Gas Price Hysteria

With all of the gnashing of teeth about how much money the oil companies are making, and all the screams that it must be price gouging; I decided to put my googling skills to work and see what the Political Truth is.

Several things had occurred to me about the topic, including that the government is collecting more from the gasoline sales than the profits the oil companies are making.  Another aspect is that a company is expected to make profit.  They don’t go into business for the purpose of charity.  It shouldn’t be anybody’s business how much money a company makes.  It most certainly shouldn’t be restricted by the government.  If I run a business and customers are willing to pay my prices, that is a free market doing what it does best.  If the customer isn’t willing to pay the price, I won’t be able to make a living and I will either adjust my prices or go out of business.  It’s capitalism working the way it’s intended.

I was pretty sure that oil company profits were not out of line with any other market or company, so that was another thing I searched for.  Most reports show about 13% profit.  Just think about it: you have a product of which huge numbers are sold.  So, simply reporting the total profits doesn’t tell us anything. 

To make things worse, the media — and the sundry other scoundrels who try to attack the oil companies — will often report the profits in multi-year terms rather than in single year terms.Why?  Well… it gives you the impression that those evil oil companies are so far out of line with the rest of the world,  that they are breaking the back of the little guy and doing it purposefully with only the bottom line as their inspiration.

What happens when we apply the same standards to other companies?  In fact, why don’t we?  Why don’t we, for instance, see screams that Wal-Mart is “price gouging” when they make $11 billion profit in one year?  If it’s a big deal and some great evil at work when an oil company merger increases that company’s profits by roughly 30 percent, then why isn’t it a big deal and some great evil at work when Wal-Mart increases their profit by 26%?  Why don’t we scream that Amazon.com is price gouging when they record $350 million profit on $8 billion in revenue with a 23% increase in one year?

In reality, the oil company profits are not out of line, the government makes more profit than the companies themselves do, and the media are largely a dishonest pack of hyenas that will use any means they can to increase their **own** bottom line at your expense.

A couple of things I found while googling:

http://www.newsmax.com/archives/ic/2006/4/26/90121.shtml

 http://taxprof.typepad.com/taxprof_blog/2005/10/gas_taxes_excee.html