delivers cigarettes to gas stations is required to charge a basic rate which cannot change as stated by State and Feds, YET GAS station can charge what they wish for gas with no regulation? Why is that? I don’t know, but what I don’t understand is if the gulf only supplies ¼ of our fuel how come in many cases the mark-up was 150 to 200% or more? On top of that weeks before Katrina hit the oil companies were projecting sharp increases in cost, I think it had something to do with the Holidays?

TaxPhd
October 11, 2005, 01:52 PM
If price gouging exists, why don't the evil gas stations charge $25/gal. for gasoline?

That's right, because market competition keeps the price at the market determined $3/gal.




Scott

foghornl
October 11, 2005, 02:04 PM
My humble 1/50th of $1 (adjusted for higher prices :neener: )

I remember after some disasters, some 'lumber yards' and stores going nuts with pricing...claiming they were pricing high so that everyone could buy some of each item and no one could hoard it all.

1/2" CDX plywood that was $5 or $6 for a 4'x8' sheet before was as much as $25 per sheet after.

Bottled water, about $2.50 per gallon in various sized jugs, was going for $15/gallon after.

Places that were open (greasy spoon eateries) that normally served a decent breakfast for about $5 were over $12 for same meal. 2 eggs/bacon/toast & juice or coffee or soda.

Hey I'm all for free enterprise and everybody making a buck...However; when you are trying to make $10 because of 'hard times'...uhmmmmm thats questionable at best.

MasterPiece Arms.com
October 11, 2005, 02:12 PM
This thread needs some of this: http://www.loctiteproducts.com/common/graphics/products/loctite/productshots/Item_455.jpg

If we're going to talk about price gouging, how about having to pay $25+ to have my own property transferred to me? :cuss: The founders weren't poor men. I'd bet cash on the barrel that if Patrick Henry were alive today (if he wasn't in jail-sold up the river by his fellow citizens on a jury-for making MGs) he'd AT LEAST go get an FFL JUST to have a no cost transfer festival (ok, maybe he'd recoup the cost of the FFL, but maybe not, because he understood that a little sacrifice makes a patriot hardened and perma pissed at tyranny).

Molon Labe
October 11, 2005, 02:26 PM
foghornl: Every seller has the right to set the price of the goods at whatever they want. As an example, I have the right to stand on the street corner and sell bottled water for $100/quart. Of course, no one would buy it. Which will force me to lower my price. See how it works?

This also means that, if the seller in your example was selling plywood for $25/sheet, and people were paying $25/sheet, then that's what it was worth and the price is correct.

"But what if there’s no competition?" you ask. Simple. If there's money to be made, competition will pop up, and the price will go down.

With all due respect, you need to read a book on economic theory.

Camp David
October 11, 2005, 02:29 PM
Each station sets the price according to the supply and demand relationship at its own store. This is a good thing, and ultimately means a lower price or better service for the consumer. So the same gas delivery truck which refills all four Exxon stations charges each a different price? :eek:

If you want to claim "price gouging" is occurring in a certain market, you must prove one of the following:. No I don't... I have to see widely varying prices for the same item in the same vicinity. Which I did. :mad:

If you cannot prove #1 or #2, then you have absolutely no basis for claiming "price gouging" is occurring... When they broke up the Bell telephone monopoly they couldn't prove #1 or #2, but they broke it up regardless...Why? Price gouging... they relied on common sense.

For more information, read an introductory book on economics.For more information, take a course entitled "Common Sense 101"!

Gas companies are making tremendous profits of an item whose price per unit (gallons), as determined at the refinaries, has been relatively stable. This profit is passed down to individual franchise operators, who fluctuate prices based on their whim and what they see others doing... I know this because gas delivery drivers, who fill up several stations from delivery trucks, charge the same price per gallon to all vendors serviced. This price has been stable for some time....

Molon Labe
October 11, 2005, 02:37 PM
I don't know how many ways to tell you this, Camp David. First of all, sellers are allowed (and should be allowed) to set whatever price they want for their goods. This is a good thing, as it (usually) prevents shortages and surpluses. Secondly, if you see the same product for sale at different locations w/ different prices, then why not purchase the product from the seller with the lowest price? What's wrong with that?

NCP24
October 11, 2005, 02:38 PM
Every seller has the right to set the price of the goods at whatever they want. As an example, I have the right to stand on the street corner and sell bottled water for $100/quart. Of course, no one would buy it. Which will force me to lower my price. See how it works?So a natural disaster should be viewed as just another opportunity to profit, even at the cost of human suffering?

Molon Labe
October 11, 2005, 02:42 PM
So a natural disaster should be viewed as just another opportunity to profit, even at the cost of human suffering?Profit and competition are always good things, regardless of the circumstances. Why? Because it's the best way of preventing shortages and surpluses, while at the same time giving the buyer the best deal.

HankB
October 11, 2005, 02:44 PM
I think the convenience store operator ought to be required to post the gross margin he makes on gasoline (both in absolute dollars and % of sales price)

RIGHT ALONG SIDE THE MARGIN HE MAKES ON CHEESE DOODLES, DORITOS, diet coke, and lotto tickets.
Funny thing . . . when I read this, I had a flashback to a few years ago when our friend Chuckie Schumer wanted to investigate the pricing of corn flakes . . . :rolleyes:

NCP24
October 11, 2005, 02:50 PM
Molon Labe you sure drive a hard bargain.

R.H. Lee
October 11, 2005, 02:52 PM
Where does the 'free market' end and coercion begin? Let's say you're in a traffic accident and went through the windshield. You're spurting blood when the ambulance pulls up and offers to sell you some for $1000/pint, cash or credit card in advance only. Would you support the 'free market' in action? Or would you assert there are some circumstances where other consideratons override the bottom line?

Molon Labe
October 11, 2005, 02:55 PM
Molon Labe you sure drive a hard bargain.Stubborn SOB, ain't I? ;)

Even though I was an engineering student, I took a lot of courses in economics as an undergrad. I have always had an interest in the subject, and I take guilty pleasure in educating others on the beautiful logic of free-market economic theory.

Molon Labe
October 11, 2005, 03:02 PM
Where does the 'free market' end and coercion begin? Let's say you're in a traffic accident and went through the windshield. You're spurting blood when the ambulance pulls up and offers to sell you some for $1000/pint, cash or credit card in advance only. Would you support the 'free market' in action? Or would you assert there are some circumstances where other consideratons override the bottom line?So let's say there was a ambulance company practicing the tactics you described. Due to competition, companies would naturally sprout up that would offer lower prices and credit. Problem solved.

"But what if the ambulance was the only one on the scene of the accident? And you were minutes away from death??" you ask.

Well then... we no longer have competition, do we? It would be a monopoly, and thus the rules no longer apply. (Note in all my previous posts where I assume there is competition.) Because there's no competition in your example, we have laws to protect people in this circumstance.

NCP24
October 11, 2005, 03:09 PM
Stubborn SOB, ain't I?

Even though I was an engineering student, I took a lot of courses in economics as an undergrad. I have always had an interest in the subject, and I take guilty pleasure in educating others on the beautiful logic of free-market economic theory. Not to mention a tad sly.

petrel800
October 11, 2005, 04:53 PM
I pose this question to all those who think there is "price gouging."

Assuming price gouging exists, what would your solution for the problem be?

I hope your answer isn't government regulation, because if it is, I challenge you to answer my next question.

Other than welfare (income redistribution), what does government do more efficently than the private sector?

Oh by the way, the cigarette example is a very poor one. Since the government has gotten involved, cigarettes have almost tripled in price. So you want the government to regulate gas prices . . . great, you fill up on Tuesdays and Thursdays, and I'll get to fill up on Wednesdays and Fridays, . . . If you need gas any other day I guess your up the brown river without a paddle.

TaxPhd
October 11, 2005, 06:58 PM
Camp David,

Why not answer my previous question? If gouging exists, why aren't gas stations charging $25/gal. for gas?

Where does the 'free market' end and coercion begin? Let's say you're in a traffic accident and went through the windshield. You're spurting blood when the ambulance pulls up and offers to sell you some for $1000/pint, cash or credit card in advance only. Would you support the 'free market' in action? Or would you assert there are some circumstances where other consideratons override the bottom line?

What would you advocate? That we compell the ambulance company to sell at a price you deem acceptable?

The only person who can price a good or service is the owner of that good, or providor of the service. To compell a doctor to perform a medical service at a price less than what the doctor decides is involuntary servitude. That has been illegal in this country for a long time.




Scott

CZ-100
October 11, 2005, 07:29 PM
I see Gas companys in the same category as the power companys, they are a utility, a monopoly if you wish, and should be regulated.

Our whole ecomany is based on moving goods and such, prices of fuel, as they are now are going to make the price of EVERYTHING of UP.

Fairlane63
October 11, 2005, 07:55 PM
Walter Williams is one of my favorite columnists-- he has the ability to take complex problems and explain them in a way that even I can understand. Here's what he recently had to say about price gouging. Makes sense to me...

http://www.gmu.edu/departments/economics/wew/articles/05/lessons.html

HURRICANE EVACUATION LESSONS

Evacuations are not a benign process. Twenty-four people were killed when a bus carrying 38 Houston nursing home residents and six employees caught fire in a traffic jam. It's thought that oxygen tanks used by elderly evacuees had a role in the fire. Given the hurricane predictions for Houston and Galveston, one can't blame officials for ordering evacuations, but the lesson to be learned is evacuations can be costly. In addition to injuries and loss of life, when evacuations are ordered, there are costs associated with opportunistic criminal behavior such as looting, which there were reports of in Houston.

Hurricane Rita provided us with another evacuation lesson as millions sought to leave Houston and Galveston. Gasoline stations ran out of gas leaving hundreds of motorists stranded. Many abandoned their cars. Police officers were deployed to carry gas to motorists whose tanks were empty. Texas authorities also asked the Pentagon for help in getting gas to stranded motorists. Much of the blame for the shortage rests at the feet of Texas Attorney General Greg Abbott, who recently ordered that penalties of up to $20,000 be imposed per incident of price-gouging. You say, "How come you blame Greg Abbott?" Let's look at it.

When the hurricane evacuation order came, there was an immediate change in the demand conditions for gasoline; namely, demand became much greater than the available supply. Retailers, in fear of prosecution by the attorney general, didn't do what would have brought demand more in line with the available supplies of gasoline -- raise prices.

Suppose a family evacuating Houston chose to make a 146-mile drive to stay with relatives in Austin. Their car has a half a tank of gasoline -- plenty to get to Austin -- but just to be safe, they decide to fill up. What do you think they might do if they expected to pay $2.75 a gallon but when they got to the gas station they found the gas selling for $3.75? I bet they'd say, "The heck with that; we'll fill up in Austin." That's wonderful; they've voluntarily made gas available for someone running out of gas. In my book, for a motorist who's running on empty, gas available at $3.75 a gallon is preferable to gas being unavailable at $2.75 a gallon.

Attorney General Abbott also threatened legal action against what he called "unconscionable pricing" by hotels. Take that same family. The husband might have said, "Honey, I don't feel like driving all the way to Austin to stay with your mother and father; let's rent a room." When they get to the hotel, the rooms are no longer $75 a night but $150. The husband says, "Okay, I'll put up with the in-laws." That's wonderful, too. They've made a room available for a family who has no other alternative.

Market allocation isn't the only way to make sure people economize on resources that have suddenly become scarce. Texas officials resorted to pleading with motorists not to top off their tanks. Their pleas were ignored. What Texas officials could have done was to place anti-top off officers at every gas station to make sure people weren't buying more gas than they needed to get to their evacuation destination. Texas officials also could have stationed hotel officers at every hotel. The job of the hotel officer would be to query potential guests as to whether they had nearby relatives or friends with whom they could spend a night or two. If they had relatives or friends within a reasonable distance, such as my example of the husband and wife with relatives in Austin, the hotel officer would tell them to hit the road. Would measures such as these have been preferable to rising prices or the unavailability of gas and lodging?

Don't get me wrong. There's nothing pleasant about rising prices in the wake of a disaster. My argument is that not allowing the market mechanism to allocate suddenly scarce resources produces the inferior outcome.

Amusetec
October 11, 2005, 08:47 PM
When they broke up the Bell telephone monopoly they couldn't prove #1 or #2, but they broke it up regardless...Why? Price gouging... they relied on common sense.
If there was any gouging going on with the bell that is becuse of the PUC and if they where gouging going on then what would you call it now. I pay more on my phone bill than when they where a monopoly.

On my way to work there are four (4) seperate Exxon Mobil filling stations... this morning gas prices on unleaded "regular" ranged from $2.99 to $3.15 per gallon, each station different, even though they all sport the Exxon Mobil name. Why?

Now you might think that it is just fine and dandy that local vendors charge what they want per gallon, but what about vendors that service them? Do you know cigarettes are highly regulated by FEDERAL GOVERNMENT? Thus company that delivers cigarettes to gas stations is required to charge a basic rate which cannot change as stated by State and Feds, YET GAS station can charge what they wish for gas with no regulation? Why is that?

have you priced soda? one store on the corner charges .75 the other .89 same truck brings them but charge diff. price. same for chips same for cigaretts same for everything in the store so why should one product be treated diff. :confused:

R.H. Lee
October 11, 2005, 10:02 PM
The only person who can price a good or service is the owner of that good, or providor of the service. When that 'owner' is being subsidized by public funds (either directly or through tax credits), he should not have exclusive control over pricing.
To compell a doctor to perform a medical service at a price less than what the doctor decides is involuntary servitude. That has been illegal in this country for a long time Simplistic, ideological answer that completely ignores reality. Many (most?) hospitals are 'non-profit' entities. Not only are they exempt from income taxes, but local property taxes as well. The public who provided those exemptions did so with an expectation of some return.

You should know better.

poe_9999
October 12, 2005, 03:56 AM
It appears that many of you think storeowners should be free to charge whatever they wish for their product or service at any given time. I personally don’t think so. I think price gouging should be illegal and should carry harsh penalties.

Our current economic structure does not allow for anything even close to perfect competition. “Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes. Perfect competition means there are few, if any, barriers to entry for new companies, and prices are determined by supply and demand. Thus, producers in a perfectly competitive market are subject to the prices determined by the market and do not have any leverage. For example, in a perfectly competitive market, should a single firm decide to increase its selling price of a good, the consumers can just turn to the nearest competitor for a better price, causing any firm that increases its prices to lose market share and profits.” *http://www.investopedia.com/university/economics/economics6.asp

Now I think a free market economy is a great thing, except when there are substantial barriers to enter the market place. The current barriers that exist to enter the market place allow companies to gouge customers without the possibility of serious repercussions. For instance, if you have 10 gas stations in your locality and 1 of them gouged their prices, to be substantially higher than the other 9, then that company would almost immediately price itself out of the market. In this situation everything works outs. The price gouging company goes under. Now what happens in this town when the demand for an item spikes. Supply and demand dictates that the prices will rise, due to the increased demand and lack of supply (and suppliers). All the current suppliers are able to raise their prices drastically (price gouging) without fear of any repercussions. Now the market will rebalance itself, as new entrepreneurs take advantage of the increased demand and open up new gas stations and refiners. Right??? The answer is no. The substantial barriers that exist to enter the market drastically prolong the amount of time needed for these new companies to enter the market place. All price-gouging companies know that they cannot continue to charge high prices (higher than what the market will normally dictate) indefinitely. They know that by doing this they will eventually lose market share and profits caused by the increased competition. But they also know that they can temporary take advantage of the prolonged amount of time required for new competition to emerge. They can charge extremely high prices for a period of time, then lower them back to acceptable rates before new competition has time to emerge. Thus removing the entrepreneurial incentive for the new competition, and without any new competition the companies are virtually immune to any serious repercussions caused by their temporary price gouging.

Now if our economic structure allowed for new competition to quickly enter the market, prices would rebalance themselves quickly. And companies would be reluctant to price gouge because they would damage their customer relations with their current market share. And even if prices returned to normal quickly, the displeased customers would probably patronize the new companies.

Now because the government is responsible for several of the barriers that exist for companies to enter the marketplace they should also be responsible for limiting short term price gouging.

--Poe

c_yeager
October 12, 2005, 03:58 AM
But what about during and in the wake of natural disasters?

Oh hey yeah, good point. Why dont we just suspend the right to Life and Liberty while we are at it. There is simply no such thing as a mitigating circumstance when it comes to restriction inalianable rights, and the right to PROPERTY and the purchase and sale thereof is one of the most fundamental of those rights.

If you dont want to pay for gas then DON'T. The fact that you have built your life around a dependance on a steady supply of regular unleaded is *not* the fault of the guy who owns the gas station, its yours.

jeff-10
October 12, 2005, 04:39 AM
I am one of those people who are tired of people complaining about gas prices. Why do people think they have a right to cheap gas? Do they believe the supply is infinite and demand from the rest of the world has no effect on our gas prices? The problem isn't high gas prices its people buying vehicles with ridiculously low mpg. I don't see how how $3 a gallon for gas is particularly high.

javafiend
October 12, 2005, 05:07 AM
Our current economic structure does not allow for anything even close to perfect competition.

So what? Perfect competition is NOT a precondition for the efficient functioning of free markets.

Laws against "price gouging" are stupid and counter-productive. They are a form of price controls. Price controls always and everywhere create shortages.

Increased demand causes prices to rise, that in turn sends a signal to the supply chain to reroute greater supply to customers. The best thing that government can do is get out of the way and allow markets to operate. The worst thing that governments can do is interfere with markets as they seek equilibrium. Prices convey information. Government price controls are essentially a form of censorship.

