Price Gouging

[DRZinn]

heavy government intervention (vs control) is needed for the markets to run.

That's disgusting.

Working logistics in the Army tought [sic] me

Logistics 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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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.

 

[TaxPhd]

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]

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]

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.

 

[Lupinus]

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]

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]

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]

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.

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!!

 

[c_yeager]

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]

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]

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. )

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.

Art