Skip to comments.What if we don't run out of oil?
Posted on 11/15/2005 7:05:19 AM PST by Dan Evans
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The FTC did not impose Nixon's wage and price controls, that was all Tricky Dicky.
I'd like to see the bottled water barons hauled before Congress to justify their outrageous price gouging.
Yes. I guess you mean price supports, which are the reverse of price controls. They are usually in effect at the wholesale level. Sugar, milk, corn have price supports.
Just as bad. If any industry were to do something like this on their own, they would go to jail.
There are meteorites that contain some percentage of carbon and hydrogen and so it would be surprising if the earth's core had none. It wouldn't take very much at all to account for the oil deposits since the crust is a tiny fraction of the earth's mass.
I really think it is a stretch to make that assumption. I would not be at all surprised that these people would be completely bewildered that price controls would cause a shortage.
You don't understand. They don't "jack up" prices because they can, they do it because they have to. There is only one correct price. If the price is too high, they can't sell all of their product. If it is too low, they there is a shortage -- gas lines.
What oil companies can do, and what all companies do, is adjust the production to maximize profit. Produce too little or too much and profit falls. It's tricky because competitors are doing the same, demand changes, customer habits change, oil supplies vary, etc. And they have to do this while a hostile government is looking over their shoulder ready to jump on them if they perceive any "gouging".
No. They could make a profit by selling some gasoline at the controlled price but not a lot. The more gas they produce, the more it costs them per gallon to make it. Why? Because:
1) Some crude costs more than others. Long term contracts may cost less than the spot market price.
2) Refining costs more if you have to pay people overtime.
3) Some crude costs more to refine than other types. If you limit production you can save costs.
4) Some refineries are more efficient. If they can shut down the inefficient ones they save costs.