No such thing as price gouging huh?

http://money.cnn.com/2005/11/09/news...ex.htm?cnn=yes

NEW YORK (CNN/Money) - CEOs from the nation's biggest oil companies sparred with lawmakers Wednesday at a Senate hearing into this year's jump in oil prices and record industry profits.

The contentious hearing comes as consumers face a jump of 50 percent or more in home heating bills this winter and gasoline prices have surged 20 percent this year.

It also came after some Democrats slammed Republicans recently for pushing through more federal subsidies for oil companies rather than trying to help consumers cope with the rise in energy prices. (Full story)

Even before the remarks got started, Democrats and Republicans were at each other over whether energy executives should have to swear to tell the truth before the panel.

Senate Commerce Chairman Ted Stevens rejected calls by some Democrats to have the executives sworn in, saying the law already required them to tell the truth.

"There is nothing in the standing rules to require that witnesses be sworn," the Alaska Republican said. "These witnesses accepted the invitation to appear before the committee voluntarily. I shall not administer an oath today."

Daniel Inouye, D-Hawaii and the ranking Democrat on the Commerce Committee, said the CEOs should want to testify under oath.

"If I were a witness I would prefer to be sworn in so the public knows what I was about to say is the truth, the whole truth and nothing but the truth," he said. "If I were a witness I would demand to be take the oath."

The CEOs of Exxon Mobil (Research), Chevron (Research) and Conoco (Research), as well as the head of U.S. operations for overseas oil giants BP (Research) and Shell Petroleum (Research) appeared before the joint hearing of the Senate Energy and Commerce committees.

The industry's third-quarter profits jumped 62 percent to about $25.9 billion as Exxon Mobil, the nation's biggest oil company, posted the largest corporate profit in history in the quarter. Oil company's stocks are up some 40 percent from a year ago, giving big gains to shareholders.

Some members of Congress have called for a windfall profits tax, with the money distributed to lower-income consumers to help them with energy costs.

In their opening remarks, Exxon Mobil CEO Lee Raymond and Chevron CEO David O'Reilly said their companies and others in the industry invest billions in developing new sources of energy no matter the market price of oil or the level of the industry's profits.

"Since 2002...we invested what we earned," O'Reilly said.

Several executives said that the industry faces costs of between $18 billion to $30 billion to repair damages from hurricanes Katrina and Rita.

Raymond argued that industry profits as a percent of revenue were in line with other industries, adding that companies had to use earnings to invest in new sources of oil.

"In politics time is measured in increments of two, four and six years," Raymond said, referring to the terms of offices for members of the House, the president and senators. "In the energy industry, time is measured in decades, based on life cycle of our projects.

"History teaches us that punitive measures hastily crafted in response to short-term rises in prices will have unintended consequences and disincentives to investment," he added.

Sen. Barbara Boxer, D-Calif., criticized the CEOs' pay and bonuses and urged them to make significant personal and corporate contributions to energy assistance programs.

"To my constituents, today's hearing is about shared sacrifices in tough times versus oil company greed," she said. "Working people struggle with high gas prices and your sacrifices appear to be nothing."

But none of the executives volunteered that they would make personal or corporate contributions to energy assistance programs.

"As Americans, we all feel for those who are less fortunate. We want to make sure they get the energy they need," said Jim Mulva, the CEO of Chevron. "We feel it's not a good precedent for one industry to fund a program as such. We think that's a responsibility of the government."

Raymond, questioned about reports of a one-day 24-cent a gallon increase in the wholesale price of gasoline by Exxon Mobil following Hurricane Katrina, said he couldn't comment on that instance but denied the company was price gouging.

Raymond said the company's pricing policy after Katrina was "to minimize the increase in price while at the same time recognizing that if we kept the price too low, we would quickly run out of gasoline and have shortages. It's a tough balancing act."

Inouye said that he understands why many Americans are outraged over the industry's profits.

"In the midst of pain, in the midst of suffering, the public sees headlines about record profits," he said, though he stopped short of endorsing a windfall profit tax. "I have nothing against making profits, it's what makes capitalism live," he added.

Sen. Pete Domenici, R-N.M., chairman of the Senate Energy Committee, said he would oppose such a tax.

"From what I know, it didn't work before and it won't work again," he said. But he also told the executives that one of the first questions he always gets from constituents is about the price of oil and the way oil prices are set.

"I think most Americans think that someone rigs these prices and that someone is getting ripped off and it's them," he said. He said he wanted the executives to assure the country they were investing their profits in the business and working to increase production to keep prices in check.

Personally I think what they did is akin to War Profiteering and they should all be prosecuted.

Taking advantage of a disaster of that proportion as an opportunity to make astounding amounts of money is just ... there are no words for it. Those ####ers make me sick.

but they should not pay a winfall tax.. that will only end up hurting you, me, aunt and uncle flow in the end... you tax them legally then they have a reason, legal, to up prices again...

what would be a better way to punish

Winfall tax is crap. The company itself in all honesty is not to blaim.

Basically, if a company is found to be in gross violation of "disaster" profiteering, then all managers responsible for those corrupt decisions, and the corrupt business practices should have their position forfeitted, and their PERSONAL assets seized by the government. The shareholders would be responsible for replacing those found guilty. Interrim managers could be appointed by the government.

