Posted on 09/29/2005 11:36:23 AM PDT by JZelle
If you bought a home 10 years ago for $100,000 and just sold it for $300,000, have you engaged in price gouging? Most people would say "no," provided there were willing buyers and sellers of both sides of the transaction merely responding to the market at the time. As a result of hurricanes Katrina and Rita, some politicians have demanded prosecution of "price gougers." In many states, like Florida, "price gouging" is illegal. The Florida statutes say, "It is illegal to charge unconscionable prices for goods or services following a declared state of emergency." Hmmm, I know what the law means when says burglary or murder are illegal, but an "unconscionable price"? So I looked in Webster's Dictionary, and found unconscionable is defined as "excessive; extortionate" and gouge is defined as "to extort from or to swindle." As an economist, I know prices allocate scarce resources (like gasoline) and motivate future production. At some price, the quantity demanded and the quantity producers are willing to supply come together. If that price is high enough to provide producers a profit, they will be motivated to produce more.
(Excerpt) Read more at washingtontimes.com ...
>If the lender charges you 35% interest per annum for your mortgage on that house, the gov't would nail it for usury under the same principle. The free market isn't allowed to work in many facets of the economy.<
Usury threshold is defined in advance.Give us a profit rate above which gouging occurs.
Not like that around here. They ALL are within 2-3 cents of each other and ALL raise their rates on the same day. Within a few hours even.
Best I've heard of is the occasional tax break (reduction). Production taxes, lease sales, federal/state royalties, 'windfall profits' taxes, transportation taxes, fuel taxes, permit fees, reclamation bonds, etc., etc., etc.
The industry is one of the few taxed on par with tobacco, but it is taxed from prospect to the gas tank.
SO what are the subsidies?
Ethanol? NOT oil.
Sure, you can buy cheaper gas. Any day there is a 15cent differential in price/gal. Consumers could force the prices down, if they would shop for price, but they don't.
I don't know about subsidies, but government roadblocks to exploration and development of gas, oil, and other energy resources need to be removed.
Indeed, "unconscionable" leaves the door wide open. How much profit is acceptable? 10%? 50%? 100%? Should present CGS be the basis of the markup or future CGS?
The gasoline retailer does not burn up the gas before they resell it, thus the comparison of buying and reselling a house is correct.
5 Companies in the US with refining capacity over 1M bbl/day:
Conoco Phillips: 2,198,400
Exxon Mobil: 1,846,500
BP: 1,504,500
Valero Energy: 1,449,528
Chevron Texaco: 1,006,901
8 Companies with refining capacity over 500K bbl/day
Marathon Oil: 948,000
Sunoco: 900,000
Premcor: 768,400
Koch Industries: 763,126
Motiva Enterprises: 746,500
PDV America: 719,300
Royal Dutch Shell: 597,200
Tesoro: 562,500
Source: www.eia.doe.gov
I don't believe in the price gouging argument. However, I do believe that oil companies are not trying very hard to increase the gasoline supply to meet the nation's demand.
If any law should be passed, it should be strictly limited to requiring oil companies to increase their supply to meet the nation's demand.
IE - if the current refining capacity of US oil companies is 17 million barrels/day and the US demand is 21 million barrels/day, then the oil companies should increase their capacity by 4 million barrels/day.
And if, after a set timeframe (let's say... a year), the oil companies cannot show a sizeable increase in refinery construction or expansion, then the law should mandate that the oil companies be required to spend a set portion of their profits (let's say... 25%) into increasing their supply production. For Exxon, 25% would mean that they would spend $10 billion/year into increasing their refining capabilities, leaving $30 billion for their shareholders. Even with the insane environment regulations, $10 billion would easily cover the cost of building a new refinery (and grease the palms of stubborn lawmakers). Once supply then meets demand, the law should then go into remission.
The biggest problem right now is that the oil companies are abdicating their free market duties. Which is to increase supply to meet demand. And all the talk of 'windfall profit' taxes just adds more ammunition for them not to increase supply.
I agree - one doesn't absolutely NEED to buy gas to survive, but they do need to buy it if they wish to maintain the lifestyle that they now enjoy.
Some consider it a need, but in reality, it is a luxury. Unless you drive 30 minutes or more to work, you could ride a bike. if it is 10m, or less, you could walk.
I'm not sure that luxury is the right description today, given the distances one must travel to work, school, shopping, and all. We have essentially built our cities based on the freedom of movement brought about by the automobile. The car has allowed us to move out of crime-ridden neighborhoods to the sanctity of the suburbs. It has allowed us to have a reasonably large yard. It has allowed us to get our children out of dysfunctional city schools (and arguably into dysfunctional suburban schools in some cases). It has given us our own space, away from the closeness of the city, while still allowing commuting into and out of the city.
In my own situation, I drive about 17 miles to work - the trip is about 20 minutes. There are no busses, especially considering the hours I work (24/7 operation). Walking is out of the question, given the distance and time constraints. Likewise, bicycling is a bit dodgy given that there is quite a bit of big elevation change on the way downtown each day. That, and I'd need a good hot shower when I got to work. I average nearly 60 mph on my trip to work including parking time - cycling, assuming I were in excellent shape and a bit younger, would put me at about a 10 mph average, given the hilly/mountainous terrain.
Of course, one could move back into the inner city and that would alleviate the need for daily commuting to work. Shopping might be another situation depending on the city. There's not a great abundance of low-priced stores in the downtown area here. There's a lot of other things people can do to reduce the need for gas, and I would hope that prices would guide people in their driving decisions.
My neighbor is a chemist for Amoco. He says that ethenol is not the holy grail as a gasoline substitue. The process required to get ethanol to market consumes energy... fossil fuel.
As for subsidies, the oil companies are paying taxes on their untapped oil reserves!
I get fed up with some liberals I know who spout off with unfounded statements.
My wife worked for Texaco for 30 years in their World headquarters in NY.
She said what the feds are, and have been doing to the oil companies, is unconcienable.
Oil companies are hog-tied from building new refining capacity.
She goes ballistic when I mention the "Federal Government" and "energy" in the same sentence.
"Not like that around here. They ALL are within 2-3 cents of each other and ALL raise their rates on the same day. Within a few hours even. "
You just live in an area with a more efficient market.
>
You just live in an area with a more efficient market.<
The Retail margin for Gas is so tight their is no room for competition on gas.Costco and the grocery chains are selling at almost cost and using gas as a loss leader.Convienence stores compete corner by corner.If their are four small chains at one intersection they usually manage to make $.10-$.15 margin.If one corner has a large chain like Quick Trip,Hess or RaceTrac the margin is bet back to $.10 or less.
I just sat on an outcropping there and watched them pull up on the wellsite, slide to a stop (fanned out formation), guys pop out of all the doors with clipboards in hand, and deploy like some sort of strike force, (as I was later informed) looking for infractions.
It looked like a SWAT operation. Just unreal.
I just sat up there and watched the show.
One fresh water tank had overflowed when it was filled that morning, spilling three or four barrels of water, and the company was fined heavily for spilling water on the ground--that came out of a private pond about five miles back up the road (where it had been in contact with the ground...).
Are you claiming that all 14 of those companies are colluding together?
Are you claiming that these companies could have colluded 5 years ago, but only recently decided to?
Are you claiming that the other independent refiners out there (and there are a lot of them)aren't able to make a killing by undercutting these guys a little?
You can read that book online for free now. One of the best books ever.
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