Read How Capitalism Saved America: The Untold History of Our Country, from the Pilgrims to the Present (http://www.amazon.com/exec/obidos/tg/detail/-/0761525262/qid=1129107300/sr=8-1/ref=pd_bbs_1/002-7929783-4516825?v=glance&s=books&n=507846) by Thomas DiLorenzo. Even if you hated econ in school, you could easily like this book. It's not loaded down with jargon, inscrutable graphs, math, or academic gobbledegook.

(I'm another econ major.)

Molon Labe
October 12, 2005, 06:00 AM
+1 javafiend

Wiley
October 12, 2005, 06:52 AM
If you don't like the price you pay at the pump, you have a number of choices:

1. Go somewhere else.
2. Walk.
3. Buy your own gas on the spot market just like all the independents. It's only $1.8370/gal according to CNBC as I write this.
4. etc.

But please stop whining about it.

oh blanky
October 12, 2005, 07:00 AM
No such thing as price gouging.

Unless you want to be a commie.

Go be a commie and see how well price controls work.

Hey look at how cheap gas is!! But they don't have any.

Yeah, but it sure is cheap!!

You can't wipe your ass with fluffy charmin if there are price controls.

Molon Labe
October 12, 2005, 08:02 AM
because the government is responsible for several of the barriers that exist for companies to enter the marketplace they should also be responsible for limiting short term price gouging.Please tell me how the government should do this.

zahc
October 12, 2005, 08:05 AM
Now because the government is responsible for several of the barriers that exist for companies to enter the marketplace they should also be responsible for limiting short term price gouging.

hurray for using socialism to justify more socialism!

GunGoBoom
October 12, 2005, 08:08 AM
So what? Perfect competition is NOT a precondition for the efficient functioning of free markets.

Laws against "price gouging" are stupid and counter-productive. They are a form of price controls. Price controls always and everywhere create shortages.

Increased demand causes prices to rise, that in turn sends a signal to the supply chain to reroute greater supply to customers. The best thing that government can do is get out of the way and allow markets to operate. The worst thing that governments can do is interfere with markets as they seek equilibrium. Prices convey information. Government price controls are essentially a form of censorship.

Read How Capitalism Saved America: The Untold History of Our Country, from the Pilgrims to the Present by Thomas DiLorenzo. Even if you hated econ in school, you could easily like this book. It's not loaded down with jargon, inscrutable graphs, math, or academic gobbledegook.

+2. Yup. Poe, I think you seriously misunderstand the problem. All price control laws do (call them anti-gouging laws if you wish) in the case of a natural disaster, for example, is cause people to DIE. Because if the entrepeneurs are not allowed legally to come and sell their $4 a gallon water (the market price *in that market*), then they simply won't, and the people that need it won't have water, and they will die. Don't tell me the red cross and fema will be there, cuz if they were there giving away free water, then there wouldn't be a market for $4 per gallon water.

Dave P
October 12, 2005, 08:12 AM
Merchants should be allowed to set a price of their choosing. Besides Williams, Stossel also provides us with insight:


In praise of price gouging

Sep 7, 2005
by John Stossel ( bio | archive )

Politicians and the media are furious about price increases in the wake of Hurricane Katrina. They want gas stations and water sellers punished.

If you want to score points cracking down on mean, greedy profiteers, pushing anti-"gouging" rules is a very good thing.

But if you're one of the people the law "protects" from "price gouging," you won't fare as well.

Consider this scenario: You are thirsty -- worried that your baby is going to become dehydrated. You find a store that's open, and the storeowner thinks it's immoral to take advantage of your distress, so he won't charge you a dime more than he charged last week. But you can't buy water from him. It's sold out.

You continue on your quest, and finally find that dreaded monster, the price gouger. He offers a bottle of water that cost $1 last week at an "outrageous" price -- say $20. You pay it to survive the disaster.

You resent the price gouger. But if he hadn't demanded $20, he'd have been out of water. It was the price gouger's "exploitation" that saved your child.

It saved her because people look out for their own interests. Before you got to the water seller, other people did. At $1 a bottle, they stocked up. At $20 a bottle, they bought more cautiously. By charging $20, the price gouger makes sure his water goes to those who really need it.

The people the softheaded politicians think are cruelest are doing the most to help. Assuming the demand for bottled water was going to go up, they bought a lot of it, planning to resell it at a steep profit. If they hadn't done that, that water would not have been available for the people who need it the most.

Might the water have been provided by volunteers? Certainly some people help others out of benevolence. But we can't count on benevolence. As Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer or the baker, that we can expect our dinner, but from their regard to their own interest."

Consider the storeowner's perspective: If he's not going to make a big profit, why open up the store at all? Staying in a disaster area is dangerous and means giving up the opportunity to be with family in order to take care of the needs of strangers. Why take the risk?

Any number of services -- roofing, for example, carpentry, or tree removal -- are in overwhelming demand after a disaster. When the time comes to rebuild New Orleans, it's safe to predict a shortage of local carpenters: The city's own population of carpenters won't be enough.

If this were a totalitarian country, the government might just order a bunch of tradesmen to go to New Orleans. But in a free society, those tradesmen must be persuaded to leave their homes and families, leave their employers and customers, and drive from say, Wisconsin, to take work in New Orleans. If they can't make more money in Louisiana than Wisconsin, why would they make the trip?

Some may be motivated by a desire to be heroic, but we can't expect enough heroes to fill the need, week after week; most will travel there for the same reason most Americans go to work: to make money. Any tradesman who treks to a disaster area must get higher pay than he would get in his hometown, or he won't do the trek. Limit him to what his New Orleans colleagues charged before the storm, and even a would-be hero may say, "the heck with it."

If he charges enough to justify his venture, he's likely to be condemned morally or legally by the very people he's trying to help. But they just don't understand basic economics. Force prices down, and you keep suppliers out. Let the market work, suppliers come -- and competition brings prices as low as the challenges of the disaster allow. Goods that were in short supply become available, even to the poor.

It's the price "gougers" who bring the water, ship the gasoline, fix the roof, and rebuild the cities. The price "gougers" save lives.

Waitone
October 12, 2005, 08:33 AM
Hurricane comes throug town and destroys everything.

Two families have needs. Both needs are important. Both sets of needs are satisfied by a gas generator. The generator in question sold at Lowe's before the 'cane for $400. After the 'cane the generator is now the object of desire of two families.

Family #1 wants the generator so it can run fans, a few lights, the microwave all in an attempt to bring a semblence of sanity and normalcy to their lives.

Family #2 wants the generator so it can power the refridgerator unit of its meat locker since the family owns a butcher shop. It does not care about lights and microwaves. It cares only about saving $30,000 in inventory.

Both families go to Lowe's only to find the price is now $1,000. Family #1 is upset. Who wants to spend $1,000 to run a fan and microwave. Family #2 is tickled pink to pay the asking price because it will net the family $29,000.

If government bigfoots the pricing through anti-gouging laws, the chance of the generator satisfying the greatest economic utility is greatly reduced. The issue becomes who get to the generator first, not where the generator does the most good for society in general.

"Gouging" is a market means of allocating scarce resources for the greatest economic utility. Count me in favor of gouging.

NCP24
October 12, 2005, 09:11 AM
It saved her because people look out for their own interests. Before you got to the water seller, other people did. At $1 a bottle, they stocked up. At $20 a bottle, they bought more cautiously. By charging $20, the price gouger makes sure his water goes to those who really need it.
"Gouging" is a market means of allocating scarce resources for the greatest economic utility. Count me in favor of gouging. I’m not advocating for or against “price gouging”, but please lets be realistic about it. Capitalism has nothing at all to do with looking out for the welfare of the less fortunate. It’s all about the bottom line and taking advantage of every possible opportunity to promote ones financial wellbeing.

c_yeager
October 12, 2005, 09:21 AM
because the government is responsible for several of the barriers that exist for companies to enter the marketplace they should also be responsible for limiting short term price gouging.

artificially keeping prices low is the single greatest barrier to entry in any market.

Molon Labe
October 12, 2005, 09:33 AM
Capitalism has nothing at all to do with looking out for the welfare of the less fortunate.Well... yes and no.

Capitalism in-and-of-itself has no concept of "providing for the less fortunate." It is simply an economic system. But here's what's interesting: capitalism is the best at "providing for the less fortunate" when compared to all other types of economic systems.

solareclipse
October 12, 2005, 09:38 AM
Free market is a relative term. In reality, heavy government intervention (vs control) is needed for the markets to run.

same with democracy.. in the pure sense, there shouldn't be all the laws telling you what to do and what not.

I find it hilarious when people find an issue they do not agree with and start to proclaim "free" left and right as the opposing view.

NCP24
October 12, 2005, 09:44 AM
Capitalism in-and-of-itself has no concept of "providing for the less fortunate." It is simply an economic system. But here's what's interesting: capitalism is the best at "providing for the less fortunate" when compared to all other types of economic systems. Oh yes, “when compared to all other types of economic systems”.

ID_shooting
October 12, 2005, 09:45 AM
"Hurricane comes throug town and destroys everything.

Two families have needs. Both needs are important. Both sets of needs are satisfied by a gas generator. The generator in question sold at Lowe's before the 'cane for $400. After the 'cane the generator is now the object of desire of two families.

Family #1 wants the generator so it can run fans, a few lights, the microwave all in an attempt to bring a semblence of sanity and normalcy to their lives.

Family #2 wants the generator so it can power the refridgerator unit of its meat locker since the family owns a butcher shop. It does not care about lights and microwaves. It cares only about saving $30,000 in inventory.

Both families go to Lowe's only to find the price is now $1,000. Family #1 is upset. Who wants to spend $1,000 to run a fan and microwave. Family #2 is tickled pink to pay the asking price because it will net the family $29,000.

If government bigfoots the pricing through anti-gouging laws, the chance of the generator satisfying the greatest economic utility is greatly reduced. The issue becomes who get to the generator first, not where the generator does the most good for society in general.

"Gouging" is a market means of allocating scarce resources for the greatest economic utility. Count me in favor of gouging."

Let me add to this. but family two realizes that they do not have $1000.00 dollars because the banks are closed, the ATMS are under 3 feet of water and he can not get to his money. They plead with the Lowes manager but he will not not budge. In fact, the franchise owner just happens to be there, sees that two people are seriously interested in his generator so he decides he can raise the price to what ever he wants. He runs down and bumps the price to $3000.00. Well, Family four sees this, and since they are wealthy, and have the funds on hand, they decide to buy it on the spot before it goes higher to run thier AC unit and thier hot tub.

All of this sounds fine in a free market, and is the basis for straight capitolism; however, what we didn't realize is that the butcher is not selling his meat on the open market and is instead rationing out his meat to the nearby families. With the meat supply gone, 14 children die of malnutrition.

So what is the perfect answer? There really isn't one. We can agrue semantics till we are blue in the face and still not come to a conclusion.

All I know is that anytime you are dealing with a comodity (you can't say you have a choice not to buy fuel. Some of us, like me, have a job the requires it. Not becuase I live too far from work but rather that driving is my work) you have to controll it, if rationing and selective distrobution are required, then so be it.

Working logistics in the Army tought me that in a crisis situation, such as limited fuel supply, you may have to make tough decisions. If we had 20,000 galons of JP8 and the armor unit needed it, but the infantry got there first and decided they were going to hord it, how long would be before the armor unit became stationary artillery with 65 ton radios.

Remember, we aren't talking about cans of Pepsi here, we are talking about a needed unit of supply that consumers are reliant upon. Yes, there are limited supplies, but not becuase distrobution companies choose it, but rather the top level suppliers controll it to maximize profits and prey on the needy.

Does this sound socialists, you bet it does. That is why niether true capitolism nor true socialism do not work. You must have a mix of both to provide for your society.

The natural response will be for somone to tell me to study basic econimics, well, while you were studying the past, I was living and working in the field of logistics. Sorry, no book can teach you about what really happens in the real world.

DRZinn
October 12, 2005, 09:53 AM
heavy government intervention (vs control) is needed for the markets to run.That's disgusting.
Working logistics in the Army tought [sic] meLogistics in the army is different because, umm, you're running an army. There are no prices. There is no disincentive to prevent the infantry from taking all the fuel. In civil society, the high price is that disincentive to ayone who doesn't really need the product.

NCP24
October 12, 2005, 10:00 AM
The natural response will be for somone to tell me to study basic econimics, well, while you were studying the past, I was living and working in the field of logistics. Sorry, no book can teach you about what really happens in the real world. I can tell you from a business point of view that I really don’t care what you do with the product as long as I make a profit.

R.H. Lee
October 12, 2005, 11:26 AM
These oil companies are corporations and as such are artificial constructs of government. They are also heavily subsidized by government (read: public funds).
The report "Fueling Global Warming: Federal Subsidies to Oil in the United States" by Douglas Koplow and Aaron Martin of US economics consultancy company Industrial Economics found that the US government provided up to $11.9 billion in subsidies to the US oil industry in 1995 excluding the cost of defending the Persian Gulf oil supplies. Including defence costs, the subsidies figure rises to $35.2 billion.

"This study shows the hypocrisy of the US government on climate change policy which attempts to blame developing countries for failing to take action to cut greenhouse gas emissions while it continues to provide billions in subsidies to its domestic oi l industry, which includes some of the richest companies in the world," said Greenpeace climate campaigner Kalee Kreider

The subsidies to the oil industry include:

· the full cost of maintaining the Strategic Petroleum Reserve (a stockpile of oil in case of disruption to imports) at $5.4 billion; tax breaks to domestic oil exploration and production at $2.3 billion and support for oil-related exports and foreign production at $1.6 billion.

· Oil companies continue to pay substantially less than the standard rate of corporate taxation, with payments in 1995 more than 23 percentage points below the statutory rate. The average effective tax rate paid by oil companies fell from 21.9 per cen t in 1981 to only 11.9 per cent in 1995.

· Creative accounting by oil producers and lapses in auditing practices by some government agencies led to federal government losses of $200 million per year in royalties.

· Inadequate bond payments and user fees to cover the plugging of oil wells and dismantling of rigs at the end of production shifted up to $550 million in liability insurance premiums from oil companies to the public. · Multinational oil companies also benefited from subsidised export promotion with below market rate loans and cheaper insurance, through the Export-Import Bank and Overseas Private Investment Corporation, both of which continue to heavily favour oil over clean energy alternatives.

· The study found that the oil tax proposed by Congress in 1992-93 ($0.31 per million British thermal units Btu) would not have even offset federal subsides to oil.
http://archive.greenpeace.org/pressreleases/climate/1998jun9.html

Billions Spend in Oil Subsidies
Industry profits receive preferential tax treatment SAN FRANCISCO -- The oil industry is soaking up billions of dollars in tax breaks, government funding, and indirect subsidies that pay for oil related environmental damage.
Even as they reap these benefits, they are spending millions on slick lobbying campaigns and political contributions to put the brakes on California's growing electric and clean vehicle industry.

These are the conclusions of two reports released last month by the Union of Concerned Scientists (UCS) and the California Public Interest Research Group (CalPIRG).

The UCS study, "Money Down the Pipeline: Uncovering the Hidden Subsidies to the Oil Industry" concludes that the oil industry profits from preferential treatment in tax laws and government support. While the non-oil industries are taxed at a rate of 18 percent, the oil industry is taxed at a mere 11 percent. This reduced rate equates to $2 billion in federal corporate income tax benefits per year. They also benefit from low state and local sales tax rates on gasoline, an indirect subsidy exceeding $4 billion a year. Direct government funding of oil and motor vehicle infrastructure and services tops off at $45 billion a year. And taxpayers, not the oil industry, are left to pay the cleanup bill for oil-related health and environmental damage, which could be as high at $232 billion annually.

"The current system creates an energy policy by default through lower income tax rates for oil companies, government handouts, and hidden environmental costs," said Roland Hwang, author of the UCS report. "These subsidies fuel our unhealthy appetite for oil."



Pete Wilson received almost a million dollars from oil and auto lobbyists CalPIRG's study reviewed Secretary of State records for industry contributions to state elected officials, lobbying the governor, and key statewide initiatives. From 1991 to 1995, oil companies spent $27.5 million and the auto industry spent $5.4 million in lobbying and campaign donations.
The study shows that Pete Wilson received almost a million dollars from these two industries in the same time period. Wilson holds the key to the future of zero-emission vehicles and has steadfastly supported the ZEV program. However, his need for donations to his presidential campaign could throw a monkey wrench into the emerging clean vehicle industry in California.

"The oil industry is spending millions each year fighting clean air laws, especially the electric vehicle requirement," said Ed Maschke, executive director of CalPIRG. "This spending not only eats away at the potential for cleaner air, increased employment and a promising new technology, but also the very heart of our democracy. We are committed to stopping this corporate attempt at buying influence which destroys our chance for clean air."



Mobil Oil refuses to acknowledge that subsidies exist CalPIRG will launch a campaign finance reform initiative next month to stop such abuses. The initiative will be on the November 1996 ballot.
The Sierra Club noted that the oil industry received as much as $400 million to supply reformulated gasoline in California, courtesy of a special state tax credit instituted by Gov. Wilson. This is in addition to millions of dollars in California tax subsidies the oil industry collects for modernizing and expanding their refineries.

"The oil industry has had a free ride for too long, secretly ringing up a huge bill that the taxpayers have to pay. The oil industry may be the most subsidized industry on earth -- it's certainly the most polluting," declared V. John White of Sierra Club California.

The groups, speaking on a knoll overlooking the Mobil Oil refinery in Torrance, assailed a Mobil Oil vice president's recent attack on "subsidies" for electric vehicles. VP Bob McCool's press statement failed to even acknowledge the existence of subsidies to the oil industry.