I was thinking a great idea would be to force oil companies to be non-profit, and keep some very harsh watchdogs over them. Regulate the kind of pay the top execs can get to ensure that any increase in revenue is immediately translated into lower gas prices.



Reason being, with oil, competition doesn't work the same way since supply is pretty much uniform. Thus the only change is demand, and demand perpetually increases.

I guess if congress holds hearings on porn saying it's obscene and should be banned, that would make that true too.

All anyone does on any day at any time anywhere in the market is charge the highest price they can. Technically everyone is guilty of gouging. Not letting prices rise and fall as the market dictates is a sure way to **** the economy up. There are several points to be made.

1: The oil industry is already regulated beyond belief. The differences in the markets for sweet and sour crude and refined fuels is too complex for any board of nimrod senators to decide whether or not the stuff is adequately priced. When senators and congressmen claim the economics of the moment don't justify the price hike, it's necessary to keep in mind that they are most certainly excluding every short and long term negative economic effect of their oh so enlightened regulations.

2: Prices go down and up. A price is nothing more than information, an indicator of a good or service's value expressed as ratio to the money commodity and thus to other goods and services in the economy. No one has access to the kind fo information to decide what is and is not a 'fair' price or a 'just' price or a market clearing price or anything else. Anyone who claims otherwise, no matter how many industry stats they have in their hands, is a pinhead.

The price level cannot be determined apriori. The price yesterday or even ten minutes ago is meaningless in economic terms. They are based on subjective evaluations by people and those can change, usually gradually, but also sharply and without notice. If you want a good to remain available you'd better hope the price goes up if the supply gets restricted or demand increases without a concurrent increase in supply. When the price is forced to stay the same in that situation it leads to one thing: shortages. Take a look at what happened to water, food and ice supplies in Florida after Charlie hit the area. Oh, also of course after various government nimrods promised to crack down on gouging.

3: The government has passed regulations that have put artificial restrictions and bottle necks in the flow of the supply of oil and gas to the market. The government has enacted the regulations that raise the cost of entry into the market which have restricted competition. Within this framework the government has been doing anything and everything it possibly can to make sure the price of oil and gas is as low as possible. This ensures the reelection and reappointment of the scumbags in the government, but it is the exact opposite of what the market is supposed to be doing. The price of a good not only includes people's subjective evaluations of the value of that product, but their evaluations of what they think that product will be worth in the future. This a vital mechanism, speculation, which the government has done a lot to put the brakes on, thus ensuring severe price spikes.

4: The oil is their property. Not yours, not mine, not 'the people's', not the government's, theirs. They can charge whatever the hell they please, just as you or anyone else can charge whatever the hell you please for your property. The criticality of oil to the market is not an excuse for regulation, it's the exact reason why there should be little to no regulation.

Nobody has a right to that oil except the people who risk their asses to go get it and turn it into gas for the rest of the population to use. Just as nobody has the right to your car at any other price other than that at which you're willing to sell it to them, no one has a right to that oil or gas at any other price than what the companies are willing to seel it for. If you don't like their prices, don't buy the frigging oil and gas. If you don't want the economy to slow down due to a price rise, get the government out of the business of ****ing the prices up so their fluctuations will be a lot smoother and the economy can adjust much easier.

Congress calling it gouging is ridiculous, those people can't tell their *******s from their elbows on the best of days, most of them probably can't even draw a proper supply-demand graph. Call it what they will, it's the market working the way it should be working. Oooooooo! The oil companies made profits. Gee, ya think? Profits are evil of course. Or there's a certain level they just can't go over for some reason. Exactly what that level is, who decided and how it was arrived at is something I'd be interested in knowing. At the very least it would give me someone to make fun of.

That's got to be my last post on this subject. You want to learn more, read an economics text book that's not written by a government stooge.

Originally Posted by Nullifidian

Winfall tax is crap. The company itself in all honesty is not to blaim.

Basically, if a company is found to be in gross violation of "disaster" profiteering, then all managers responsible for those corrupt decisions, and the corrupt business practices should have their position forfeitted, and their PERSONAL assets seized by the government. The shareholders would be responsible for replacing those found guilty. Interrim managers could be appointed by the government.

I was thinking a great idea would be to force oil companies to be non-profit, and keep some very harsh watchdogs over them. Regulate the kind of pay the top execs can get to ensure that any increase in revenue is immediately translated into lower gas prices.



Reason being, with oil, competition doesn't work the same way since supply is pretty much uniform. Thus the only change is demand, and demand perpetually increases.

Because government ownership of oil worked so well in all other countries that have tried it. Wonderful idea. I have no idea how you call yourself a libertarian when you advocate blatant economic nonsense and flagrant violations of property rights as you do in this post, Null.

4: The oil is their property. Not yours, not mine, not 'the people's', not the government's, theirs. They can charge whatever the hell they please, just as you or anyone else can charge whatever the hell you please for your property. The criticality of oil to the market is not an excuse for regulation, it's the exact reason why there should be little to no regulation.

Nobody has a right to that oil except the people who risk their asses to go get it and turn it into gas for the rest of the population to use. Just as nobody has the right to your car at any other price other than that at which you're willing to sell it to them, no one has a right to that oil or gas at any other price than what the companies are willing to seel it for. If you don't like their prices, don't buy the frigging oil and gas. If you don't want the economy to slow down due to a price rise, get the government out of the business of ****ing the prices up so their fluctuations will be a lot smoother and the economy can adjust much easier.

