There’s been a lot of talk recently about the rising gas prices and many people look to the local and federal governments to help as many people believe the oil companies are engaging in price gouging.
It is one thing to be unhappy with the current prices of gas, but to seek legal action to keep gas cheap is wrong. What right does anyone or any government have to be involved in the pricing structure of gas? They didn’t drill it, refine it and distribute it?
I know my view is most likely a minority view… but for me it’s a matter of principle. Growing up I was taught to respect others and to be honest. Honesty and respect for others includes not stealing from others. By telling an individual or company what they can charge for a product or service is stealing. If someone goes into a store and tells the store clerk, selects a stereo they like for $200, pulls out a gun and tells the clerk, you will give this stereo to me for $100, isn’t that theft? We simply don’t have a right to cheap gas.
Besides, as always, any government intervention will just increase the cost as any tax or regulation of anything usually results in an increased cost to the end consumer in some form of taxes or is passed on by the business to the consumer. The goals of government regulation are rarely, if ever, achieved.
If government wanted to do something to help, they could stop increasing taxes on gas and decrease regulation… allow more refineries to open to increase supply. If there was ample supply of gas, prices would indeed go down… and most of all the government could stop giving out corporate welfare benefits to the oil companies and providing them protected markets… allow more competition.
Another point I will make is when you here about the supposed “obscene profits” being made by oil companies… the facts are being exaggerated. When compared to other companies, ExxonMobil‘s profits are not so hot for everything they put up with. I compared their stock performance over the last 5 years to many different companies and most companies actually perform better or much better and have far less debt than ExxonMobil. ExxonMobil’s stock performance is 40% over 5 years. A few comparisons are below…
Nathan’s Famous Hot Dogs:
Stock Performance: 300% over 5 years.
Stock Performance: 40% over 5 years.
Green Mountain Coffee Roasters:
Stock Performance: 90% over 5 years
The performance of Pepsico is similar to ExxonMobil and Nathan’s blows them away in stock performance. Their profit margins are also better, and since I don’t see any protests about the pricing of Pepsi’s bottle water, soda and snacks or nathan’s hotdogs, this suggests that consumers value these more than gasoline. Surely gasoline a miracle substance that allows us to travel anywhere, get to work, see friends and family is more valuable than sugar, salt, water and wheat?
Full Disclosure: Jeremy Ryan is a shareholder in both Pepsico and Nathan’s Famous and operates PepsiCollectables.com. Jeremy does not plan to invest in ExxonMobil.
April 25, 2006 @ 12:00 am
Interesting to see the parallels of Green Mountain Coffee Roasters & Exxon Mobil 🙂
Now, what I’d personally like to see is if everyone only took that same opinion that they have about gas prices increasing, and applying it to taxes that the government imposes. 😉
April 25, 2006 @ 12:00 am
Comparing stock price increase percentages serves to prove nothing to your argument: “ExxonMobil’s profits are not so hot for everything they put up with”.
Stock prices do not reflect profits. If they did, then XM Satellite Radio – which had to borrow a quarter of a trillion dollars just to get out of the starting gate – would not have a stock price today of $22.23 (or a 133% increase over 5 years ago). To this day, they remain riddled with debt. In short, stock prices certainly have profits as one of their factors, but there is a whole lot more involved than profits to justify your nifty charts and argument.
ExxonMobil indeed makes obscene profits on the backs on American consumers. This is no exaggeration. They are the same company who, for 2005, achieved the highest profits of any corporation in history: $36 billion. In one year! In profits only (that’s above and beyond operating costs)! Furthermore, ExxonMobil’s CEO received from his handpicked board finance committee a $400 million retirement package.
On another of your arguments, you think government regulation is keeping oil companies from opening new refineries (as implied above)? Think again. Fact is, oil companies don’t want new refineries. Why? Market instability. By investing $5 billion in a new refinery, they need to put their long-term hopes for return-on-investment (ROI) at the whims of OPEC, U.S. tensions with Venezuela, automakers diminishing fascination with low-gas-mileage vehicles, and so on. Ironic to think that market forces are what is keeping more refineries from being built, eh?
But to your larger argument about price gouging, it’s a tricky endeavor to regulate pricing structures. The only reason there is talk to regulate it is because profiteering negatively impacts the economy. The only feasible way to do it is implement price controls (such as Canada does with pharmaceuticals). So it all comes down to choice: do we allow the oil companies to stymie the economy so that their CEO’s can retire in filthy luxury? Or do we risk slimmer profits and angry stockholders by regulating the industry and therefore boosting our economy?
April 27, 2006 @ 12:00 am
“Stock prices do not reflect profits.”