"It's time for the oil industry to 'come clean' and abandon their multi-million dollar campaign against electric and alternative fuel vehicles," added Michelle Robinson of UCS. "Governor Wilson should base his support for California's electric vehicle requirements on its merits not the size of special interest wallets."

http://www.monitor.net/monitor/10-9-95/oilsubsidy.html

So, go ahead and attack the sources (Greenpeace & Sierra Club), all you 'free market' proponents. Then prove that the oil industry does not get preferential treatment by way of public funds and as such is hardly 'independent'. The oil industry regularly takes government handouts and should be subject to government regulation since its 'ownership' of its 'product' is not exclusive and was not acquired solely through its own capital investment.

Waitone
October 12, 2005, 11:59 AM
So, go ahead and attack the sources (Greenpeace & Sierra Club), all you 'free market' proponents. Then prove that the oil industry does not get preferential treatment by way of public funds and as such is hardly 'independent'. The oil industry regularly takes government handouts and should be subject to government regulation since its 'ownership' of its 'product' is not exclusive and was not acquired solely through its own capital investment.Nope. If what is presented in the articles is accurate (and I apriori rule out "factual" data from marxists organization) it points to the nature of the problem. Oil no more deserves taxpayer largess than does farming or production. You rightly complain about the handouts oil gets even when there is a heavy does of competition. So the solution to government interference is MORE GOVERNMENT INTERFERENCE? Great plan. The solution is to cut oil loose from the taxpayer.

jnojr
October 12, 2005, 12:34 PM
The whole pro/anti "price gouging" thing comes down to the basic difference between a liberal and a conservative. The conservative deals with facts and reality. There has been a hurricane. Some things are more expensive. I have to deal with that. The liberal moans and cries about how unfair everything is, and begins dreaming up plans to make everything equitable.

Right now, I could tell you I'll sell you an old rifle for $1000. You'll laugh at me. But will you argue that I cannot choose to set my own price on something I own? Am I breaking a law by asking what you feel is a ridiculous, outrageous price? Now... tomorrow, there's a huge earthquake. The streets are lined with bodies, society is broken down, FEMA is useless, looters and gang members are everywhere. I still offer to sell you the old rifle for $1000. But now, I'm a "profiteer" or a "gouger". Why is this? What has changed from yesterday other than an event I could not have forseen and had absolutely no control over? You don't laugh at me and walk away from me today... you curse me, and want to use some legal proceeding to force me to turn over my property to you at a price that you determine. How is that "fair" or "right"? Especially when you consider that, due to the laws of supply and demand, my rifle has become much more valuable than it was before the earthquake.

Nehemiah Scudder
October 12, 2005, 12:38 PM
I don't think that you can fairly divide this out by political affliliation.

The difference between a gouger and a non-gouger is a lack of morals. And I wouldn't go so far as to say that conservatives lack morals.

TaxPhd
October 12, 2005, 01:08 PM
When that 'owner' is being subsidized by public funds (either directly or through tax credits), he should not have exclusive control over pricing.

Guess what - EVERYONE who pays taxes benefits in some way from government granted deductions and/or credits. Would you argue that a mechanic who takes a child tax credit on his return should be compelled to provide his services at the price that you find attractive, rather then at the price he would choose?

Simplistic, ideological answer that completely ignores reality. Many (most?) hospitals are 'non-profit' entities. Not only are they exempt from income taxes, but local property taxes as well. The public who provided those exemptions did so with an expectation of some return.

So are you saying that doctors (or anyone else) can/should be compelled to provide goods or services at less then the price they choose? The Marxists failed miserably using that idea.

The government already regulates prices in natural monopoly's. We don't need more of their involvement.




Scott

R.H. Lee
October 12, 2005, 02:01 PM
Guess what - EVERYONE who pays taxes benefits in some way from government granted deductions and/or credits. Would you argue that a mechanic who takes a child tax credit on his return should be compelled to provide his services at the price that you find attractive, rather then at the price he would choose?
and
So are you saying that doctors (or anyone else) can/should be compelled to provide goods or services at less then the price they choose? The Marxists failed miserably using that idea.

The government already regulates prices in natural monopoly's. We don't need more of their involvement.
Again, a complete evasion of reality followed by a headlong leap into the pit of ad hominem.

First, the mechanic is a natural person. He is not an artificial creation of government as are corporations. He would continue to exist in the absence of government, whereas corporations would not.

Second, the child tax credit offsets some of the expenses of raising a child. It was not designed to subsidize the cost of doing business. If it were so intended, those expenses would be deductible business expenses. You, of course know that, Mr TaxPhd.

My point is not to make a case for government price controls. My point is to disabuse you 'free market' proponents of the absurd notion that the oil industry is not inextricably linked, and beholden to, government. Government heavily subsidizies and nurtures the oil industry, therefore the products (gas & oil) are not the exclusive property of the oil companies. The handouts provided to the oil industry with public funds were used to produce the commodity they sell, ergo the public has a say-so in how they operate.

TaxPhd
October 12, 2005, 02:10 PM
Again, a complete evasion of reality followed by a headlong leap into the pit of ad hominem.

What was the ad hminem attack?

First, the mechanic is a natural person. He is not an artificial creation of government as are corporations. He would continue to exist in the absence of government, whereas corporations would not.

Yes, I understand the distinction. So what?

Second, the child tax credit offsets some of the expenses of raising a child. It was not designed to subsidize the cost of doing business. If it were so intended, those expenses would be deductible business expenses. You, of course know that, Mr TaxPhd.

Doesn't matter if it is business or not. Your original post talked about being subsidized by public funds (see your post, below). My point is that all taxpayers experience some subsidization.


Quote:
The only person who can price a good or service is the owner of that good, or providor of the service.
When that 'owner' is being subsidized by public funds (either directly or through tax credits), he should not have exclusive control over pricing.


And where did I evade reality?





Scott

R.H. Lee
October 12, 2005, 02:28 PM
You 'free market' proponents keep yammering about government 'meddling' in corporate practice, as though government and corporations are separate and distinct, existing in two different realities. Nothing could be further from the truth.

The oil industry is heavily subsidized by government with public funds as I've shown above. In return, it lavishes huge contributions on government officials by way of lobbyists. One hand washes the other. There is also a revolving door between corporate and government positions. Hired government consultants, regulators and policy makers typically have financial interests in oil companies, as stockholders and top managers. It's an incestous relationship, and unparalleled in any other industry. Does Microsoft, for example, get the same consideration? I think not.

jefnvk
October 12, 2005, 02:47 PM
It appears that many of you think storeowners should be free to charge whatever they wish for their product or service at any given time. I personally don’t think so. I think price gouging should be illegal and should carry harsh penalties.

Yep. I believe that someone should have the option to sell their private property for whatever price they want, or not at all. If they want to charge $25/gallon, that is fine. I'll walk, or carpool, or take a Greyhound. If they don't want to sell their gas at all, that is fine. It is their gas. If I don't like it, I can take out a loan and buy a gas station, and then sell for whatever I want.

As for gov't subsidies, I don't agree with them. If they can't stay afloat, it means that they probably aren't running the business right, which probably isn't going to improve just by handing out money.

Glock Glockler
October 12, 2005, 03:01 PM
RH Lee,

Wouldn't the logical solution be less govt meddling as opposed to more? If the govt is washing the oil company's hands, and they are then reaping unnaturally huge profits, why don't we just remove all supports and subsidies and let them charge whatever they want?

R.H. Lee
October 12, 2005, 03:11 PM
Wouldn't the logical solution be less govt meddling as opposed to more? If the govt is washing the oil company's hands, and they are then reaping unnaturally huge profits, why don't we just remove all supports and subsidies and let them charge whatever they want?
That's the answer. :)
Until that happens, you don't have a 'free market', and allegations of price gouging are completely legitimate.

Headless Thompson Gunner
October 12, 2005, 03:57 PM
CORPORATIONS ARE NOT CREATED BY THE GOVERNMENT.

Corporations are created by entrepreneurs. They are created by investment (both time and money), skill, and boatloads of hard work. The rewards of creating a corporation belong to the people who created it, as do the risks. That's why the corporations have the right (both legally and morally) to charge whatever they want for the fruit of their labors.

Corporations are registered in a given state, and have legal standing there. But that does NOT mean corporations are created by the government.

People are registered in a given state as well. Individuals have legal standing. But does that mean people are created by the government?

Real estate (land, fields, houses...) is registered in a given state (or county). Real estate has legal standing there. But does that mean that land (land, fields, houses, etc...) is created by the government?

Don't confuse recording/registering a corporation with creating a corporation. No government could create something as useful and productive as ExxonMobile in a thousand years.

Headless Thompson Gunner
October 12, 2005, 04:15 PM
Oh, one other thing...

Tax breaks aren't the same as subsidies. Most everybody gets a tax break of some kind or another, simply because the tax code is so incredibly complex. "Big oil" gets tax breaks right alongside everyone else. That doesn't mean that the oil industry is "washing hands" with the fed gov. (At least, no more than it does for all business/industry/private life in general)

Few industries receive less in subsidies and tax breaks than the oil industry. On ballance, government subsidies harm the oil industry far more than they benefit the oil industry.

Greenpeace doesn't have a clue. :fire:

TaxPhd
October 12, 2005, 06:25 PM
Until that happens, you don't have a 'free market', and allegations of price gouging are completely legitimate.

Come on, answer the earlier question. If gouging exists, why aren't the price gougers charging $25/gal. for gas?




Scott

R.H. Lee
October 12, 2005, 06:42 PM
If gouging exists, why aren't the price gougers charging $25/gal. for gas?
For the same reason embezzlers don't steal all the cash.....

Amusetec
October 13, 2005, 12:46 AM
How come nobody ever accuse the gold industry of gouging? :confused:
How about the stock market they gouge by deffenition here.
So how is oil, Water, or anything else diff. from gold or stocks.

Lupinus
October 13, 2005, 01:14 AM
Personally.

I believe in little goverment control. That is little, not none.

You should be allowed to run your business as you feel fit. Without the goverment impossing countless redicules rule's and regulation's.

However, when big buisness take's advantage of people, then and only then should the goverment step in.

When after a disaster the price of gasoline shoot's up two dollar's a gallon, that should be stopped and the goverment should step in.

How the hell can you argue it's because of your cost increase's? The fuel you jsut jacked the price up two dollar's a gallon was alreadyi n your friggin tank's. You payed a dollar a gallon for it and planned to sell it at a 1.50, now all of a sudden disaster is in the headline and you are selling it for two. That has nothing to do with supply and demand, that has to do with taking advantage. When they take advantage of people that is wrong and the goverment should step in.

Short of a company or industry taking some serious advantage of people because a big company or a few big companies have the market cornered they should be allowed to do their buisness with very little goverment interfearence. But when they play to people and take serious advantage othem, goverment should step in.

Of course if the goverment wern't such idiot's and didn't make people jump through hoop's and make the process rediculessly hard and complicated we would have more refineries and supply.

Lupinus
October 13, 2005, 01:18 AM
How come nobody ever accuse the gold industry of gouging?
How about the stock market they gouge by deffenition here.
So how is oil, Water, or anything else diff. from gold or stocks.
Because stock result's from instant supply and demand.

If the price of a barrle of oil goes up five dollar's, that same day or next day the price at the pump increases. Even though that barrle of oil hasn't even been pumped onto the ship yet. The price paid for the gas the station is selling at that moment remain's the same untill they have to call the wholesaler and have thier inground tank's refilled.

Amusetec
October 13, 2005, 02:03 AM
Because stock result's from instant supply and demand.

If the price of a barrle of oil goes up five dollar's, that same day or next day the price at the pump increases. Even though that barrle of oil hasn't even been pumped onto the ship yet. The price paid for the gas the station is selling at that moment remain's the same untill they have to call the wholesaler and have thier inground tank's refilled.
And Oil isn't? right now there is so much gas and more demand so isn't this instant supply and demand. I mean if you only have 1000 gal of gas and a demand for 2000 gal. how is this not instant?
And agian how is this diff. from Gold.
Have you watched gold prices market goes down gold goes up.
Say I bought gold 500 dollars an ounce and all of the sudden eco. starts to tank so the price jumps to 600 same gold I paid 500 for now it is worth 600 how is this diff.? I did not get new gold it is the same gold.

even the gold that is still in the ground is worth 600.
Supply and demand.

I do not belive that gov. has any business doing anything about prices. If you think some one is gougeing then do not buy from them.

Take a lumber yard 5 dollar plywood goes up to 50 dollars becuse he is the only one that has it. Ok then when all the other yards get new supplies and only charge 5 dollars then NEVER EVER GO BACK TO THE OTHER YARD.
soon he will go out of business the other yards see that he gouged and now no one shops there do you realy think that next time another business will gouge? No not if he wants business when things return to normal.
I know it takes everyone to do this but if everyone feels this way it will work.
If not then THE PEOPLE HAVE SPOKEN.
IMO boycotts work but only if enough people do it.

I am boycotting conoco

Headless Thompson Gunner
October 13, 2005, 02:19 AM
How the hell can you argue it's because of your cost increase's? The fuel you jsut jacked the price up two dollar's a gallon was alreadyi n your friggin tank's. You payed a dollar a gallon for it and planned to sell it at a 1.50, now all of a sudden disaster is in the headline and you are selling it for two. That has nothing to do with supply and demand, that has to do with taking advantage. When they take advantage of people that is wrong and the goverment should step in. That's a fine bit of self delusion, son. You say you're for little government interference, while at the same time advocating a mild form of socialism. :rolleyes:

If gas stations ran their business your way they'd soon be bankrupt.

Let's think it through:
If the price of gas goes up, and you don't raise your prices to match, you'll soon sell out. (People would all buy from you because you're the cheapest). So far so good, right?

Then you'd have to fill your tanks up at a time when prices are high. Problem is, you didn't make enough money selling your previous tank to cover the higher costs of the next tank. (If you sell a tankful at $2/gal, you won't make enough $$$ to buy a tankful at $3/gal). So you hafta make up the difference out of your own pocket. That's a serious loss.

The problem gets even worse, then. Under your system, you'd wouldn't adjust prices until your next resupply. That means you hafta sell your gas for $3/gal until you sell out. You WON'T sell out, because eventually prices will go down and you'll be overpriced. That $3/gal gas will sit in your tank unsold, while your competitors are doing business at $2.75/gal or $2.50/gal. The only solution is to take another loss and start selling your gas for less than you paid.

No business can take losses like that and stay open. It just doesn't work that way in the real world.

But that's OK, reality doesn't enter into this discussion. Everyone just wants to gripe about high gas prices. We're all victims of the fatcat oil industry capitalists. It's price gouging, and we all need Big Brother to rescue us!! :barf:

c_yeager
October 13, 2005, 02:36 AM
Its pretty basic common sense that the price you pay for gas is *not* the price that the station paid to fill their tank, but the price they will have to pay to fill it again. Its kinda suprising that I even have to point that out.

Lupinus
October 13, 2005, 11:42 AM
I've worked at gas station's and seen the profit's in the book's.

Trust me, it's a lot more then what it cost's to cover refilling your tank's.

Art Eatman
October 13, 2005, 12:01 PM
R.H.Lee, I think you put the cart before the horse in the relationship between oil companies and government.

Back 80 or so years ago, the government came to look upon the oil companies as a source of revenue--taxes. As with any group that is "picked on", the oil companies responded with lobbying efforts to protect their own interests.

Sorta like the NRA.

So, over the decades, with ever more government involvement, the companies spend more money on lobbying or bribery or whatever label suits you. It's their own version of your CHL; only the specific "enemy" is different.

This whole thread reminds me of a story from the 1940s. (The more things change, the more they remain the same. Old French saying. :D )

A lady walks into a butcher shop: "How much are your pork chops?"

"$3.89 a pound."

"That's outrageous! Across the street, they're $1.89 a pound!"

"So go across the street."

"He doesn't have any."

"Okay. When I don't have any, they'll be $1.89 a pound."

Y'know, that's the trouble with all you young guys. You think the wheel is a brand-new thing. :D

Art

Oleg Volk
October 13, 2005, 12:18 PM
Please read: http://www.mises.org/midroad.asp

TaxPhd
October 13, 2005, 12:19 PM
For the same reason embezzlers don't steal all the cash.....

No, embezzlers don't steal it all because they want their crime to remain invisible. "Price gouging," by its very nature, is visible to all.

The correct answer is that when the gas "gouger" raises his price to $5 or $10 or $25 per gallon, his competitors will charge the market determined price of $3/gal., and the "gouger" will sell no gas.

If you want to present evidence of price fixing, fine. But that's a different argument. Gas retailers don't have the ability to "gouge."




Scott

Lupinus
October 13, 2005, 12:19 PM
I have no problem with adjusting your price's to cover the bottom line, or the concept of supply and demand. But there need's to be limit's.

I set out for SC the day after katrina to visit family. Gas jumped from 2 dollar's and change to four dollar's and change in the span of 8-10 hour's. And I talked with local's, they had similer price's to where I set out from. There were report's from atlanta of people charging upward's of six dollar's a gallon.

2.50 at day break and 5.00 when you close. That is not adjusting your price to supply and demand. That is an outright double in the price to play on people's fear's. And that is no longer adjusting to supply and demand so oyu can cover the price of refilling your tank's. That is gouging.

Art Eatman
October 13, 2005, 01:06 PM
But it's still a fact that with gouging, gasoline is available. Without gouging, gas can easily become unavailable.

Which is better?

Economics 101 worked even before anybody could spell the word. It's just that nobody used "money" in the days of spear points and mastodon meat.