I agree with most of your viewpoints on these matters, CDB and its obvious you have a good depth of knowledge concerning economics and politics. Two fields which I admittedly have failed to devote even a passing interest in until recently.

Although the fact may be that these companies own the oil and can charge whatever the hell they please..there's a difference between that and what I would sell my property or my car for. What Im selling my car for has no effect on anyone financially except the person who decides to buy it. They can also negotiate that selling price and if Im willing, they can buy that car at a cost that's more affordable to them. I dont think negotion is an option when I have to fill up my Honda. Fuel oil prices affect *everything*. The food we eat, how we heat our homes and how we get to work...the price of energy touches nearly everything in your day-to-day lives. We *have* to buy the oil and gas. I suppose if you're wealthy enough you could rip out your oil furnace and install an array of solar panels before winter arrives, or buy a brand new hybrid vehicle - but I know at least for me that's not a possiblity at the moment.

I understand the comparison you are making here, but the price of oil and the price of personal goods and services aren't really a parallel relationship. In the science of economics, sure. But the reality of life in America is, I'm going to have to freeze my ass off this winter so I can afford to eat healthy and put gas in my car.

I dont think the government should be involved in the price of fuel, and I think the idea of a Windfall tax is absurd. Despite all my griping I am *glad* the price of fuel went up..its already spurring private industry to increase their efforts on viable sources of more environmentally friendly, and cheaper, energy sources. That's what's going to shut Big Oil down for good.

BV

I haven't read the entire thread.

I usually don't...

some very good points made by the obviously educated CDB and jmh80.

supply and demand my friends. WE, the consumer, set the price(each gas station can adjust to a certain degree).

there are plenty of things pointing in the direction of this. all of the people sellin their SUV's for little lawnmowers called "hybrids" lol, and then after a bit(probably already now-prices here are 2.15/gallon for 87) when the prices come down as demand is reduced, they realize they didn't need to and they go out and get their precious SUV's again and prices come back up as demand becomes more. it's a vicious cycle.

also, if you take the value of the dollar for the YEAR it was a certain price, at 2.15 and today's value of a dollar, it is 2nd or 3rd CHEAPEST EVER in the last 50 YEARS!!

wanna talk about gouging?! how about the price of WATER?! how about the price of KETCHUP?!

don't fall for these senators, etc that are saying "yeah let's go get the big oil companies, yeah!" and hypin you up into thinkin they're gonna do something about it.

gouging - anyone happen to know what the big oil companies and the govt. make on the dollar(or a gallon, i forget)? doesn't really matter gallon or dollar although i'll edit if i can find which it is:

for every dollar/gallon the govt makes 45 cents and "BIG OIL" companies make 10 cents!

we need to increase supply if we want to lower prices even more. yet how do we do this with these left wing activists restricting where we can and cannot drill(emphasis on CANNOT)? how about the 45 or so different types of fuel the companies have to make from oil just to please the crazy cook activists? give me a break folks! we'd pay WAY less if we only made 10 or so different fuel grades. this is common sense.

so what they made crapload of profits? that's the way it works, and they'd have something to reinvest INTO if they were allowed to drill in other areas.

just wait and see the results from this "investigation". lol, these senators, etc. either KNOW actually how supply and demand works and they want to milk this for more tax money on their side, or they are just plain dumb(which particulars prove true everyday) and don't understand BASIC ECONOMICS!

*rant over*

So, CDB, you think war profiteering is a good thing?

Originally Posted by Nullifidian

So, CDB, you think war profiteering is a good thing?

be specific.

war profiteering

You know, the federal crime, war profiteering.

Originally Posted by Nullifidian

So, CDB, you think war profiteering is a good thing?

My opinion is irrelevant, it has nothing to do with this situation.

when he said be specific, he meant you're obviously trying to draw some parallel between war profiteers and the current situation with the oil companies. No need to be cagey, spell it out.

War profiteering is the act of making unreasonable profits during wartime due to the necessity of the products you provide. The increased price of these products and increased expenditure puts our military at risk and thus is not only deemed unethical, but illegal.


Taking advantage of major disasters the way big oil has is the same exact kind of activity. When katrina hit and caused all that devastation, oil copanies took advantage of it and raised oil prices far beyond what the damage caused by the storm warranted. Buses and other transportation used to evacuate people required that gas. It is also needed to fuel many power plants in the area. As a result energy prices and energy availability dropped significantly. Through their push to take unfair advantage of our country's grave misfortune, they put thousands of lives at risk.


I'm all for capitalism, but this just doesn't seem right. I mean, taking advantage of people's misfortunates and then your taking advantage of them causing more people to die; that just doesn't seem right.

Exxon should settle their Lawsuit for the spill in Prince William Sound its been 16 YEARS!!!!

Funny how there were no shortages or complaints from anyone a few years ago when gasoline was 89 cents a gallon. It's a paper tiger.

There is no need for gasoline to cost $2+ a gallon. That is what the problem is.

Ask yourself why, if gasoline prices could fall so low and still oil companies could make a profit, (which is what happened) why is it necessary to inflate prices in order to deliver a service? The price is subjective to the market, yes. But there are issues of ethics to consider here. "Greed is good" may have made a great tagline in the movie "Wall Street" but it didn't help Michael Douglas' character escape indictment. There has to be an element of ethical business when price is based on demand. Otherwise it is "price gouging".

Originally Posted by Nullifidian

War profiteering is the act of making unreasonable profits during wartime due to the necessity of the products you provide.

That's all you need to know it's BS. Unreasonable is an aesthetic critique of a situation people don't like. It's got nothing to do with the qualitative science driving the situation. When products are more scarce their price goes up, whether it's due to war, natural disaster, or anything else that throws a monkey wrench into the works. Saying you don't like it and/or passing a law against it doesn't change what's happening and why, nor does it negate the consequences of ill advised laws like price freezes or laws against "gouging."

To further my opinion on war profiteering, the only objections I have against profits in war time is when they are made through treason, selling products to the enemy in other words. I also oppose any inteference with neutrals except stopping contraband supplies, basically the traditional internation law standards before Wilson ****ed them up.

Taking advantage of major disasters the way big oil has is the same exact kind of activity.

They are not taking advantage of anything. That is simply how the world works.

When katrina hit and caused all that devastation, oil copanies took advantage of it and raised oil prices far beyond what the damage caused by the storm warranted.

This is the crux of it, isn't it? Please present any and all information you have that would let us know that you or whatever senator or other person you're listening to knows what the price should have been at that time. Here's a hint, you won't be able to. No one on the planet has access to that kind of information.

Buses and other transportation used to evacuate people required that gas.

And?

It is also needed to fuel many power plants in the area. As a result energy prices and energy availability dropped significantly.

And?

Through their push to take unfair advantage of our country's grave misfortune, they put thousands of lives at risk.

No they didn't. By raising the prices they made sure that other people wouldn't suck gas and oil up when those people needed it more than they did. The price causes a fall in buying which eases demand on reserves and makes sure more is available to those who need it. Yes, they have to pay more. That's the point, because of the increase in demand and strain on supply the commodity is more valuable at that time. If the price doesn't go up there's a good chance it would not have been available at all to those who need it most.

This is how the economy deals with differing levels of scarcity over time. To alleviate scarcity for a product it has to priced accordingly so people don't buy it all and leave us with a shortage. That's what can happen if the price is capped or if a backdoor cap is accomplished with laws against "gouging."

I'm all for capitalism, but this just doesn't seem right. I mean, taking advantage of people's misfortunates and then your taking advantage of them causing more people to die; that just doesn't seem right.

Right or wrong is an ethical question, it has nothing to do with economics. It's a normative science and a qualitative one, not a quantitative one. When you listen to people who try to mix aesthetic critiques in with such a discipline you get fallacies like those many repeat here. While the two sciences are different, what you and others are doing is akin to complaining that electrons act a certain way at a certain energy level because it's not nice for them to do that. It's irrelevant, and passing a law against it or saying you don't like doesn't change the situation.

Originally Posted by Brooklyn

There is no need for gasoline to cost $2+ a gallon. That is what the problem is.

The USSR had this attitude. I'm sure you're aware of what happened to them.

There has to be an element of ethical business when price is based on demand. Otherwise it is "price gouging".

What is unethical about selling your property at the price you want to receive for it?

Right or wrong is an ethical question, it has nothing to do with economics. It's a normative science and a qualitative one, not a quantitative one. When you listen to people who try to mix aesthetic critiques in with such a discipline you get fallacies like those many repeat here. While the two sciences are different, what you and others are doing is akin to complaining that electrons act a certain way at a certain energy level because it's not nice for them to do that. It's irrelevant, and passing a law against it or saying you don't like doesn't change the situation.

That's a good analogy CDB, but here's what I don't understand:

I grasp the concepts of what your talking about when you explain the science behind economics, etc. But if the price of a given product should be at a certain level based on supply vs demand, and a boardroom of executives wants to inflate that price in order to increase company profits, how is that following a rule of economical science? The laws of physics govern the behavior of electrons, but not the thoughts and motives behind the actions of a human being.

I agree that the government should *not* be involved in the prices of fuel for the reasons you describe. However, I can't wrap my head around the reasoning behind some posts that relate the price of gasoline to the price of ketchup,etc.

I understand that it *is* a commodity and thus its price is governed by the rules of economical science. But shouldnt there be some sort of variable to the equation when a certain commodity is so essential to the livlihood of nearly everyone in the country? If a corporation decides to artificially inflate a price of a product that people need to surivive, shouldnt there be some sort of control?

I dont know enough about it to say what that control should be though. If crude oil costs x and the costs to refine it cost y, and Exxon needs to make z amount for profit in order to re-invest in their business, where do they get off adding an exponent to z? Sure its their right as the provider and distributor of their product to charge whatever they please. But when artifically increasing their profits *beyond* what the science governs what it should be has a negative effect on *everyone* what can be done?

I know what Ill do, Ill use less petroleum. And, if everyone does that, prices will indeed fall. I guess *that* is the only control we can and should have over the situation.

BV

Originally Posted by CDB

What is unethical about selling your property at the price you want to receive for it?

When you are in a position of power such that millions upon millions of lives are in your hands, it is unethical to make a decision knowing it will kill many of them, cause many harm, and ruin the lives of many more all in the name of making some extra money.