:), Art

R.H. Lee
October 13, 2005, 01:19 PM
R.H.Lee, I think you put the cart before the horse in the relationship between oil companies and government.

Back 80 or so years ago, the government came to look upon the oil companies as a source of revenue--taxes. As with any group that is "picked on", the oil companies responded with lobbying efforts to protect their own interests.
Which came first, the chicken or the egg? That's the current relationship between government and the oil industry. They're inextricably linked; separate pockets in the same pair of pants. It's a cozy relationship that benefits them both, and asking the government to control gas prices is like asking the fox to guard the henhouse. Now it may very well have started off as a one way street as you suggest, but now they are a team, at the expense of us all.

You've seen politicians call for a 'windfall profits' tax? It's a dog and pony show for the rubes to rally 'round. "Yeah, stick it to 'em. Evil, greedy big oil. Spank them good". Government keeps that tax, they don't return the overcharged money to consumers. It's just a transfer of $$ from one pocket to the other in the same pair of pants. In return, oil corps get direct subsidies and preferential tax treatment. Meanwhile, both government and the oil industry is rolling in dough and the rest of us just ante up the increases.

The 'free marketers' are operating under the same delusion as the 'stick it to evil big oil' proponents. Both groups think government and the oil industry are two separate and distinct groups operating at odds with each other.

That is not to say that 'market forces' do not have an influence over gas prices. They most assuredly do, but 'the market' alone is not responsible for the steeply increasing gas prices (and the record oil company profits) over the last three years. The incestous team of government/oil corporations is the main factor.

Just because the price is $3 rather than $25 does not mean it is not 'gouging'. Not too long ago, gas cost $1.50/gal. $3 represents a ONE HUNDRED PERCENT INCREASE in just a short time. What 'market forces' have come into play in the last 3-4 years that justify a doubling of the retail price? Crude is up, way up, but so are oil company profits. so it's not a linear increase attributable soley to the cost of crude.

Now don't get all twitchy and begin knee jerkin' and start making sounds like 'commie' and 'socialist' just because I used the 'p' word. It's a legitimate question. Break yourselves of the mindset that government and corporations are two separate and distinct entities. They're not.

R.H. Lee
October 13, 2005, 01:31 PM
That's a great link, Oleg. Here's an excerpt from it:
It is, of course, true that this type of socialism preserves some of the labels and the outward appearance of capitalism. It maintains, seemingly and nominally, private ownership of the means of production, prices, wages, interest rates and profits. In fact, however, nothing counts but the government's unrestricted autocracy. The government tells the entrepreneurs and capitalists what to produce and in what quantity and quality, at what prices to buy and from whom, at what prices to sell and to whom. It decrees at what wages and where the workers must work. Market exchange is but a sham. All the prices, wages, and interest rates are determined by the authority. They are prices, wages, and interest rates in appearance only; in fact they are merely quantity relations in the government's orders. The government, not the consumers, directs production. The government determines, directs production. The government determines each citizen's income, it assigns to everybody the position in which he has to work. This is socialism in the outward guise of capitalism.
That's what I'm talking about. We're moving toward a socialist/corporate state. The cozy relationship between big government and big oil is emblematic of the problem.

Art Eatman
October 13, 2005, 06:21 PM
"We're moving toward a socialist/corporate state."

Yup. Have been, since at least FDR's time. Several good science fiction books envisioning how it could work. Mack Reynolds' novels, for one example...

Corporations give folks what is asked for. Government tries the same; taxes go up to pay for it all. Corporations hustle government to increase profits; government hustles corporations to get more taxes. Both rely on the working stiff and the consumer for income.

I've been watching it all my life, and I don't have a clue about how to change it or stop it. Nothing that's politically feasible, anyhow.

But as far as morality goes, I'm far more hostile toward the governmental ways than I am against corporate behavior. Boycotts, gripes and lawsuits can change corporate behavior to some extent, but the Gummint mostly responds to "Gimme!"

Art

publius
October 14, 2005, 08:10 AM
I've been gouged. It happened after hurricane Andrew, and again after Charley. I appreciated gougers. I call them entrepreneurs. $5 for a bag of ice after Andrew was a great deal, if you had lots of stuff going bad in your now-inactive freezer.

Capitalism has nothing at all to do with looking out for the welfare of the less fortunate. It’s all about the bottom line and taking advantage of every possible opportunity to promote ones financial wellbeing.
We have a deli in Punta Gorda. The sandwiches are good, but not great, and the prices are OK. I never went there much.

After Charley, that deli owner (who had a destroyed house like everyone else) GAVE AWAY large numbers of sandwiches to those in need. Most would have paid double his usual price, but he gave them sandwiches.

I go there once a month now. The sandwich isn't quite as good, and the price is a little higher, than the place down the street. I go anyway. I'm not the only one. We don't forget who helped in time of need, and we don't forget who took the opportunity to screw us. Gouging should not be a crime, for reasons discussed at length. It also is not a great idea.

Helping those in need, in the long run, DOES have everything to do with being a good businessman, and letting a short term opportunity go by can be the best way to promote your economic well-being.

publius
October 14, 2005, 08:13 AM
Gouge Away (http://reason.com/9612/col.hood.shtml)


Hurricanes and the politics of prices

By John Hood

I am a victim of price gouging.

Less than a day after Hurricane Fran's visit September 6, I ventured out of my neighborhood just south of Raleigh, North Carolina, to look for gasoline. I, along with seemingly half of the population of Wake County, found it at a nearby service station, the owners of which had rented someone's generator to get the pumps going. The line stretched far down U.S. Highway 70. I didn't mind waiting. Nor did I mind paying about 15 cents a gallon more than I had the previous week. Driving away with $10 of gas, I didn't feel gouged. Excited would be more like it. Not only did I have transportation, but also a potential source of air conditioning--a necessity of life even in late summer.

It is often said that natural disasters bring out the best in people, and I suppose that is true. But they bring out the worst in politicians, particularly when they occur during election season. Democrat, Republican, liberal, conservative, Bill Clinton, Jesse Helms--somehow these petty differences wash away in flood waters and torrential rains. What you're left with is a sincere desire by selfless leaders in federal, state, and local government to get people the help they need to recover.

If you doubted their sincerity here in Fran country, you had only to read the Federal Emergency Management Agency's official newspaper, Recovery Times, stuffed into your local fishwrapper a few days after the hurricane blew through. Subtitled "People Helping People," Recovery Times objectively reported on the front page: "North Carolina Gets Fast Help from FEMA and State." The banner headline splashed across page two was even more reassuring: "President, Gov. Pledge Fast, Compassionate Aid." Personal, caring messages (helpfully accompanied by photographs) from Clinton and North Carolina Gov. Jim Hunt, also running for re-election, assured stricken readers that "your government" will be "with you as long as it takes to help you on the road to recovery."

That road to recovery was paved with good intentions but incredibly wrongheaded government policies. North Carolina Attorney General Mike Easley, for example, decided shortly after the wind subsided to declare legal war against "those trying to make a quick buck at the expense of others." He called on citizens to report what they perceived to be price gouging to his office. Many did. Even more of them, however, took Easley's pronouncement as an indication that any price they didn't like was unfair, and the resulting haggling sometimes got nasty.

Tree-removal firms and self-employed carpenters probably got the worst of it. Already beset by the often-broadcast suggestion that homeowners hire only licensed contractors (monumentally stupid advice when rain is pouring through a hole in your roof and a skilled carpenter with plenty of experience and references is offering his services), these entrepreneurs were treated by many as guilty-until-proven-innocent.

"[Easley] gave customers the impression that every tree service is in town to rip people off," said the owner of one Charlotte-based firm that sent a crew to Raleigh. Her fellow tree-service owners called the attorney general's office to ask him what a "legal" price for tree removal was, and got no answer, making it impossible to defend their charges to angry customers.

After any serious natural disaster, gas-powered generators are perhaps the most sought-after items. Their scarcity is caused by a combination of their usefulness to those with freezers full of meat, the fact that the market for generators is pretty small in normal times, and state regulation that forbids retail competition for electrical power (otherwise entrepreneurs would fill the gap between full service and no service by selling short-term, higher-priced power). If comments from retailers around here are any indication, generators will be even more scarce the next time we need them. "I wish I had never seen a generator," said one retailer from nearly Lillington, tired of arguing with customers. "This is the worst thing that has ever happened to me in this business." Another retailer from Raleigh said that he sold his generators below retail and still got customer complaints. "We went out of our way to help people, and I'm not sure it was worth it."

Understood correctly, the law of supply and demand is just common sense. A bag of ice is worth more to an Arab than an Eskimo. Similarly, it is worth more to me after my refrigerator loses power than before. But a competing theory, often advanced in the aftermath of storms and other disasters, is that price-gouging occurs whenever price increases are not justified by increases in production cost. This is little more than the labor theory of value rearing its old and ugly head.

Two stories from my own neighborhood illustrate the inanity of this idea. The first involves Honda Yamaha of Raleigh, paradoxically located in the town of Garner just down the highway from the service station that mercilessly sold me the gasoline I needed. Honda Yamaha sold Garner resident David Carter a generator for about $2,000--hundreds more than what Carter omnisciently said was its "actual price." Another Honda Yamaha customer said he drove 300 miles to Richmond, Virginia, to buy a generator for a couple of hundred dollars less, and thought he was even gouged there. Ever since the hurricane, Carter and others have been picketing the store to protest its prices, even though they were roughly the same as those charged throughout the area. I've heard variations of this story from numerous individuals, both friends and perfect strangers. Some customers have gone to Tennessee and South Carolina to find generators. In the telling, it never occurs to them that if retailers weren't brow-beaten by politicians like our attorney general, they might be able to raise their prices enough to induce faraway stores to sell or transport their generators to the afflicted area, thus alleviating the scarcity at least a little bit and eliminating all these road trips.

Only Marxists believe that a product's value is determined by its production costs or the amount of labor required to make it. In a free enterprise system, prices are subjective and depend upon the needs and preferences of consumers at a particular point in time. A price is a bundle of information. When it goes up, it signals producers to make more or redirect existing products to areas of higher demand. If you artificially keep a price low, regardless of consumer demand, then you create shortages, as we found in the 1970s with price controls on gasoline.

My second story is set just after Hurricane Hugo devastated South Carolina and Charlotte in 1989. My next-door neighbor then worked for a construction company in Raleigh. The day after the storm, I saw him packing up his pickup truck with a chain saw and other tools. "I'm taking the day off," he said, "and driving to Charlotte." He had heard that one could make really good money cutting trees and clearing debris.

Was he taking advantage of a disaster? In a sense, of course he was. But if there were no prospect of making more money in Charlotte than at his job in Raleigh, he would have stayed put-- thus reducing by one the number of skilled workers helping clean up Charlotte. Most people can't afford to take unpaid holidays and volunteer their time, or sell products below cost, or transport products from distant climes without compensation. (An aside: North Carolina's governor eliminated this barrier to compassion for state employees by giving them the week after the hurricane off, with pay. That meant that the rest of us had to pay millions of dollars in salaries to state employees out cleaning up their yards during the daytime, while we cleaned up our yards after work and on weekends.)

You can't repeal the basic incentive structure of economics with a government proclamation. Control prices after a hurricane, as North Carolina's state government did by fiat and some local governments did by ordinance, and you are making a conscious decision to force some people to wait longer for help. Let prices rise to the market level, and the supply of ice, water, food, gas, generators, and labor will expand as well.

Politics, however, has a different set of incentives. On page three of Recovery Times, among a listing of all the grant and loan programs available to those clever people who didn't bother to buy insurance, victims of Hurricane Fran could find a number to call for "assistance in filing consumer complaints about disreputable business practices." Remember, it's about people helping people.


Contributing Editor John Hood is president of the John Locke Foundation, a Raleigh-based think tank quite probably still in need of a good building contractor--licensed or not, price negotiable. LOL! Written in 1996. I wonder...

Camp David
October 14, 2005, 08:17 AM
Why not answer my previous question? If gouging exists, why aren't gas stations charging $25/gal. for gas?

Why aren't gas stations charging $25/gal. for gas? Because their attendants would be shot and their homes would be burned to the ground!

Why aren't gas stations charging $25/gal. for gas? Are you a glutton for punishment?

Why aren't gas stations charging $25/gal. for gas? They can't fit any more money in their cash registers!

Why aren't gas stations charging $25/gal. for gas? Because nobody knows how to issue change for a $30.00 dollar bill!

Why aren't gas stations charging $25/gal. for gas? Because $24.00 is a more even number!

Why aren't gas stations charging $25/gal. for gas? Because it's still too early!

Why aren't gas stations charging $25/gal. for gas? Be patient....

:mad:

R.H. Lee
October 14, 2005, 10:41 AM
Only Marxists believe that a product's value is determined by its production costs or the amount of labor required to make it. In a free enterprise system, prices are subjective and depend upon the needs and preferences of consumers at a particular point in time. A price is a bundle of information. When it goes up, it signals producers to make more or redirect existing products to areas of higher demand. Nice try but again, an oversimplistic view. Try that argument when the gubmint comes to eminent domain your house. They want to give you $200,000 for it, but you decide you want $1,000,000. Think they'll just pass and move on? Not likely.

My next-door neighbor then worked for a construction company in Raleigh. The day after the storm, I saw him packing up his pickup truck with a chain saw and other tools. "I'm taking the day off," he said, "and driving to Charlotte." He had heard that one could make really good money cutting trees and clearing debris. Not really the same thing as buying gas. First, it's optional whether or not someone will pay your price. The next guy with a chain saw might very well charge a lot less than you. Not so with gas when every station raises its prices at the same time. There's no real 'competition' is there?

If you're going to keep government out of the price control business, you also have to keep them out of the business of preferential treatment of the oil industry in the form of subsidies and accelerated depreciation. When you have a government/corporate cartel, you don't have a 'free market'. Any government meddling destroys the free market concept. It's like being a 'little bit pregnant'.

TaxPhd
October 14, 2005, 11:40 AM
Why aren't gas stations charging $25/gal. for gas? Because their attendants would be shot and their homes would be burned to the ground!

Why aren't gas stations charging $25/gal. for gas? Are you a glutton for punishment?

Why aren't gas stations charging $25/gal. for gas? They can't fit any more money in their cash registers!

Why aren't gas stations charging $25/gal. for gas? Because nobody knows how to issue change for a $30.00 dollar bill!

Why aren't gas stations charging $25/gal. for gas? Because $24.00 is a more even number!

Why aren't gas stations charging $25/gal. for gas? Because it's still too early!

Why aren't gas stations charging $25/gal. for gas? Be patient....

:mad:


That's quite an response. Your parents must be very proud. :rolleyes:

Nice try but again, an oversimplistic view. Try that argument when the gubmint comes to eminent domain your house. They want to give you $200,000 for it, but you decide you want $1,000,000. Think they'll just pass and move on? Not likely.

Pass? No. But they probably won't get away with paying you $15,000, claiming that is what it cost to build back in 1959. Eminent domain seizures are supposed to pay in the area of fair market value, not historical cost.

Not really the same thing as buying gas. First, it's optional whether or not someone will pay your price. The next guy with a chain saw might very well charge a lot less than you. Not so with gas when every station raises its prices at the same time. There's no real 'competition' is there?

It's optional if someone will buy the gas. The next station down the road might very well charge less. If every gas station raises its prices, is it price fixing, or responding to market conditions? I haven't yet seen evidence of price fixing.

If you're going to keep government out of the price control business, you also have to keep them out of the business of preferential treatment of the oil industry in the form of subsidies and accelerated depreciation.

and

Any government meddling destroys the free market concept.

Guess what - accelerated depreciation is available to EVERY business, not just the oil industry. Does that mean there is no free market?





Scott

R.H. Lee
October 14, 2005, 01:06 PM
Guess what - accelerated depreciation is available to EVERY business, not just the oil industry. Does that mean there is no free market?
It's a lot more than just accelerated depreciation. How many other businesses get these freebies from the U.S. Government?

Oil Defense: Defense operations to protect and secure Persian Gulf oil shipments and infrastructure.

Strategic Petroleum Reserve: Storage of crude oil to be used during price shocks and supply disruptions to stabilize domestic supply.

Excess of percentage over cost depletion: Allows firms to deduct more than their investment in oil properties from their taxes.

Public liability for plugging, abandoning, and remediation of onshore wells: Annualized shortfall in bonding (insurance) levels needed to cover existing liabilities in on-going operations.

U.S. Coast Guard: Water infrastructure (maintenance of coastal shipping; provision of navigational support; ice clearing)

Deferral of income from controlled foreign corporations: Allows oil companies to delay payment of U.S. taxes due on earnings from certain foreign corporations.

Low Income Home Energy Assistance: Assistance for low income energy consumers to buy oil

US Army Corp of Engineers: A government agency that maintains waterways heavily used by oil tankers and barges.

Expensing of exploration and development costs: Allows expenses related to multi-year oil well assets to be deducted from taxes in the current year rather than capitalized.

U.S. Export-Import Bank: Subsidized loans and insurance to support the sale of oil-related equipment and consulting services abroad by U.S. corporations.


These are direct cash outlays of public funds on behalf of the oil companies. This fits your definition of a 'free market'?

To return to the chain saw guy example presented by "John Hood, president of the John Locke Foundation, a Raleigh-based think tank"-
My next-door neighbor then worked for a construction company in Raleigh. The day after the storm, I saw him packing up his pickup truck with a chain saw and other tools. "I'm taking the day off," he said, "and driving to Charlotte." He had heard that one could make really good money cutting trees and clearing debris. What John Hood forgot to mention is that this transaction is subject to negotiation (that's an integral part of 'free market' economics, dontcha know). It might go like this:

Chainsaw guy: "I'll cut up and remove those fallen trees from your property for $500."