Business ethics exists to prevent supply and demand from killing the little guy. Market forces alone do not prevent disasterous economic consequences from befalling the lower and middle class.


I'd like you to go tell all those early union workers killed by the coal and railroad companies that the company had full right to starve their families the way they did in order to line their pockets. Tell them their life isn't worth as much as putting an extra couple thousand dollars in an executive's pocket every year.


Regulations exist because we let capitalism and the free market roam unrestricted in the past and it had DISASTEROUS consequences.

What is unethical about selling your property at the price you want to receive for it?

That's the part that Im not comprehending. Oil and property may be the same conceptually when considering raw scientific data, but they're *not* in reality.

I dont have to buy your property if you ask too much for it, but I *have* to buy your gasoline.

What if one company owned all the fresh water on earth, and decided to sell it for $50 a gallon? According to the above logic, that's perfectly a perfectly reasonable scenario.

While crude oil is far less essential than water to our survival, I think its a more accurate comparison than relating petroleum to land or condiments.

BV

Originally Posted by BigVrunga

I grasp the concepts of what your talking about when you explain the science behind economics, etc. But if the price of a given product should be at a certain level based on supply vs demand, and a boardroom of executives wants to inflate that price in order to increase company profits, how is that following a rule of economical science? The laws of physics govern the behavior of electrons, but not the thoughts and motives behind the actions of a human being.

Exactly, which is why it's qualitative and not quantitative. If that board room of execs gets together and decides to raise the price and people are willing to pay it, that's how it works.

Generally speaking the effect on total revenue from a price perspective depends on what's called the elasticity of the demand curve. It's a ratio of the percentage of change in price and the resulting change in sales. Or, basically the slope of the demand curve at any given moment in time. If demand for oil is considered elastic raising the price will actually lose them money. If it's inelastic a rise in prices will lead to a rise in revenue.

Problems arise with government intervention, as regulations can affect the availability of alternatives, and this can make an elestic product inelastic. For example regulations that raise the cost of entry into a system, or environmental regulations which restrict the availability of viable alternatives.

Bread is a very elastic product. If Pepridge Farm raised their prices to 100 dollars a loaf, people would just buy Dutch Country or something. However, lowering the price per load would likely lead to an increase in sales so that on a per unit or marginal basis there would be no loss of revenue. There would probably be gains.

The oil industry is different, but the difference is because of government regulation. Oil and gas should be relatively fungible goods, easily interchangable from company to company, region to region, and they're not. This essentially turns a product with an elastic demand curve into one with an inelastic demand curve. In other words, if the oil companies are raising prices 'just because they can,' it's the government regulations that are allowing them to get away with it.

I agree that the government should *not* be involved in the prices of fuel for the reasons you describe. However, I can't wrap my head around the reasoning behind some posts that relate the price of gasoline to the price of ketchup,etc.

If there were a disease that wiped out most tomatoes on the planet, ketchup would be available at a premium. People would not complain because for social reasons ketchup, no matter how much money the makers are raking in, doesn't ignite the public's passion, even though it's the exact same process. What this boils down to is people want gas and they want it cheap and that's not always going to be possible, so they would rather accuse the oil companies of being scumbags that accuse themselves of being gluttons who can't adjust to scarcity.

I understand that it *is* a commodity and thus its price is governed by the rules of economical science. But shouldnt there be some sort of variable to the equation when a certain commodity is so essential to the livlihood of nearly everyone in the country? If a corporation decides to artificially inflate a price of a product that people need to surivive, shouldnt there be some sort of control?

There is: the market. If a company raises it's prices another company will come in and sell the stuff cheaper. If all companies try to raise prices together (form a cartel) it falls apart from internal (secret price cutting) and external (new or old companies that aren't in the cartel) competition.

Basically if a cartel is formed they agree on a certain level of production at a certain price, usually to **** the public. However the built in mechanism in the market is that once they do this, they are using resources innefficiently and funding to start new companies not already in the cartel becomes much more economical. They fall apart because of greed. There's too much money to be made by breaking the price deals secretly and too much to lose to outside companies who don't want in on the cartel.

HOWEVER, if the government steps in and legally enforces the cartel, as they've done in many industries, then cartels can form and screw us. However, the principle ****er of the public in that case is the government, not the companies. They may have begged for protectionist regulations, the government gave it to them.

People don't even realize how easy this is. Open pricing regs are one thing, no secret prices. Everyone thinks this is for democracy and openess and all that ****, and it's completely off base. The first laws against secret pricing were passed by the ICC in reponse to the fact that the railroads didn't like cartel busters.

What it really meant is they want to know what their competitors are charging to make sure no one was breaking the cartel agreements. And you see a lot of that these days. Because prices have to be open you often see them calibrated across industries, standard prices almost. Companies who could and probably would charge less for a service realize they don't have to. They know what their competitors are charging, and they can charge the same amount even if they can technically provide it cheaper.

I dont know enough about it to say what that control should be though. If crude oil costs x and the costs to refine it cost y, and Exxon needs to make z amount for profit in order to re-invest in their business, where do they get off adding an exponent to z?

A price has nothing to do with how much profit people decide apriori to add on. It's a balancing of marginal utitilities and costs. There's a balance that's struck: what are we willing to pay and what are they willing to accept? It's that simple. There's no apriori way to determine that though. People change their minds every day. The profit per unit might be enough for some oil exec one day, not enough the next day. It might be enough one day, and through some technical advance he might be able to make the same marginal profit and still sell it to us for far less than his competitors.