Me: "I'll pay you $200."

Chainsaw guy:"OK, I'll do it for $300."

Me: "OK, it's a deal"

Try that at the gas station.

Headless Thompson Gunner
October 14, 2005, 01:35 PM
What twisted logic...

The government does it's job to keep the peace, the same as it's been doing for two centuries. But to you it's a grand conspiracy to provide massive backdoor subsidies to the oil indusrty.

I suppose the public highway system was just another "direct cash outlay of public funds on behalf of the oil companies". The only reason the gov built lots of roads was so they oil execs could sell their gas at unfair prices, right?

(You do realize, don't you, that the same twisted logic could be applied to EVERY major industry? The oil industry isn't the only one to benefit from the existence of a stable government...)

TaxPhd
October 14, 2005, 01:47 PM
It's a lot more than just accelerated depreciation. How many other businesses get these freebies from the U.S. Government?

Let's see . . .

Oil Defense: Defense operations to protect and secure Persian Gulf oil shipments and infrastructure.

Seems like the defense operations are protecting our national interests. I imagine if hostile activities were threatening other types of strategically important imports into the US, they would also be protected.

Excess of percentage over cost depletion: Allows firms to deduct more than their investment in oil properties from their taxes.

This is allowed for any resource extraction company, not just oil. And if it seems like the whole idea is just wrong, the excess is brought back in the calculation of the alternative minimum tax.

U.S. Coast Guard: Water infrastructure (maintenance of coastal shipping; provision of navigational support; ice clearing)

USCG services are availble to any using the waterways, not just oil companies.

Deferral of income from controlled foreign corporations: Allows oil companies to delay payment of U.S. taxes due on earnings from certain foreign corporations.

The tax benefits of CFC's are not limited to oil companies. Any company with a CFC can experience the same deferrals.

Low Income Home Energy Assistance: Assistance for low income energy consumers to buy oil

Lots of low income assistance, from food stamps to WIC to direct cash payments provide low income consumers with the ability to buy goods and services other than oil.

US Army Corp of Engineers: A government agency that maintains waterways heavily used by oil tankers and barges.

Those waterweays are not limited to oil companies, but are useable by all.

Expensing of exploration and development costs: Allows expenses related to multi-year oil well assets to be deducted from taxes in the current year rather than capitalized.

This is available for every extractive industry.

U.S. Export-Import Bank: Subsidized loans and insurance to support the sale of oil-related equipment and consulting services abroad by U.S. corporations.

Is their activity limited to oil companies?





Scott

R.H. Lee
October 14, 2005, 01:55 PM
Interesting how you focus on the infrastructure and general defense costs and completely ignore the specific handouts exclusive to the oil industry. Once again, oil industry taxes decrease, while their profits (and the price of gas at the pump) increase.

Tax Breaks Benefiting Energy Companies in the Corporate Tax Bill, HR 4520 Signed Into Law October 2004 ( http://www.citizen.org/print_article.cfm?ID=12395)

So, they've been given 'incentives' at the public's expense to provide more gasoline. Yet the price continues to rise, along with their profits, and you call this a 'free market'?

Brad Johnson
October 14, 2005, 02:48 PM
One more point people tend to forget - tax.

Here in Texas I believe the combined tax on gasoline is 38.6 cents per gallon. So... if the station bought gas a week ago at at 1.95 (delivered), adds 38.6 cents in tax, and sells it at $2.54.9 (the local avg price as of this morning), they are making 21 cents per gallon. That's a profit margin of 8 percent (or a 9 percent markup).

Now consider that many smaller stations ran out of fuel and had to buy when the cost was at it's absolute peak. They probably paid somewhere on the order of 2.20-2.25 delivered. Add in the tax, and you have a product cost of $2.64. And you are forced to sell it at $2.55 to remain competitive. Or we could have the government force everyone to pay the owner the higher price until they run out. This should should please all the anti-gouging folks because it makes everything come out fair.

Oh, and the 64 oz Coke you bought for $0.99 while you pumped the gas cost the store about 18 cents (including syrup, water, ice, lid, and straw). That's a profit margin of 82 percent (or a 450 percent markup!!).

I haven't heard anyone screaming for price controls on cokes lately. I guess going after "Big Soda" just isn't as sexy as going after "Big Oil".

Brad

Lupinus
October 14, 2005, 02:52 PM
Yeah, but I do not need a slurpy to get out of Dodge. I need gas. And if there is a shortage of slurpie in the slurpy machien and he wont be able to get a slurpy delivery anytime soon, you don't see him jacking the price up from .99 cents to 2.50 for the same size slurpy.

If oyu really want to talk about profit margin's, buy bottled water

Brad Johnson
October 14, 2005, 02:59 PM
Doesn't matter what you want or need. You are getting gouged. The government oughta do something about it...

(edited to add) :barf: What a bunch of liberal, socialistic crap. By gum, if we think someone's making too much money, sick the gubmint on 'em!

Brad

Lupinus
October 14, 2005, 03:11 PM
I don't agree with that Brad.

Certian thing's to make a profit on need to be a certian price.

Sure the slurpy mix itself might cost 10 cent's a cup. But you have to pay overhead as well. Utility bill's, employee's, etc. The same goes not jsut for the store but for the guy's making it in the first place.

And plus, that is the price. That is the price that is understood and expected. Gas is one of the only thing's the average person will come into contact with at least once weekly with a varrying price. But that price normaly doesn't alter more then a few cent's. You buy gas on mondat for 2.80 and go back thursday and pay 2.85. That isn't gouging, that is truly following the supply and demand.

Starting the day at 2.50 and ending the day are 4.85 or more is not adjusting for supply and demand, it is gouging. Gouging is when you raise the price to play on people's fear's. The general public panic's think's "OH MY GOD THERE WILL BE NO GAS TOMORROW!!!" run's out and fill's up their tank. It has nothign to do with the supply and demand because within a day or two, where is the price? Up certianly from when the storm hit, but 10 or 20, maybe 30 cent's. Not double the price.

Gouging is playing to fear's and taking advantage.
Adjusting is responding to supply and demand and your cost's.

R.H. Lee
October 14, 2005, 03:12 PM
Doesn't matter what you want or need. You are getting gouged. The government oughta do something about it...
Exactly right. And what government oughta do is remove the subsidies and preferential treatment that makes the oil industry the welfare queen of the corporate world and let 'em stand on their own for a change.

wingman
October 14, 2005, 03:20 PM
"We're moving toward a socialist/corporate state."

Yup. Have been, since at least FDR's time. Several good science fiction books envisioning how it could work. Mack Reynolds' novels, for one example...

Corporations give folks what is asked for. Government tries the same; taxes go up to pay for it all. Corporations hustle government to increase profits; government hustles corporations to get more taxes. Both rely on the working stiff and the consumer for income.

I've been watching it all my life, and I don't have a clue about how to change it or stop it. Nothing that's politically feasible, anyhow.

But as far as morality goes, I'm far more hostile toward the governmental ways than I am against corporate behavior. Boycotts, gripes and lawsuits can change corporate behavior to some extent, but the Gummint mostly responds to "Gimme!"

Art

I agree Art except I see very little difference between government and large
corporation, both greedy, both power hungry and the working stiff at the
bottom of the heap.
I do not see a "free market" with fuel it is a no competition business, they got
it we need it and no other game in town. They are gouging, huge profit increases in past few months.:mad:

Camp David
October 14, 2005, 03:46 PM
Doesn't matter what you want or need. You are getting gouged. The government oughta do something about it...

Agreed...

All Americans were asked to help during recent tragedies in Gulf Coast after hurricanes! How did Oil Companies respond: Raising cost of gasoline and raising cost of natural gas!

Down in hell, lower than lawyers, is a special room for oil executives; no chairs.

auschip
October 14, 2005, 03:59 PM
Taken from the provided link:

"The total cost of this tax deduction, $76.5 billion from 2005-2014, includes the value of the tax deduction for energy companies and other industries, including movie studios, real estate developers and engineering and architectural services associated with real estate development. It is a safe assumption that energy companies—due to their size within the U.S. economy—will be the largest recipient."

"Three companies—BP, ExxonMobil and ConocoPhillips—stand to be the primary recipients of these two tax breaks, totaling $445 million, for building an Alaskan natural gas pipeline and for processing natural gas for the project"

Now there isn't a date on that article, but if it is the same one I have heard of, this is Alaska asking these 3 companies to build this, not the other way around.

"This tax break begins with a reasonable premise: provide tax breaks to oil refineries to improve clean air standards. The problem is that the statue defines “small refiners” as those with refining capacity below 205,000 barrels/ per day—a high threshold that will include some large oil companies that have enjoyed huge profits"

Sounds like the .Gov is forcing them to move to a higher then required air quality standard. Is that an example of .Gov intervention harming the free market, and thusly trying to self correct but giving them an incentive?

TaxPhd
October 14, 2005, 04:15 PM
Interesting how you focus on the infrastructure and general defense costs and completely ignore the specific handouts exclusive to the oil industry. Once again, oil industry taxes decrease, while their profits (and the price of gas at the pump) increase.

I addressed every issue you brought up in your post with the exception of the Strategic Petroleum Reserve and Public liability for plugging, abandoning, and remediation of onshore wells. You may believe that the strategic reserve exists to pump up oil company profits. I think it is something rather different. I am not very knowlegeable on the other issue, but isn't it similar to what happens with Superfund sites? Aren't cleanup costs covered in no small part by the public?



This thread was originally about price gouging. The only way a claim of gouging can be supported is by demonstrating one of two things:

1) Collusion leading to price fixing.
2) Repeal of the economic law that states that excess returns will be driven to zero by competiton.

So far, no one on this thread has demonstrated either.




Scott

Brad Johnson
October 14, 2005, 04:44 PM
All Americans were asked to help during recent tragedies in Gulf Coast after hurricanes! How did Oil Companies respond: Raising cost of gasoline and raising cost of natural gas!

So the "greedy oil companies" are supposed to start doling out money to an area they had already been supporting for decades by providing with thousands of jobs? Hmmm, hundreds of millions in payroll that had, quite literally, singlehandedly bankrolled a big chunk of the regional economy for dozens of years just ain't enough. We gotta MAKE 'EM PAY!

sigh...

Look, if you want socialism, move to Russia. I'll buy you a ticket.

Brad

DRZinn
October 14, 2005, 04:45 PM
Try that argument when the gubmint comes to eminent domain your house.Just because they don't play fair doesn't invalidate what fair is.

And negotiation happens all thew time with gas stations. It looks something like this:

(Me) I need some gas.
(Gas station)(posted price) $2.95 per gallon
(Me) I'll just go to the other place down the street that's charging $2.89
(Gas station, if enough people follow my lead) $2.88 per gallon

See?

auschip
October 14, 2005, 04:46 PM
So the "greedy oil companies" are supposed to start doling out money to an area they had already been supporting for decades by providing with thousands of jobs? Hmmm, hundreds of millions in payroll that had, quite literally, singlehandedly bankrolled a big chunk of the regional economy for dozens of years just ain't enough. We gotta MAKE 'EM PAY!

sigh...

Look, if you want socialism, move to Russia. I'll buy you a ticket.

Brad

Don't forget the $3M that Exxon donated, not to mentioned the various other donations by oil companies.

Brad Johnson
October 14, 2005, 04:51 PM
Don't forget the $3M that Exxon donated, not to mentioned the various other donations by oil companies.

Let's see how long it takes for someone to reply that $3 mil just wasn't enough.

Brad

p.s. - Someone just looked over my shoulder and saw some of this thread. They started ranting that the oil companies didn't give enough to help. When I asked them how much THEY gave, they blushed, grimaced, and walked away.

jefnvk
October 14, 2005, 05:42 PM
I see two different types of people here.

1) The type that believe that oil companies are here to provide us a public service.

and

2) The type that believe that oil companies are here to make a profit.

Arguing that gov't intervention is necessary is logical if you fit into group #1. Arguing against it is logical if you are in group #2.

Maybe we should be arguing how oil companies are to be treated. If they are only out to provide a public service, maybe the gov't should run them. If they are to be run as a business, don't interfere.

EDIT: This could probably be applied to pharmaceuticals too.

Headless Thompson Gunner
October 14, 2005, 07:30 PM
Exactly right. And what government oughta do is remove the subsidies and preferential treatment that makes the oil industry the welfare queen of the corporate world and let 'em stand on their own for a change.:barf:


"Big Oil" at the Public Trough? An Examination of Petroleum Subsidies (http://www.cato.org/pubs/pas/pa390.pdf)
Critics of the oil industry allege that the industry receives large and unwarranted government subsidies and that rival technologies, such as those for ethanol, renewable energy, and energy efficiency, deserve compensating government preferences. The evidence indicates that, on balance, the oil industry is not a net beneficiary of government subsidies. The facts point in the opposite direction. The oil industry is more harmed than helped by government intervention in energy markets.

Special tax deductions, direct expenditures, net excise taxes, and research and development expenditures are constantly targeted by oil critics. However, those subsidies are a small share of oil revenues and far less generous than the preferences and subsidies provided for rival businesses and technologies such as mass transit and alternative fuels. Moreover, most energy subsidies are wealth transfers that do not significantly distort energy prices or affect energy markets.

The contention that oil consumers do not pay their fair share of the environmental and national defense costs they impose on society is dubious. There is little evidence to suggest that the environmental externalities imposed by oil consumption exceed the taxes and regulatory costs paid by consumers. The contention that national defense costs would be lower if domestic oil consumption were taxed is also not supported by the evidence.

Headless Thompson Gunner
October 14, 2005, 07:41 PM
Maybe we should be arguing how oil companies are to be treated. If they are only out to provide a public service, maybe the gov't should run them. If they are to be run as a business, don't interfere.

I can guarantee you that the people who own and operate the oil companies are in it for their own benefit.

The crux of the matter is whether or not they should have the right to do this. Capitalists think they do. Communists think they don't.

Who's right?

History has shown the capitalist system to be superior. The free market provides more and better goods, at lower prices.

Communist systems arbitrarily force prices to stay low, but avaiability of goods is nil. It fails to reliably provide vital goods at ANY price. See Art's story about the pork chops.

Oleg has seen both systems firsthand. Let's ask him which he prefers...

R.H. Lee
October 14, 2005, 07:55 PM
That 'study' is from 1999, HTG. It's ancient history. Well before the doubling of prices at the pump over the last 3 years. Also well before record high oil company profits and well before
Tax Breaks Benefiting Energy Companies in the Corporate Tax Bill, HR 4520 Signed Into Law October 2004
(http://www.citizen.org/print_article.cfm?ID=12395)

Things have changed, dontcha know.

Headless Thompson Gunner
October 14, 2005, 08:14 PM
It was published in 2001. I'll take 4 year old research from a reputable source over the projections of a biased source any day. But that's just me.

In fact, things haven't changed all that much. The tax code is still complicated, and the Greenies and libs are still exploiting it to farm out statistics that "prove" the oil industry is evil. Yawn...

Oil prices are up, that has certainly changed. But that's because of the massive increase in demand from developing nations like China and India. You can't beat the laws of supply and demand. That much hasn't changed.



You claim that the oil industry receives tax breaks. This of course is true. But you ignore the fact that ALL industries receive tax breaks of one sort or another. The tax code is far too complicated for things to be otherwise. Does this indicates something sinister about the oil industry?

Then you go on to use the tax breaks as a justification for more government medling into the operation oil and gasoline businesses. Rant all you want about price gouging, but what you're advocating is government intrusion into something it has no right to intrude upon.



Let's say I steal $100 from you. Then, because I'm a nice guy, I give you back $10 of that money. Are you now beholden to me for my exercise of "generosity"? Do I now have the right to order you around?

Oleg Volk
October 14, 2005, 10:03 PM
Russia is trying 1930s German-style command economy again, but it is infinitely preferable to their more pure commie past. Other countries, especially the South Baltics and Eastern Europe are trying their best to adopt relatively free markets. As a result, industy moves there (movie making, arms and car manufacture).

US has been cutting off entry to well-educated immigrants, molesting its businesses with punitive taxes and arcane, restrictive regulations, choking foreign trade at irregular intervals...we stand a good chance of losing some of our advantages. We aren't as messed up as we were during the Nixon & Carter years, but we are slowly regressing. Our only hope is that inability of beuraucrats to keep up with the technological and social developments.

Having lived in a command economy, and having lives in a very legally restrictive environment, I do not support any laws or regulations which would redistribute wealth or restrict actions of others. For example, I do not support excise taxes, I do not support ANY restrictions on foreign or domestic trade. I think that TN Attorney General should be fired for threatening legal action against "price gougers". It is my opinion that black market is morally superior to those hwo make it necessary.

poe_9999
October 15, 2005, 06:01 AM
“because the government is responsible for several of the barriers that exist for companies to enter the marketplace they should also be responsible for limiting short term price gouging.

artificially keeping prices low is the single greatest barrier to entry in any market.”

I don’t see artificially keeping profit margins down as being a barrier; it just removes a lot of the insensitive. I see a barrier as something different. For instance your not allowed to drill for oil here because ‘x’. Or it will take 6 months and $4,000 to process your zoning application. Or your not allowed to transport your goods on our road till you permit has been approved.

I never meant to imply that a company should be forced to sell at a loss, or not raise its prices to accommodated higher costs or inconveniences. I really have no problem with companies raising their prices some because there is much more demand for their product. I do have a problem with really steep price increases.

poe_9999
October 15, 2005, 06:02 AM
“because the government is responsible for several of the barriers that exist for companies to enter the marketplace they should also be responsible for limiting short term price gouging.