That's how prices should be determined. When the government steps in it does usually give far more power to the producer so they can just say, regardless of anything else, I want this much profit per unit. They can do that on the market too, but the difference there is that on a free market, which we do not live in, they don't know what their competitors are charging and they have to bargain their prices with consumers, constantly trying to beat their competitors and gain more business. When they know what everyone else is charging the entire industry is like a loose cartel.

Sure its their right as the provider and distributor of their product to charge whatever they please. But when artifically increasing their profits *beyond* what the science governs what it should be has a negative effect on *everyone* what can be done?

The science doesn't govern where it should be at, the market does. The science studies the market and gives you tendencies and a few apriori relational situations like supply and demand, marginal utility, etc. No one, not even the oil execs, knows what the price should be. It's a process of continual discovery.

If they raise the prices and find out we're buying just as much, some people flip out and call them greedy. A true economist would just point out that they were charging a subcompetitive price previously, and it's the public who is greedy for wanting the price to stay the same. If someone comes in and starts selling at the lower price again because they have a lower marginal cost, or a lower desired marginal profit, the price goes down again.

I know what Ill do, Ill use less petroleum. And, if everyone does that, prices will indeed fall. I guess *that* is the only control we can and should have over the situation.

BV

That's why I drive a 4 cylinder Honda, and my next one will be a hybrid. The only and best way to **** them is to not buy the stuff, or buy as much less as possible.

Originally Posted by Nullifidian

When you are in a position of power such that millions upon millions of lives are in your hands, it is unethical to make a decision knowing it will kill many of them, cause many harm, and ruin the lives of many more all in the name of making some extra money.

Says you, and I'll warrant a lot of other people. Says not me. That same line of reasoning taken to it's extreme leads to the complete destruction of all property rights, including the right to your own body. No matter how bad people need something they have no right to take it.

Market forces alone do not prevent disasterous economic consequences from befalling the lower and middle class.

I am wondering how you judge this since we have almost never lived in a free market. Show many any set of "disasterous economic consequences" that has befallen this country and I'll show you a government beauracrat with his **** in his hands ****ing the public bloody, with BIG oil or BIG banking or BIG anything else (interesting moniker that) begging for a reach around at most.

I'd like you to go tell all those early union workers killed by the coal and railroad companies that the company had full right to starve their families the way they did in order to line their pockets.

Gladly. I can only assume they were working there because it was better than the alternatives. In which case the coal companies did them a favor. In the broader sense you might want to explain why things like workplace safety and similar statistics were all steadily increasing until the government took an overt hand in things and then stalled the process.

They're always quick to teach you in school how wonderful unions and government regulations are and how much they've helped, and always quicker to ignore that period of years beforehand where, by some magical force I guess, all those conditions the regs and unions supposedly solved were getting steadily better already, and why they so suddenly stopped getting appreciably better when the government gets involved.

Tell them their life isn't worth as much as putting an extra couple thousand dollars in an executive's pocket every year.

If they chose to work there, it was worth it to them, or at least more so than the alternatives. A difficult or ****ty choice is still a choice.

Regulations exist because we let capitalism and the free market roam unrestricted in the past and it had DISASTEROUS consequences.

Sure..... Give me one instance and, as I said before, I'll show the government ****ing everyone and the private market at worst begging to watch. I hate to say it Null, but you sound like a standard raised public school kid. I get fed this **** for years too. Did you ever, ever, ever bother to question it? Did you ever, ever, ever bother to think logically about some of this ****? I did, it was rather eye opening.

Originally Posted by BigVrunga

That's the part that Im not comprehending. Oil and property may be the same conceptually when considering raw scientific data, but they're *not* in reality.

I'll bet you would feel differently had you dug it out of the ground yourself, or paid someone to do it for you. Explain the difference. Property is property. That oil would not exist were it not for their effort. Would you say a farmer's farm isn't his property, or the produce that comes off it not his to sell as he sees fit?

I dont have to buy your property if you ask too much for it, but I *have* to buy your gasoline.

No, you don't. You want to. The alternatives to not buying it don't appeal to you, but that's not the same as having to buy it. Plus you don't have to buy it from me, you can buy it from someone else.

What if one company owned all the fresh water on earth, and decided to sell it for $50 a gallon? According to the above logic, that's perfectly a perfectly reasonable scenario.

No it's not, because that doesn't happen. Sounds like a variation of the value paradox and it just doesn't work that way. A better analogy would be Plato's forms, except instead of an ideal you're pointing out a extreme nonideal that would never exist. At least, it wouldn't exist absent any legal enforcement.

While crude oil is far less essential than water to our survival, I think its a more accurate comparison than relating petroleum to land or condiments.BV

The forces that govern each are the same. Whether people value something highly or lowly, the market forces necessary to deal with the scarcity of any desired good or service are the same.

CDB, you don't HAVE to buy water. Instead you could just die.

You don't HAVE to buy gasoline, instead you can walk 3 miles to the nearest MacDonald's and not even make enough money to pay rent at the biggest ****hole in your area. And since you don't have money for gas you can't move unless you hop on a bus. Oops, you don't have money for a friggin bus because you work at MacDonald's.


As for people back in the turn of the century working for coal mining companies, NO they didn't have a choice. It was that or die. That simple. They couldn't move because they didn't have the money or transportation. They die, or they work for the company, simple as that.

When you dont' restrict the market you get sweatshops. You get forced labor. You get bonded labor. You get slavery. You may hold faith in the market, but the market is controlled by the rich. The rich are shortsighted. Given the opportunity, they would bleed everyone else dry until there was just rich, and dirt poor.


The only way to ensure that the middle class isn't struck down is to implement legal checks and balances. Certain things businesses just shouldn't be allowed to do. Like form a monopoly for example; not only do monopolies result in high prices, they completely halt development and onnovation. Afterall, why innovate when you can continue making money with what you've got? You might say, oh but small companies would start up and compete. Small companies start up and get bought out and their ideas typically get hidden in some basement somewhere. It happens ALL THE TIME. When you've got monopolies in multiple industries, that's what results.

Example: my grandfather, 40 years ago, went to an invention fair. He met a guy there who had invented a washingmachine that didn't use water or soap. It ran purely using ultrasonics. The machine was able to clean plumbing grease out of my grandfather's shirt. It was far better than any conventional washingmachine, it didn't wear out fabrics, it got them cleaner, and it didn't require soap OR water, just electricity; about as much as a dryer does. Sounds great right? You bet. My grandfather scraped some money together to invest in the guy's company. When he called the guy back, he found out a detergent company had bought the rights to the patent from the guy for a large sum of money. Hmm, I wonder why no one has ever seen that type of washingmachine since???



Take a look at cable companies. Until recently they were the ONLY option for TV outside of the standard networks. In New Jersey as well as a lot of other areas, they are not regulated and thus the cable companies OWN the cable lines in given areas. As a result, they have local monopolies. There is no competition, and as a result, for years cable was preposterously expensive, service was horrible, and the number of channels sucked a fatty.

Then satellite became affordable and low and behold the cable rates plummeted.

Additionally, in states like PA where the cable companies DO NOT own the cable lines, cable rates are far cheaper. Why? Because they don't own the lines, and in the cases where a cable company does own the lines in an area, they HAVE TO rent them out to any company that choses to offer service in that area and the rates are regulated so as to prevent them from forcing competition out.

And that is a luxury item. When companies are able to **** people over unrestricted for luxury items, imagine what happens when the product in question is a necessity.


Sometimes regulation is good. TO A DEGREE. Totally unregulated economies and markets are almost as bad as fully restricted ones.

Originally Posted by Nullifidian

CDB, you don't HAVE to buy water. Instead you could just die.

You're missing the point. No one person owns or even will own all the fresh water in the world. It's ridiculous to say what would happen if... when that if will never happen.

You don't HAVE to buy gasoline, instead you can walk 3 miles to the nearest MacDonald's and not even make enough money to pay rent at the biggest ****hole in your area. And since you don't have money for gas you can't move unless you hop on a bus. Oops, you don't have money for a friggin bus because you work at MacDonald's.

Funny, I know people who have never owned a car in their lives and they're doing fine. Some live in the city, some in the suburbs. I had a physics teacher who had one car, he brought it out once or twice a year. Otherwise he just rode his bike everywhere. He was doing fine, healthier than most too.

When you dont' restrict the market you get sweatshops. You get forced labor. You get bonded labor. You get slavery.

Please show one instance where this has happened without government help and intervention to make it happen.

You may hold faith in the market, but the market is controlled by the rich. The rich are shortsighted.

Given their ability to get money and hold on to it by using it productively, they are by example much more far sighted than the poor, living day to day when a little savings would go a long way.

Given the opportunity, they would bleed everyone else dry until there was just rich, and dirt poor.

Please explain how they do this absent the backing of the government. The government either has to lend their force to the rich, or ignore their abuses of other's rights in order for this to happen. In other words the rich are no different than anyone else, and absent any legal enforcement of their will have, in the end, just as much power as any other person.

Like form a monopoly for example

Please show me one example of a monopoly that formed without government collusion. Hint: the traditional historical examples don't count, they were increasing production and lowering prices faster than any other players in their respective markets at the time. See articles by Thomas DiLorenzo who has examined the historical data at the time anti trust laws were conceived. He did this in 1985. Up until that point absolutely no systematic look at whether or not monopolies actually formed during that time had never been undertaken.

In all cases the prices of the goods and services provided by the trusts were falling in line with the prices of other goods, and in most cases much faster with concurrent increases in production up to seven times that of GDP. Monopolies are supposed to restrict production and raise prices.

Now of course if you were the owner of a company and some big cartel was raising prices the first thing you'd do is complain to the government. Wait, on second thought since you could either raise your prices too or keep them lower and get more business, maybe you wouldn't. However, if someone was legitimately out competing you and you either wouldn't or couldn't beat them, then I think you would go to the government and complain about the horrible unethical and cut throat competitive methods used by these monopolies, these trusts. What horrible people! I mean they're driving you, the hard working honest constituent of some congressman, to whom of course you donate a lot of money, out of business. A sad state of affairs indeed.

Of course monopoly in the traditional sense and as the word is still used by Austrians means a special grant of privilege from the government to some individual or group for the manufacture, distribution and sale of a specific product. In that sense we do have many monopolies and cartels these days. What you seem to miss is that without the government enforcing their existence, for a price of course, they would not survive.