Please tell me how the government should do this?”

I don’t know how they would fix it. A lot of you guys have the mindset that whenever the government tries to fix a problem they create 2 more problems to replace it… I feel pretty much the same way also...

poe_9999
October 15, 2005, 06:13 AM
Now because the government is responsible for several of the barriers that exist for companies to enter the marketplace they should also be responsible for limiting short term price gouging.

hurray for using socialism to justify more socialism!

How much higher do you think your electric bill would be if the government said you must get your electricity from company X, then allowed company X to fluctuate its prices however it saw fit. Now this really doesn’t make sense does it?

When the government decides it NEEDS to interfere with things, I think it should do a good job of it.

poe_9999
October 15, 2005, 06:17 AM
"Gouging" is a market means of allocating scarce resources for the greatest economic utility. Count me in favor of gouging.

I don’t think it is. Lets just say that Lowes has 3 generators. Each priced at $9,000. Who is going to get them? The simple homeowner who wants to power his lights and TV, not him he can’t afford one. What about the butcher who wants to keep his meat cold, probably not, being a workingman he too probably can’t afford them. Millionaire Steve is going to buy all 3, so he can keep the temperature in his house regulated while he is on vacation.

poe_9999
October 15, 2005, 06:25 AM
No such thing as price gouging.

Unless you want to be a commie.

Go be a commie and see how well price controls work

Yep. I believe that someone should have the option to sell their private property for whatever price they want, or not at all. If they want to charge $25/gallon, that is fine. I'll walk, or carpool, or take a Greyhound. If they don't want to sell their gas at all, that is fine. It is their gas. If I don't like it, I can take out a loan and buy a gas station, and then sell for whatever I want.

Boy I bet you can’t wait for the government to deregulate monopolies. Just think of how high your heating bill might actually become. I guess you would have no problem with your natural gas or electric bill increasing 1,000% next month. With the colder weather it is going to be in much greater demand than it was in July. Oh and lets just say you got a loan to open up a Nat gas company. Think your company would be operational before March.

ReadyontheRight
October 15, 2005, 06:26 AM
Funny how no one gets upset about airline prices changing by the minute or taxes taking 1/2 our wages, but ATM fees and gas prices cause a panic.

I remember $1.30/gal gasoline for nice cars that cost $5000 in the 1980s.

Now we have $3.00 gas for basic $25K cars. Who is gouging who?

poe_9999
October 15, 2005, 06:28 AM
Because if the entrepreneurs are not allowed legally to come and sell their $4 a gallon water (the market price *in that market*), then they simply won't, and the people that need it won't have water, and they will die.

People how can’t afford water at a gouged price simply won’t be able to afford it and therefore will die.

poe_9999
October 15, 2005, 06:30 AM
Why aren't gas stations charging $25/gal. for gas?

Most people cannot afford $25 gas, along with all of their other inflated expenses. And at $25 per gallon almost no one will see an economic gain from that gasoline. Would you buy $50 worth of gas to drive to work to earn $80 before taxes and expenses? No… After taxes, parking, and tolls you might be losing money.

Lupinus
October 15, 2005, 10:31 AM
I never meant to imply that a company should be forced to sell at a loss, or not raise its prices to accommodated higher costs or inconveniences. I really have no problem with companies raising their prices some because there is much more demand for their product. I do have a problem with really steep price increases.
Very well said.

Gouging is not adjusting price so you can still turn a profit. But a sharp, sudden increas to make a MASSIVE profit due to the public's bit of temporary hystaria is gouging, and has zero to do with being able to turn a profit. I am all for a free market. What I am not for is the few huge companies that are the only real producer's jacking the price up to double when something is needed most jsut to play on the fear's of the public.

gm
October 15, 2005, 11:26 AM
intersting thought..when does the cost of gas offset the cost of working for those working poor folks that are getting minimum wages on a family of 2?kinda makes welfare more of an incentive.


:rolleyes: naw.no way someone would gouge consumers here, the big ceos are down to earth,understanding and educated folks just like the rest of us..just remember to smile and thank them for helping push the economy in the right direction:rolleyes:

Titus
October 15, 2005, 12:11 PM
How can they call it a "free" market when stuff costs so much? I can't do without food, housing, gas, medical care, clothes, and high speed internet, so the government should give them to me for free. What am I paying taxes for anyway?

Everyone should post what stuff they sell or services they provide, cause I'll probably need some of those too, and since they're so concerned about people making too much money, I bet I can get a sweet discount. Heck, if it's something I really need, maybe I can get them to give it to me for free.

Titus
October 15, 2005, 12:13 PM
Most people cannot afford $25 gas, along with all of their other inflated expenses. And at $25 per gallon almost no one will see an economic gain from that gasoline. Would you buy $50 worth of gas to drive to work to earn $80 before taxes and expenses? No… After taxes, parking, and tolls you might be losing money.

That's okay, keeping profit margins artificially low isn't a barrier to entry into the work force.

Waitone
October 15, 2005, 02:37 PM
A while back the Wall Street Journal published an article which said we are in an oil price bubble and that it has all the characteristics of other bubbles we've experienced in years past.

My question to those who favor government intervention to prevent "price gouging" is simply this: Assuming the bubble busts, are you willing to then favor government intervention to keep economic hardship from befalliing oil companies?

TaxPhd
October 15, 2005, 03:48 PM
Boy I bet you can’t wait for the government to deregulate monopolies. Just think of how high your heating bill might actually become. I guess you would have no problem with your natural gas or electric bill increasing 1,000% next month. With the colder weather it is going to be in much greater demand than it was in July. Oh and lets just say you got a loan to open up a Nat gas company. Think your company would be operational before March.

Natural monopolies won't be deregulated. Your example is absurd.




Scott

c_yeager
October 15, 2005, 07:50 PM
I don’t see artificially keeping profit margins down as being a barrier; it just removes a lot of the insensitive.

Would you open a business in which the government wouldnt allow you to profit enough to pay of your start-up loans? How could you possibly compete against established players in that environment?

publius
October 15, 2005, 08:27 PM
It is my opinion that black market is morally superior to those hwo make it necessary.
Standing ovation for Oleg!

Lupinus
October 15, 2005, 08:29 PM
Getting there lol.

Least there you know you are dealing with people who can be less then desirable and its painfully obviouse. Though there are certian mobster's I would trust more then an oil exec.

Art Eatman
October 16, 2005, 02:13 PM
I guess what bugs me about the arguments of what i'll call the "anti-gougers" here:

Who do you think is the individual person who sets the price per gallon on an individual pump at a gas station? The oil company exec, or the operator of the station?

If one station sez $5/gal, and across the street it's $3/gal, is it the oil company exec? I think not...

It wasn't all that long ago when I noticed that McDonald's stock was a better investment than Exxon. Who was worried about the low profit percentages for the evil old oil companies, then? I'm seeing that current profit percentages are up around to six to seven percent. That's evil?

The rising prices for crude oil have been yakked about for the past several years. Why haven't you bought stock in Shell or Exxon, and used your profits to buy gasoline that you should have known full well is gonna go up in price?

Why haven't you already gotten out of your low-mileage gashog and bought an econobox? Why haven't you looked ahead and said, "Hmmm. The world is changing. What should I do to avoid being harmed by changes that could be bad for me?" This could include changing both job and residence "ahead of the rush".

Anybody who sits around and thinks that the future is gonna be the same as the past is just working really hard to fool himself. "Change is the only constant."

Government ain't gonna save you from nuthin'. You're on your own. Get used to it.

Art

javafiend
October 16, 2005, 02:42 PM
Lupinus wrote:
But a sharp, sudden increas to make a MASSIVE profit due to the public's bit of temporary hystaria is gouging, and has zero to do with being able to turn a profit. I am all for a free market. What I am not for is the few huge companies that are the only real producer's jacking the price up to double when something is needed most jsut to play on the fear's of the public.

Playing on the temporary "hystaria" of the public? Oh please. Let's review the facts. Katrina took out the LOOP (Louisiana Offshore Oil Port), which ships about 1 million barrels per day (bpd) of oil to the mainland. (It's not permanently damaged, but it's not operating). It shuttered 9 refineries in the Gulf Coast, and 20 more were operating at reduced capacity because of supply shortfalls. That means that more than 10% of the nation's refining capacity was taken offline. A similar amount of America's crude oil production was shut down, and it is yet unknown how much damage has been done to drilling rigs and the underwater pipes that carry oil to refiners.

Do you understand how merchants price their goods in anticipation of the replacement costs?

Poe_9999 wrote:
I do have a problem with really steep price increases.

Price fluctuations in a free society are driven by market forces. The laws of supply and demand are like the tides.

I don't intend my next remark as an insult, but it is clear that both of you guys could benefit from reading up on economics.

In Praise of Price Gouging (http://www.realclearpolitics.com/Commentary/com-9_7_05_JS.html) by John Stoessel.
See also Gouge On: A defense of gas profiteering (http://nationalreview.com/comment/taylor200509022359.asp) by JerryTaylor and In Defense of Price Gouging (http://www.lewrockwell.com/lott/lott45.html) by John R. Lott, Jr. and Sonya D. Jones.

Brad Johnson
October 17, 2005, 03:44 PM
Government ain't gonna save you from nuthin'. You're on your own. Get used to it.

sic 'em, Art! :D

Brad

R.H. Lee
October 17, 2005, 04:32 PM
The entire oil industry supply chain pricing structure is very complex and probably worthy of several college level courses. There are a number of speculators and investors involved who continually buy and sell crude oil from the time it leaves the ground. It's not unusual for crude oil to change hands several times while aboard ship crossing the ocean. That part of the pricing is purely market driven and not a part of the problem.

The 'gouging' is coming during the refining and distribution phase. Here are some bare facts:

Since 2001, the five largest oil refining companies operating in America—ExxonMobil, Valero, ConocoPhillips, Shell and BP—have recorded $228 billion in profits.

Oil and gasoline prices were rising long before Hurricane Katrina wreaked havoc. U.S. gasoline prices jumped 14% from July 25 to Aug. 22. Indeed, profits for U.S. oil refiners have been at record highs. In 1999, U.S.oil refiners made 22.8 cents for every gallon of gasoline refined from crude oil. By 2004, they were making 40.8 cents for every gallon of gasoline refined, a 79% jump
http://www.eia.doe.gov/emeu/aer/pdf/pages/sec5_53.pdf

The Senate voted to approve HR 6, the “comprehensive” energy bill, by a vote of 74 to 26, even though the only “comprehensive” aspect of the legislation is the $6 billion in subsidies to big oil companies. Here is a list of those subsidies:

OIL & GAS SUBSIDIES: $6 BILLION

Section 1329
Allows “geological and geophysical” costs associated with oil exploration to be written off faster than present law, costing taxpayers over $1.266 billion from 2007-2015. The provision claims to raise $292 million from 2005-06, and cost taxpayers $1.266 billion from 2007-2015. It originated in the House (there was no such provision in the original Senate bill). Record-high oil prices should provide a sufficient incentive for oil companies like ExxonMobil to drill for more oil without this huge new tax break.

Section 1323
Allows owners of oil refineries to expense 50% of the costs of equipment used to increase the refinery’s capacity by at least 5%, costing taxpayers $842 million from 2006-11 (the estimate claims the provision will actually raise $436 million from 2012-15). This provision was added by the Senate. Record high prices for oil and gasoline, and record profits by refiners like ExxonMobil and Valero should provide all the incentive needed to expand refinery capacity without this huge tax break.

Sections 1325-6
This tax break allows natural gas companies to save $1.035 billion by depreciating their property at a much faster rate. This tax break makes no economic sense, as natural gas prices remain at record high levels, and these high prices—not tax breaks—should be all the incentive the industry needs to invest in gathering and distribution lines.

Section 342
Allows oil companies drilling on public land to pay taxpayers in oil rather than in cash.

Sections 344-345
Waives royalty payments for drilling for some natural gas in the Gulf of Mexico.

Section 346
Waives royalty payments for drilling in offshore Alaska.

Sections 353-4
Waives royalty payments for gas hydrate extraction on the Outer Continental Shelf and public land in Alaska.

Section 383
Allows oil companies drilling in federal land off the coast of a particular state to pay the state 44 cents of every dollar it would have paid to the federal government for the privilege of drilling on federal land.


Title IX, Subtitle J
This section would provide $1.5 billion in direct payments to oil and natural gas corporations to drill in deepwater wells.

The only possible explanation for why Congress would bestow these subsidies on oil companies are the $52 million in campaign contributions by the oil industry, with 80% of that total going to Republicans. Also included were a number of regulatory rollbacks.

Mergers:
This is for you 'free marketers'.....
Over 2,600 mergers have been approved in the U.S. petroleum industry since the 1990s. In just the last few years, mergers between giant oil companies—such as Exxon and Mobil, Chevron and Texaco, Conoco and Phillips—have resulted in just a few companies controlling a significant amount of America’s gasoline, squelching competition. A number of independent refineries have been closed, some due to uncompetitive actions by larger oil companies, further restricting capacity. As a result, consumers are paying more at the pump than they would if they had access to competitive markets and five oil companies are reaping some of the largest profits in history.

In 1993, the five largest U.S. oil refining companies controlled 34.5% of domestic oil refinery capacity; the top ten companies controlled 55.6%. By 2004, the top 5—ConocoPhillips, Valero, ExxonMobil, Shell and BP—controlled 56.3% and the top ten refiners controlled 83%. As a result of all of these recent mergers, the largest 5 oil refiners today control more capacity than the largest 10 did a decade ago. This dramatic increase in the control of just the top five companies makes it easier for oil companies to manipulate gasoline by intentionally withholding supplies in order to drive up prices. Because most of the largest companies are also vertically integrated, they enjoy significant market share in oil drilling and retail sales.

The proof is in the numbers. Profit margins for U.S. oil refiners have been at record highs. In 1999, U.S. oil refiners made 22.8 cents for every gallon of gasoline refined from crude oil. By 2004, they were making 40.8 cents for every gallon of gasoline refined, a 79% jump. It is no coincidence that oil corporation profits—including refining—are enjoying record highs.

So when you have a small cartel-5 companies-virtually controlling the U.S. supply, how can you assert there is a free market? What you have is a heavily subsidized (by the U.S. taxpayer) monopoly making more money than ever before with gas prices at record highs. If that isn't gouging, I don't know what is.

jefnvk
October 17, 2005, 04:50 PM
So record profits are a bad thing?

Art Eatman
October 17, 2005, 05:23 PM
I don't think anybody imagines that there is a "free market" in the US, other than in the world of illegal drugs...

Taxes foregone don't cost me anything, whether oil companies get a break or an individual gets a break. Besides, one way or another, the consumer pays all taxes. One way or another, a company's taxes are dealt with by the way they keep the books and the way they target their costs and overall business plan. Merely consider how many corporations no longer pay dividends: Better to use whatever "loopholes" exist to hide the profits (by inflating internalized costs, e.g.) and rely on increases in the stock value to provide justifcations for investors to buy the stock. This is to the stockholders' advantage: There is double taxation on dividends, but only a 20% tax on capital gains.

Gross dollar amounts of profit are meaningless unless measured against something. They must be considered in terms of percentages, whether on sales or on assets. The P/E ratio is but one measure, among many.

As far as only a few grease companies dominating the market, this but a continuation of a trend that began some seventy years or more ago. Look at car companies or regional and national breweries or, heck, banking and meat-packing, among numerous other types of businesses.

It's not that all this style of growth is "good". Any business will do what it can to reduce overhead or cost per unit of output. It's a way of increasing profit without having to raise prices in a competitive world.

From what I've seen of the people I've met who work in larger corporations, even if there are only five "majors", they are as visciously competitive as though there were a hundred. Maybe moreso. As near as I can tell, it's an ego thing: There's nothing a T. Boone Pickens likes more than "gettin' over" on a competitor.

Art

R.H. Lee
October 17, 2005, 05:25 PM
So record profits are a bad thing?
They are when they're the result of collusion between government and business. High gasoline prices are not the result of 'market forces'. They're the result of avarice and hubris. Government has allowed over 2600 mergers in the petroleum industry since the 1990's, culminating in the 'Big 5'-ConocoPhillips, Valero, ExxonMobil, Shell and BP. And they've got the Republican majority in their hip pockets, sorta like the 5 New York crime families.

Art Eatman
October 17, 2005, 07:10 PM
And why should government not allow these buyouts/mergers/acquisitions? Why is it government's business in the first place?

Royal Dutch Shell was the Big King Kong windmill against whom all other companies tilted. Shell ain't a U.S. corporation, last I heard. The only way any company fights a Biggie is to get big. Not many 200-pound defensive tackles in the NFL, either.

Banking? During the 1990s, Bank of America bought out some 4,000 banks in the U.S. A buddy of mine told me about it; he bought all the office equipment and computer stuff for seven cents per pound. He shipped container loads of IBM Selectrics to Asia and eastern Europe, and salvaged the metals from the computers. (Sometimes he even got paid.)

You can see the same deal in retail chains (Wal-Mart, et al) or in the car world. Who are the biggies, Toyota, Nissan, GM, FoMoCo and Daimler-Chrysler? Any one of them equals the total output of all the companies I didn't name.

There is Budweiser, and then there are all the rest.

In Coolidge, Georgia, today, gas was down to 2.49/9 at the same station where before Katrina it had been $2.35/9.

I note that when oil was at $3/bbl, gasoline was around $0.28-$0.33. At $25/bbl, $1.00-$1.25. Now, at $67/bbl, I guess it oughta be some $2.75-$3.00?

In constant dollars, gasoline at $3.00 = 1980. Is gasoline up? Or, is the dollar worth less?