Afterall, why innovate when you can continue making money with what you've got? You might say, oh but small companies would start up and compete. Small companies start up and get bought out and their ideas typically get hidden in some basement somewhere. It happens ALL THE TIME.

Then you won't have any trouble providing examples. I'd suggest Dominck Armentano's books and articles on this subject if you'd like an opinion actually based on evidence instead of rhetoric.

Example: my grandfather, 40 years ago, went to an invention fair. He met a guy there who had invented a washingmachine that didn't use water or soap. It ran purely using ultrasonics. The machine was able to clean plumbing grease out of my grandfather's shirt. It was far better than any conventional washingmachine, it didn't wear out fabrics, it got them cleaner, and it didn't require soap OR water, just electricity; about as much as a dryer does. Sounds great right? You bet. My grandfather scraped some money together to invest in the guy's company. When he called the guy back, he found out a detergent company had bought the rights to the patent from the guy for a large sum of money. Hmm, I wonder why no one has ever seen that type of washingmachine since???

A simple internet search reveals tons of these machines available for clothes, industrial parts, etc. Incidentally patents are government granted protections, and it's only enforcement of those laws that would stop anyone else from using a similar technology. In other words if what you say is true detergent companies relied on the power of the government to restrict the introduction of a new idea. Without that power they wouldn't have been able to do ****, and they were not that successful from what I can see at a glance.

The man did not have to sell the patent, apparently he thought it was easier than raising the capital to start his own company. Maybe he was right. Perhaps selling that patent to a company with enoug accumulated capital to bring it to market was the only way to get the idea out. But I'm sorry your father's dreams were cruched by the evil laundry detergent cartel.

Take a look at cable companies. Until recently they were the ONLY option for TV outside of the standard networks.

And who controlled the airwaves and the infrastructure and everything else necessary to bring cable television and broadcast television to people in their homes? Who auctioned off the airwaves on the reasoning that they were a 'public good' owned by 'the people' and therefore actually owned by... Oh yeah, the government.

In New Jersey as well as a lot of other areas, they are not regulated and thus the cable companies OWN the cable lines in given areas. As a result, they have local monopolies. There is no competition,

Satelite tv, books, radio... They did not hold a monopoly, I'd suggest you look up the definition of the word, Austrian and common.

Then satellite became affordable and low and behold the cable rates plummeted.

Holy ****! You mean, by God, you mean, the market worked?!?!?!?! People wanted a lower priced alternative and it showed up without the government having to pull it out of its ass?!?!?!?!?! Wow, what a ****ing concept.

Additionally, in states like PA where the cable companies DO NOT own the cable lines, cable rates are far cheaper. Why? Because they don't own the lines, and in the cases where a cable company does own the lines in an area, they HAVE TO rent them out to any company that choses to offer service in that area and the rates are regulated so as to prevent them from forcing competition out.

Justout of curiosity, who is stopping the laying or stringing of new lines that other companies can use. Oh yeah, it's the...

Sometimes regulation is good. TO A DEGREE. Totally unregulated economies and markets are almost as bad as fully restricted ones.

Since we've never seen the former and have seen plenty of the latter (not too successful unless you like crumbling infrastructures and massive unemployment, starvation, etc.) I will hold off judgement on that claim. You may be right, the evidence suggests you are very wrong.

Originally Posted by jmh80

All this is trying to say (with some facts) that motor gasoline sales in the US really aren't ****.

Which is something I love. People take a product that they think is so critical, and in the end it really isn't except in the fact that the government has ****ed the market to the point that something which should be fairly easy to come by, isn't. And almost no one is willing to look at any other industry providing something just as critical, food or computers for example, and take a look to see why they're working so well and the oil and gas industry is such a cluster ****.

CDB, gas prices didn't start to skyrocket until it was put on the commodities market. Before that it was less than a dollar a gallon.

Seriously, you're living in a friggin dream world. Your ideas are nothing more than utopian nonsense. You're ideas are just as unworkable and pointless as Karl Marx's. They look absolutely wonderful on paper. They sound tremendous and you can argue till you are blue in the face until you see it in reality.


I can't really argue too much against you because you are arguing the point of a theoretical economic condition. I can only pick out close examples of unrestricted capitalism which you of course go on to claim are restricted.


Let me ask you, how exactly were coal mining companies restricted at the turn of the century? Did the government restrict them? NO. The government didn't do jack ****. The government couldn't care less. In fact, the government didn't step in until the mining company's employees started fighting back against the company with force and forming unions. Those companies weren't taxed in any way, and they didn't have to abide by any laws whatsoever. They in fact made their own laws in the mining towns they owned. Really, coal mining industry at the turn of the century is the closest I can think of when it comes to totally unrestricted capitalism. And that is what you'll get if your "dream" were to ever come true. Corporations OWNING you, me, and everyone else. Determining whether we live or die, and deciding how we'll live. Basically the exact same situation as socialism only instead of it being a country it will be a corporation. Same ****, different name.


Autonomous nations are a logical extension of the what corporations become as an end result of purely unrestricted capitalism.

Null - it was 85 cents per gallon in the late '90's when the price of oil plummeted to below $10 a barrell due to the Asian economy collapse.

Try again.