Art

R.H. Lee
October 17, 2005, 08:00 PM
The U.S. has a long history of anti trust legislation beginning back in 1890 with the Sherman Act. A short history can be found here http://www.globalpolicy.org/socecon/tncs/mergers/trustbusters.htm Interestingly, the Sherman Act came about primarily as a result of farmers paying high rail prices to take their produce to the cities. Transportation costs are the issue again today.

Even Theodore Roosevelt was an active trust buster, with 43 antitrust suits filed during his administration. http://www.sparknotes.com/testprep/books/sat2/history/chapter14section2.rhtml

The purpose of antitrust laws are to promote free market competition. When one group (cartel) controls a commodity, there is no competition to control (drive down) prices. Instead, the oil companies are free to control/restrict supply, which drives higher prices. They feed on shortage fears and in fact, make more money in artificial shortage periods than when the supply is ample.

A barrel of oil contains 42 gallons, and makes about 19.5 gallons of gasoline. For each $10 increase in the cost of a barrel of crude, that translates to a 24 cent cost increase in gasoline ($10/42). So if gas cost $1.35 when oil was $30 per barrel, it should only cost roughly $2 rather than the $3 we’re paying today. You can’t attribute the gas price increase solely to the cost of crude oil; that difference of $1 per gallon is purely gouged profit.

Scottmkiv
October 17, 2005, 09:01 PM
The purpose of antitrust laws are to promote free market competition.

No, the purpose is to thwart the free market whenever the public gets upset, or a politician wants to make a name for himself. Free markets mean the absence of government intervention unless a company initiates force or steals. Going after big unpopular companies just for the sake of it, or "to make things fair for the little guy" is the exact opposite of a free market. It is fascism.

wingman
October 17, 2005, 10:16 PM
You can spin this as free market/economics 101, etc, but the end results
will be the same greed is killing America, it starts at the top, corporations,
government and continues right down to us the working stiffs. I don't have
an answer to the problem however if we hang around long enough an answer will be forced on us, so hang on to your oil stocks and hope for the best.:(

bjbarron
October 17, 2005, 10:46 PM
Before Katrina I was paying about 2.57/Gal...

It got up to about 3.32 at the highest and quickly dropped back to 2.62 this week.

I live in the Northeast and drive into NYC every day.

I really don't see the gouging. It was up for a while when the refineries were down and now the price has fallen as the refineries came back on line.

I'm sure they are making money, but a good portion of what we pay per gallon is taxes. It ain't as much of a price shock as it was in the 70s, and I haven't seen a line or an even/odd day like we used to have.

Scottmkiv
October 17, 2005, 11:18 PM
You can spin this as free market/economics 101, etc, but the end results
will be the same greed is killing America(

Greed is the reason America is America. Everything that is good in this country is a result of greed. Capitalism is the system of greed, and Communism is the system of its opposite.

R.H. Lee
October 18, 2005, 08:56 AM
Greed is the reason America is America. Everything that is good in this country is a result of greed. Thank you Gordon Gekko.

Capitalism is the system of greed, and Communism is the system of its opposite. Unrestrained capitalism gets you child labor, sweatshops, hazardous uninsured workplaces, and all sorts of economic coercion. That's different than communism how? This kneejerk reaction that Corporate=Good and Government=Bad is simplistic ideology.

NCP24
October 18, 2005, 09:10 AM
Six pages, I’m surprised this thread is still active.

DRZinn
October 18, 2005, 09:49 AM
Unrestrained capitalism gets you child labor, sweatshops, hazardous uninsured workplaces, and all sorts of economic coercion.Depnds on how you define "unrestrained." If you mean "operating outside any framework of laws whatsoever," then sure. But the only laws necessary should be those that actually protect actual rights of those involved. Then you could have a healthy capitalism unrestrained from being what it has the potential to be.

Tall Man
October 18, 2005, 01:15 PM
(G)reed is killing America.
Greed, coupled with white men with guns, built this great country. Greed keeps America alive.

The formation of America wasn't a perfect process, but it happened, and I'm glad it happened.

TM

Waitone
October 18, 2005, 01:21 PM
Greed is a defining characteristic of human nature. Capitalism is a system that harnesses greed and uses it against itself to limit its effect.

Count me appreciative of greed. Its good stuff.

Brad Johnson
October 18, 2005, 03:09 PM
This kneejerk reaction that Corporate=Good and Government=Bad is simplistic ideology.

Actually, no. It's reality. And it has been proven over, and over, and over...

Don't confuse "corporate" with "monopoly". They are entirely different concepts. Intentional intermixing of the terms has long been a liberal socialistic way of promoting yet another version of class warfare...

Brad

R.H. Lee
October 26, 2005, 01:50 PM
ConocoPhillips profit UP 89% (http://news.yahoo.com/s/nm/20051026/bs_nm/energy_conocophillips_earns_dc_4)

waterhouse
October 26, 2005, 02:50 PM
The rising prices for crude oil have been yakked about for the past several years. Why haven't you bought stock in Shell or Exxon, and used your profits to buy gasoline that you should have known full well is gonna go up in price?

thanks Art, that's what I did. When I buy gas I just smile. After all, I'm just putting money back into my pocket. When my friends talk about how "the evil oil corporations are making record profits" I just smile. But it is a bigger smile, because now they are putting money into my pocket.

The neat thing about a publicly traded company is that you can be a part of the record profits. Some of those record profits actually belong to you, since you own a little slice of the company. And 4 times a year Exxon is kind enough to send me my dividend check. It's their way of saying, "thanks for investing with us, here's some return on your investment, please go buy some ammo and have a good day at the range." :D

NCP24
October 26, 2005, 03:16 PM
Maybe we should be arguing how oil companies are to be treated. If they are only out to provide a public service, maybe the gov't should run them. If they are to be run as a business, don't interfere. Interesting thought.

Funny how no one gets upset about airline prices changing by the minute or taxes taking 1/2 our wages, but ATM fees and gas prices cause a panic. You forgot to add increased insurance premiums.

And 4 times a year Exxon is kind enough to send me my dividend check. It's their way of saying, "thanks for investing with us, here's some return on your investment, please go buy some ammo and have a good day at the range." You may have something there. . . .

R.H. Lee
October 26, 2005, 03:56 PM
40+ mpg AND Japanese. My way of sticking it to corporate America AND the unions. :)

http://www.thehighroad.org/attachment.php?attachmentid=29638&d=1128632270

Brad Johnson
October 26, 2005, 04:16 PM
R.H. Lee wrote-

ConocoPhillips profit UP 89%

Yeah, and...? If I made nothing last year and $89 this year, my profits would be up 89% too. But I would still only have $89 in my pocket.

Why are you so mad at someone who found a way to be successful? Do you, as part of your normal daily routine, try to actively undermine your ability to promote yourself and your well-being? Unless the answer is an emphatic "NO" then you are doing the same thing as the people you despise, just on a smaller scale.

R.H. Lee wrote-

40+ mpg AND Japanese. My way of sticking it to corporate America AND the unions.

And my car is a used Ford Crown Victoria. It's my way of riding around comfortably in a car I can afford, and paying for it with the evil profits I get.

Brad

R.H. Lee
October 26, 2005, 04:24 PM
Yeah, and...? If I made nothing last year and $89 this year, my profits would be up 89% too. But I would still only have $89 in my pocket.


From the article
The Houston company's net profit in the third quarter rose to $3.8 billion, or $2.68 a share, compared with $2.01 billion, or $1.43 a share, a year earlier

'Nothing' is a looooooooong way from $2.01 billion. The increased profit comes from what reasonable men call 'gouging'.

auschip
October 26, 2005, 04:33 PM
From the article


'Nothing' is a looooooooong way from $2.01 billion. The increased profit comes from what a minority of people call 'gouging'.

Fixed

Brad Johnson
October 26, 2005, 06:10 PM
The Houston company's net profit in the third quarter rose to $3.8 billion, or $2.68 a share, compared with $2.01 billion, or $1.43 a share, a year earlier

'Nothing' is a looooooooong way from $2.01 billion. The increased profit comes from what reasonable men call 'gouging'.

You know, it's really laughable sometimes. People want to stick it to the "eeeeeevil" oil companies for making a profit without thinking about where that money really goes. Thank you for illustrating the glaring obsurdity of that thought process so effectively.

The net profit increased from 1.43 a share to 2.68 a share. That means that every pensioner, every parent with a college fund for their kid, every single mom putting money into a mutual fund, and every person who is trying to grow their financial standing who has stock in the company, or stock in a mutual fund invested in the company, has profited.

Want to know another well-kept secret? That money does not go into a large, black hole in the ground somewhere and never used again (GASP!). What doesn't get paid out as dividends gets reinvested in new exploration, new technologies, and new equipment - all of which creates NEW JOBS. Then you know what happens? If the corporation is successful, they make even more money! The sky is falling! The sky is falling! :what:

The "eeeevil" oil company is you and me. We, the stockholders, are the ones who profit. Do you have a retirement portfolio? I bet you do. There is a very good probability that one, or even several, of the mutual funds in your portfolio have stock in the company ("Obscene profits" like that do not go unnoticed). So in pitching a fit about "big oil" you are really griping and moaning about..... yourself.

Brad

R.H. Lee
October 26, 2005, 06:24 PM
That means that every pensioner, every parent with a college fund for their kid, every single mom putting money into a mutual fund, and every person who is trying to grow their financial standing who has stock in the company, or stock in a mutual fund invested in the company, has profited.
And a much, much larger number of pensioners, parents, etc., indeed everyone in the country is being economically punished by increased prices on everything due to greatly increased transportation costs as the result of the unabashed greed of a few oil companies. That's good for us all, how?

Geno
October 26, 2005, 06:34 PM
The profits get reinvested? Development? Not! Have you checked out Fox news lately? Even CNN? The oil industry has been at Congress' doorstep, begging for money...subsidy. They just got it, some of the largest ever given, and now, they are racking record profits?!

Regarding the "reinvestment", we have had nearly no development in how many years? We have oil...we don't have refineries.

IMHO, and I admit I am not Harvard Business School Graduate, it seems to me, that we have a MANUFACTURED crisis, followed by trumped-up inability to process the oil, not due to Katrina damage, but due to failure to build refineries.

Big business is still what is has always been...not free market, and not supply & demand; rather, it is manufactured crisis followed by price-fixing. :neener:

Doc2005

Brad Johnson
October 26, 2005, 06:53 PM
The profits get reinvested? Development? Not! Have you checked out Fox news lately? Even CNN? The oil industry has been at Congress' doorstep, begging for money...subsidy. They just got it, some of the largest ever given, and now, they are racking record profits?!

Go back and read your high school econo books on how corporations work, especially the part about stockholders. The money that doesn't get reinvested gets paid as dividends to the stockholders (like I pointed out above). So where does all that "obscene profit" go? Hint - It doesn't end up locked in a bank vault somewhere. It goes right back into the pockets of the stockholders.

Okay, so they had a record profit last year (or last month, or last quarter, or whatever). They paid out the extra to the stockholders and stuck some in the bank for operations. Now they are facing a multi-billion dollar loss of infrastructure and future revenue. Judging from your statements you feel that the people who have all that "obscene profit" should ante it up to pay for all the rebuilding. Okay, so when would you like for the govt to begin forcing everyone who got paid a dividend to give it back? After all, that's where most of that "obscene profit" ended up.

You seem to think "big oil" is some etheric malevolent entity with no connection to everyday society or your particular position in the economy. Well, sorry to have to break it to you - "Big oil" is nothing more than "big group of stockholders". And the stockholders are us. WE are the ones who get all that "obscene profit". If you want to keep griping about it, start by pitching a fit to the person you see in the mirror each morning.

And take a course on economics, with an emphasis on corporate finance. Sounds like you need it.


Regarding the "reinvestment", we have had nearly no development in how many years? We have oil...we don't have refineries.

You might want to check with the enviro-freaks and their wacko liberal-socialist cronies in all the govt regulatory agencies. They had a small say in the matter...

Brad

Waitone
October 26, 2005, 06:59 PM
I agree. We have a contrived petroleum supply problem.

The disagreement come when we debate the source of the supply problem. It is mindnumbingly expense and grandly time consuming to permit and build a refinery. Why? Go find your favorite environmental nazi and give 'em a great big wet kiss because that is the source of the problem. Don't bellyache over a lack of refineries when you let the nazi's get away with choking supply. :mad:

BTW, gas in these parts is $2.39 / gallon, down from a peak of $3.39 /gallon. I guess the milk of human kindness over came evil greed of oil companies. I demand to know who the sweet person is who forced prices down even though evil oil companies were still raping the consumer. What a crock ! :scrutiny:

R.H. Lee
October 26, 2005, 07:11 PM
You might want to check with the enviro-freaks and their wacko liberal-socialist cronies in all the govt regulatory agencies. They had a small say in the matter...

and
Go find your favorite environmental nazi and give 'em a great big wet kiss because that is the source of the problem.
Yet oil company profits are at historic highs along with gasoline prices, but it's someone else's fault???? Do you guys even listen to what you're saying? You would make a Democrat blush........

JGR
October 26, 2005, 08:01 PM
Profits are at historic highs because demand is inelastic, and as demand increases relative to supply, the market-clearing price increases and profits increase. You cannot look at profits to determine whether or not there is collusion. Draw a supply & demand graph with an inelastic demand curve, then move the demand or supply curve up. You'll see that at the market clearing price, profits increase. If prices were to be artificially suppressed, whether voluntarily or through coercion, then you will have shortage, which means long lines or inefficient rationing schemes, and people who need it won't be able to get it.

A couple references:
http://cafehayek.typepad.com/hayek/2005/09/a_fair_price.html
http://www.econlib.org/library/Columns/y2005/Robertsmarkets.html

jefnvk
October 26, 2005, 08:01 PM
If I made nothing last year and $89 this year, my profits would be up 89% too. But I would still only have $89 in my pocket.

No, it would be up an infinite amount.

If you made $1 last year, and $1.89 this year, your profits would be up 89%.

As for profits being up, who cares? Profits is what drives our economy. If there was no money to be made in oil, no one would be making oil.

As for the Jap car, my guess would be that it was made in America by union workers.

Brad Johnson
October 26, 2005, 08:12 PM
Yet oil company profits are at historic highs along with gasoline prices, but it's someone else's fault???? Do you guys even listen to what you're saying? You would make a Democrat blush........

Your passion is admirable, but your economic knowledge is pitiful. As a result you are attempting to relate two distinct and mutually exclusive issues, relying on emotion to bridge the gap.

We broke the problem down to the component issue and gave you the answer. Sorry it was not what you wanted to hear.

You still think that the oil corp is this entity out there that sucks money into it's clutches, never to allow it to see the light of day again. The "oil company profits at historic highs" means that the money is paid to the stockholders and is gone from the corporation's bank account. Gone as in in someone else's bank account where they can use it for other stuff. Gone as in back in the economy buying other stuff and making other investments. Gone as in no longer there. They don't hoard money. They can't. The stockholders would never stand for it.

And, yes, the environmental movement is directly responsible for the lack of new refineries. This is not up for debate, it is established fact. Trying to argue otherwise is the equivalent of saying that two plus two does not equal four. Environmental regulations and associated public pressures have made new refineries so economically unfeasable that the oil companies have turned their attentions to making the current infrastructure and technologies as efficient as possible.

As for the Jap car, my guess would be that it was made in America by union workers.

Probably. It usually causes great distress and consternation when people find out that their "All-American" Harley has less domestic parts content than the Marysville, OH-assembled Honda GoldWing.

Brad

Bruce H
October 26, 2005, 08:21 PM
And, yes, the environmental movement is directly responsible for the lack of new refineries. This is not up for debate, it is established fact. Trying to argue otherwise is the equivalent of saying that two plus two does not equal four. Environmental regulations and associated public pressures have made new refineries so economically unfeasable that the oil companies have turned their attentions to making the current infrastructure and technologies as efficient as possible.

Brad

Yep, the refineries are paid for. They aren't allowed to build any. They can't drill for new sources because drilling is bad and we can't have that. When there isn't any way to spend the money you make expanding your business, or looking for new material supplies, the cash accumulates.

Waitone
October 26, 2005, 08:50 PM
Yea, you're right. I don't hear my self:uhoh:

I only ran a commodity business when costs of raw materials declined and I ran the same business when raw materials increased dramatically. I was the guy who took the calls from customers who wanted to give me business at <insert unit price of choice> I was the guy who had to weigh current costs, standard costs, current raw costs, future raw costs, future raw costs possiblities, potential raw shortages during life of a contract, equipment loading, management support, sales ability to service contract, logistics ability to get product to destination at the cost agreed to, competitive responses to price levels, gamed out competitive response and customer substitution, and a whole host of other factors I have submerged in my memory. At the end of the day I had one response: yes, I'll take the business or no I won't.

Note: market price levels were presented to me and I got to choose to participate or decline. That's it. I did not set market prices. Market prices were handed to me and I got to decide to play or not. Know what? During raw material shortages our gross margin (first line profitability) rose to unheard of levels. At one time GM levels were 3 times historic levels. Why, because a scarcety of supply drives market prices up. Our strategic sourcing group had long term contracts from all over the world. A disruption in the US supply caused us to shift to european sources. Our costs went up but we had raws. Some of our competitors got use to continuously declining prices and failed to write long term contracts in favor of buying on the spot market. Good plan as long as costs decline; bad plan when slapped in the face with a raw shortage. They ran out of raws and had to exit the market. Reduced supply drove up the price. I didn't drive prices up. The market did. Know what else? Just as soon as raw material shortages resolved, market prices declined. I didn't drive prices down. The market drove prices down because supply increase.

In the face of natural shortages (hurricanes) and contrived shortages (environmental nazi stopping the building of refineries) the cost of gas is behaving just exactly as I'd expect; including its drop of a dollar a gallon in recent weeks. It will continue to drop until production catches up with demand at which point the decline will stop and stay relatively constant. I guess then we can debate how evil oil companies and their obscene profits collude to keep prices high. After all, prices were declining and the mysteriously stopped. Gotta be some evil oil pricing game being foisted on the dumb-as-a-stump customer. :p

Art Eatman
October 26, 2005, 11:58 PM
So the profits were $2.68 a share. Okay, fine. What was the share price?

A price of $50/share means about 5.4% profit. McBurgers probably does better...

Art

c_yeager
October 27, 2005, 03:22 AM
'Nothing' is a looooooooong way from $2.01 billion. The increased profit comes from what reasonable men call 'gouging'.


DId you read the article you posted? It was made pretty clear that the profit increase was due to the market price of crude oil. That is NOT a price that is set by the oil company. Who is doing the "gouging" in your little scenario?

R.H. Lee
October 27, 2005, 11:08 AM
Ay-yih-yih. Where to start?
The "oil company profits at historic highs" means that the money is paid to the stockholders and is gone from the corporation's bank account. Gone as in in someone else's bank account where they can use it for other stuff. Gone as in back in the economy buying other stuff and making other investments. Gone as in no longer there. They don't hoard money. They can't. The stockholders would never stand for it.
Wrong. And what are the big energy companies doing with all this money? Mostly sitting on it. Their cash reserves overflow. (http://news.yahoo.com/s/nm/20051026/bs_nm/energy_conocophillips_earns_dc_4) also see
ConocoPhillips said Wednesday that it had about $13.6 billion cash on hand during the third quarter, $1.3 billion of which was generated during the quarter. The company invested 63 percent of that cash into capital programs, or new projects to expand the company (http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-oilearnings_27bus.ART.State.Edition2.c5548b5.html)

So they're using the largest percentage of gouged profits on mergers and acquisitions, further consolidating their monopoly.

As for the Jap car, my guess would be that it was made in America by union workers. Wrong Made in Japan, specifically, Toyota City. And if it were built by union workers it would have cost $24k, not the $12k I paid.

So the profits were $2.68 a share. Okay, fine. What was the share price?

A price of $50/share means about 5.4% profit. McBurgers probably does better... Remember, that $2.68 is just for the quarter, so in the above scenario the annualized gain would be 21.6% at a time when gas prices are at an all time high.

DId you read the article you posted? It was made pretty clear that the profit increase was due to the market price of crude oil. That is NOT a price that is set by the oil company. Who is doing the "gouging" in your little scenario?
First, your statement doesn't make sense. If the cost of crude goes up that increases the cost of goods sold, not the profit. Unless the oil company had options on crude purchased when the price was much lower; artificially inflating the CGS to current market levels and pocketing the difference. Also, please note the article says "ConocoPhillips, like other major oil companies, has reaped a windfall from.....better refining margins..." and
Profit at its refining and marketing operations rose to $1.39 billion from $708 million a year earlier So, $1.39 billion of the gouged profit comes from refining and marketing where both supply and price are determined by the oil company.

Record gas prices=Record oil company profits=Gouging.

R.H. Lee
October 27, 2005, 11:16 AM
You want to know why gas prices are dropping, just a little? The oil companies are realizing they've overreached. Even the Republicans are jumping on the bandwagon GOP to target Big Oil profits (http://washingtontimes.com/national/20051025-122641-3933r.htm)

wingman
October 27, 2005, 11:18 AM
Record gas prices=Record oil company profits=Gouging.


Simply truth, I love it. Anyone old enough to remember old cowboy movies
where the indian said white man speak with forked tongue, well that is a way
of life now in corporate American and sad to say our government. We can all
spin "profit" anyway you like but we are being gouged by oil companies because it's the only game in town and I do not expect it to end soon.:mad:

Waitone
October 27, 2005, 11:32 AM
So they're using the largest percentage of gouged profits on mergers and acquisitions, further consolidating their monopoly.Explain how a company is to increase its dollar volume sales when it is prohibited from expanding production. A company that is not growing is dying. If it cannot expand production on its own the only alternative is to purchase production from a willing seller (merger and acquisition). No, don't tell me a company could simply purchase additional gas from another oil company and resell under a different brand. Commodity markets reward production. There is insufficient room in the gross margin for a re-brand.

auschip
October 27, 2005, 11:39 AM
FOllowing that logic Apple has been "gouging" in the United States also.

Today’s announcement comes 24 hours after Apple reported record earnings, with a net annual profit of $1.335bn (€1.113bn), an increase of 384% from 2004.

Apple generated revenue of $13.93bn (€11.62bn), a 68% rise from the year before.

http://212.2.162.45/news/story.asp?j=3375465&p=337548x&n=3375557

Profits (even large profits) are not proof of gouging. In fact, if you do a little digging, you can see the flaw in your logic. Lets look at Conoco-Phillips numbers over the last 3 quarters.

Q1 2004 - $1.6B Compared to Q1 2005 - $2.9B

Q2 2004 - $2B Compared to Q2 2005 - $3.1B

Q3 2004 - $2B Compared to Q3 2005 - $3.8B

So what was the gouging that went on in Q1 & Q2? I don't believe we had any hurricanes blowing through in February & March.

R.H. Lee
October 27, 2005, 12:16 PM
So what was the gouging that went on in Q1 & Q2? I don't believe we had any hurricanes blowing through in February & March. Why do you thing gouging requires hurricanes? The oil companies control supply and price with and without hurricanes. Gas prices (and profits) have been sharply increasing for the last 3 years. Hurricanes are just the latest convenient excuse.

FOllowing that logic Apple has been "gouging" in the United States also.
Talk about faulty logic.........

Have Apple's prices doubled in the last two years? NO,
Does Apple control the computer supply? NO
Does the cost of computers increase the cost of everything else as do increased gas prices? NO

You're zero for three, but you can play again. :)

jefnvk
October 27, 2005, 01:23 PM
Have Apple's prices doubled in the last two years? NO,
Does Apple control the computer supply? NO
Does the cost of computers increase the cost of everything else as do increased gas prices? NO

He is talking about a specific company, you are talking about an entire industry.

And just because it didn't just start happening, doesn't mean computer manufacturers haven't been gouging.

If I can build the same system that Dell is, for half the price, are they gouging?

Beethoven
October 27, 2005, 02:32 PM
Assuming there's free-market competition, and assuming there's no collusion going on, there is no such thing as "price gouging." All prices are exactly what they should be.



I don't think that any intellectually honest person can say with a straight face that there is no collusion in the oil industry.

Camp David
October 27, 2005, 02:45 PM
As a follow-up to all those that foolishly denied price gouging by oil executives...

Exxon's $10B net a U.S. corporate record
October 27, 2005: 1:25 PM EDT
http://money.cnn.com/2005/10/27/news/fortune500/exxon.reut/index.htm?cnn=yes
NEW YORK (Reuters) - "Exxon Mobil Corp. posted a quarterly profit of $9.9 billion Thursday, the largest in U.S. corporate history..."
~
I hope these people all die soon and their children all get cancer and die horrible deaths...

Molon Labe
October 27, 2005, 02:58 PM
I don't think that any intellectually honest person can say with a straight face that there is no collusion in the oil industry.Do you have evidence collusion is going on? If not, then an intellectually honest person can only assume collusion is not going on.

Ball is in your court. Show me some evidence.

Waitone
October 27, 2005, 03:07 PM
I don't think that any intellectually honest person can say with a straight face that there is no collusion in the oil industry.If there is collusion, and if the federales know about it, and if it is generally known collusion exists, then I submit we are looking at another example of the federal government ignoring laws it finds inconvenient. I also submit such an attitude is dangerous for two simple reasons:
--What happens when the Great Fed Up gets the idea that it, too, can simply ignore laws it finds inconvenient, inapplicable, or onerous. One quick example is I and others like me simply decide to stop paying income tax. The same logic that allows government to ignore collusion would permit me to stop paying taxes . Will my rebellion and those like me be excused based on the precedence of collusion in the oil industry? Not hardly.

--Second, if government can fail to enforce laws it wrote, how long before that same government begins to enforce laws not written. Example: President Schumer works as hard as he can to stop gun violence and fails so in exasperation he simply decides to begin systematic gun confiscation. How do you speak against such an outrage?

Yea, if there is collusion it is because government permits it. At that point a whole host of questions arise.

auschip
October 27, 2005, 03:30 PM
Why do you thing gouging requires hurricanes? The oil companies control supply and price with and without hurricanes. Gas prices (and profits) have been sharply increasing for the last 3 years. Hurricanes are just the latest convenient excuse.

Talk about faulty logic.........

Have Apple's prices doubled in the last two years? NO,
Does Apple control the computer supply? NO
Does the cost of computers increase the cost of everything else as do increased gas prices? NO

You're zero for three, but you can play again. :)

Yes - Some of Apple's prices have doubled, but not all of them, similar to say Conoco (some of their products have doubled in price, but not all).

Yes - Apple does control the computer supply.

Yes - The cost of computers can effect everything else, not to the same impact as the cost of oil, but 90% of manufacturing is done with computers, and if the manufacturing isn't done with computers the planning and day to day operations definately are.

And just so we can be clear, you are contending that oil companies have been price gouging for at least the last 3 years. Would you care to share how you came to that conclusion?

ReadyontheRight
October 27, 2005, 04:02 PM
I was just in Houston. World series tickets were much more expensive than tickets for regular season games.

Was THAT price gouging?:confused:

How about the $400 hotel rooms and $50 parking lots near the stadium?

jefnvk
October 27, 2005, 06:20 PM
I don't think that any intellectually honest person can say with a straight face that there is no collusion in the oil industry.

And the point most of us are trying to make, is that the vast majority of collusion is somewhere outside of our control, say, at the OPEC fields.

R.H. Lee
December 19, 2005, 05:11 PM
Spitzer fines gas stations over price gouging (http://www.msnbc.msn.com/id/10532906/)

Oil firms, gas stations accused of price gouging (http://www.msnbc.msn.com/id/9501181/from/RL.3/)

TaxPhd
December 19, 2005, 05:24 PM
Wonderful. Political grandstanding over something that doesn't even exist.

jefnvk
December 19, 2005, 05:28 PM
SO, because the Attorney General of a state has said something, makes it right?

I'd bet if the attorney general filed suits agains gun manufacturers for something, you'd be screaming about how they are full of it.

Flyboy
December 19, 2005, 06:56 PM
R.H. Lee, I'll make you a deal:

If you'll enroll in a basic economics course, I'll pay for it, just so that you learn that A) "gouging" is a term that's made-up by politicians to score political points with the illiterati, and B) that it's usually used to describe a market response to an economic stimulus that they want to modify--again, to scre political points--thus making it worse for everybody.

Just because Eliot Spitzer--paragon of virtue and champion of individual rights that he is--says "the EEEEEVIL oil companies cheated you" doesn't make it true. Matter of fact, given his track record of attempting to use the law and the courts to bend the laws of economics (among other things), I'd be inclined to automatically assume the opposite of anything he said.

Edited to add:
Spitzer also called on state legislators to amend price-gouging laws to further define “gross disparity,” the concept of large price differences after a market disruption from the previous prices that can not be explained away by higher costs.
This is about as clear an example of Spitzer's misunderstanding--or complete disregard--of economics as is possible. Yes! Yes, you stupid git, prices change after a market disruption! That's just common sense! I'd ask how you got elected, but I know how: your constituents are socialist idiots.

I have more faith in the people around here.

gm
December 19, 2005, 07:25 PM
Id almost forgot about this..not.


in todays paper,monday,the 19th of december,headlines here say heating oil will be raised 49% for january.average bill up from 212.66 last year to 315.90 this month. the oil company is blaming it on the hurricanes and cold weather. gee,wasnt winter cold last year and didnt it also snow last year but here we are after the hurricane excuses are done for car fuel and the prices at the pump did fall below 2 dollars a gallon,in fact,in the 1.78 range, for a few weeks after the hearings...soooooo back up it all goes.,maybe cause its xmas or a weekend or (insert reason here)I remember 1 year that the heating oil company sent us a letter telling us they were going to have to consider raising it because of warm weather all winter and the lack of sales,they raised it that year anyways.


I wouldnt give a crap cept heating oil and gasoline are not things I could do without,I have to work though I dont make alot nor do I do alot ...I suppose I could always start walking the 25 miles to work,bike ride or ask the owner of the gas delivery truck for a ride to work if hes headed that way.

"Yea, if there is collusion it is because government permits it. At that point a whole host of questions arise". I couldnt agree more,someones lying.

taliv
December 19, 2005, 07:37 PM
guess i'm at a loss here to understand why everyone is up in rhlee's craw.

gouging, i'll grant you, isn't a "technical" term with a precise definition, but it's pretty much clear to everybody else that it's synonymous with 'profiteering'.

it's not some political fantasy. it's real. it's easy to define. (grab a dictionary if you doubt me.) and what's more, it's illegal.


if you want to make a case that spitzer has a secret agenda against big oil, then let's hear it. but i'm not buying any "well, he's anti-gun so everything he says is wrong" crap.


i don't know why you're insulting people by bringing economics into this either. after you check up on the definitions, i'm sure you'll notice that the illegal bits (profiteering and gouging) are what CANNOT be explained by economics (supply/demand and increased costs). hence, economics is irrelevant and it's quite appropriate for him to disregard them.

so there's no call for your tone, although i'd certainly recommend rhlee take you up on your offer of a free education. it's quite generous, as tuition at CA state schools can be steep.

besides, unless he edited his post, rhlee didn't actually SAY anything. he just posted the links. if you post a link about a bg shooting a police officer, i don't think we'd all assume you supported shooting at the po po.

try to relax, guys
remember to breathe

Art Eatman
December 19, 2005, 07:47 PM
Post the link. Then post a precis. Then post a conclusion. Just posting a link isn't all that interesting, compared to somebody's conclusion(s) from the link's argument/information.

If I own anything that I want to sell, I can post any price that suits me, anytime. People don't have to buy. Competitors can price their goods as it suits them. Sooner or later, those willing to sell with get right with Jesus as to how much they want for the product.

Generally, when folks go to hollering things like "Gouging!", it's an indicator that their knowledge of basic economics is somewhat lacking. Or, they have no experience with buying and selling and not only making a profit now, but also staying in business in order to make a profit in the future.

Drifting over to heating oil: If the refiners get tied up in making gasoline instead of heating oil, there will be a low supply of heating oil. Last year's temperatures have nothing to do with the pricing. If some disaster--such as Katrina--obviate refining heating oil in the quantities needing for stocking in advance of demand, the price is gonna go up--per Econ. 101. That's only been going on since they first started refining gasoline and heating oil. But, given the short-term memory problems of most modern Americans, it's all new and unusual and must be the fault of some Evil Price Gouger.

Art

jnojr
December 19, 2005, 08:55 PM
I don't think that any intellectually honest person can say with a straight face that there is no collusion in the oil industry.

If that's true, then why isn't gas $5 a gallon, or $10? After all, who could do anything about it?

And, if current pricing is the result of collusion, any given gasoline supplier could make a freakin' mint by cutting his prices below the colluded price. That supplier would gain huge market share and be the Golden Boy in the eyes of the public. And what could his former collusion partners do?

jefnvk
December 19, 2005, 09:27 PM
but i'm not buying any "well, he's anti-gun so everything he says is wrong" crap.

I didn't mean to imply that he is. I have no idea if he is or not. The point I was trying to get to, is that just because an AG says somethign, doesn't make it so.

So, I'll ask this very simple question. Why is it wrong for you to sell your property at whatever price you see fit?

Chris Rhines
December 19, 2005, 09:59 PM
guess i'm at a loss here to understand why everyone is up in rhlee's craw. Mainly because he's wrong, and annoyingly insistant about it.

gouging, i'll grant you, isn't a "technical" term with a precise definition, but it's pretty much clear to everybody else that it's synonymous with 'profiteering'. Not at all. Price gouging is nothing at all like profiteering, except in that they are both nonexistant concepts made up by economic know-nothings.

"Price gouging" is whinging about how unfair it is that the landlords-um, business owners can set prices higher than you want them to.
"Profiteering" is a more generalized mewling about how the capitalist roaders make money at the expense of the workers (whatever that is supposed to mean.)

- Chris

taliv
December 20, 2005, 12:27 AM
Mainly because he's wrong, and annoyingly insistant about it.

well, since his post consisted, in its entirity, of two links to other articles and no positive or negative commentary at all, please explain where he's "wrong" and "annoyingly insistant".

perhaps you've some lingering frustration from a past thread?

jefnvk, i agree. sorry i misunderstood and thought you were implying exactly taht.


i'll continue the rest of the discussion in the other thread

Headless Thompson Gunner
December 20, 2005, 01:07 AM
well, since his post consisted, in its entirity, of two links to other articles and no positive or negative commentary at all, please explain where he's "wrong" and "annoyingly insistant".

perhaps you've some lingering frustration from a past thread?

jefnvk, i agree. sorry i misunderstood and thought you were implying exactly taht.


i'll continue the rest of the discussion in the other thread
Go re-read this entire thread. We've gone round and round about economics, free markets, "evil capitalists", and "price gouging".

The bottom line is that market forces cause fluctuating prices. This is a natural, normal, routine occurance. Yet R.H. Lee and some others insist, despite all reason, that is an intentional and immoral situation caused by greedy executives. It isn't.

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