Price Gougers One and All
Steve Verdon
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Monday, May 1, 2006
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17 comments
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.
The cartoon makes a bad comparison. The single employee has little control over what a company will pay. She can only negotiate between existing limits set by the company. Whereas the oil companies have been exercising great control over gas prices. The prices are up and the profits are up. To make a better comparison, we criticize the unions for forcing employers to pay more. Why not criticize the oil corps?
‘The cartoon makes a bad comparison. The single employee has little control over what a company will pay. She can only negotiate between existing limits set by the company. ‘
Uhhhh….no. She can go work somewhere else.
This is your best evidence of a cartel? Are you kidding or what?
Gas companies make 9-10 cents a gallon. Government makes 40-50 cents a gallon. Its the gas companies who should be holding hearings.
RA,
Right. Obviously oil companies are getting screwed. That explain why the CEO of Exxon was getting 100k + a DAY in salary, not to mention a benifit package that most workers could not even fantasize about.
anjin-san:
The pay scale of the CEO is certainly not a clue as to whether price gouging is happening, especially since that giant bonus the head of Exxon got breaks down to about three cents per American per day, while the overall profits of Exxon put them righht in the middle of the pack for non-gouging companies…
Hey, anjin-san jap man, if you hate it here so much, why don’t you go back to the pacific islands whence you came? Hmmm…???
That’s a helluvan assumption there, IC. I’d be willing to lay down cash that at least 80% of the US workforce can’t just ‘pick up’ and go work somewhere else in a reasonable timeframe (less than a month) and for a reasonable salary (within 10-15% of what they’re making now).
If I don’t want to pay ‘current market value’ (ha!) for gas, though, I’ve got damn few options available…
anjin-san,
So if we take away the CEO’s retirement package, and perhaps pass a law limiting his pay to $500,000 a year, that will magically lower the price of gasoline and everyone will be happy?
Steve:
Your putting this cartoon up is BS and you know it.
Walt Disney sure wouldn’t have published something as stupid as this.
It is so simple, When a company controls supply, They control price because they can, that’s why over 80 % of the American agree that they are getting gouged by the oil companies. (according to a poll taken and reported on TV news)
Answer this:
The drug Companies , who also rip the people off, at least have assistance programs that offer free medications to those who can not afford them.
Thing you will ever see an oil company do something like that???
Herb, how do you believe the “oil companies” control the supply of oil when OPEC controls the means of production of the majority of the world’s crude oil, and the price the oil companys must pay for that oil is set on a freely traded spot market?
Just wonderin’.
Vnjagvet:
Yup, OPEC controls all the production here in the USA, RIGHTTT.
Then tell me why WTI Crude is at the same price as the spot market.
And who controls the gasoline production here in the US.
I have heard reports on TV News that oil supply in the US is in good shape, Do you know what the oil supply is from OPEC to the US.
The price of crude is a speculation price based on what the Gamblers,(speculators) think the supply will be way down the road and they are telling everyone that it is “Because of the Iranian Situation”
And, when I speak of supply, I mean gasoline supply and the oil companies completely control that. Get smart.
80% of Americans think they’re getting gouged because 80% of Americans slept through (or didn’t take) economics. 80% of Americans are fairly economically retarded when it comes to stuff beyond balancing a checkbook. OPEC may be a cartel, but it’s not where the majority of our oil is coming from, and when people talk about price gouging, they’re talking about individual gas stations, or the oil companies that own them (which are often one and the same). The economics don’t back that up. The government makes more money on a gallon of gas than the gas station and the oil company combined. By a lot.
People cry “price gouging” because they’re paying a high price at the pump. They just see $3.50 a gallon and assume that gas stations are making a killing. A high price does not “price gouging” make. Neither does charging the most that people will pay. Charging a price that maximizes your revenue (and thus, profit) isn’t gouging, that’s capitalism. Gas stations are not free to do this. If the Mobile station in your town raised prices to $6.00 a gallon, what would Citgo do? They’d keep prices the same, and they’d get all the town’s business. 80% of Americans don’t understand that… they seem to think that there is some sort of “me too” effect. It doesn’t stand up to reason.
Oh, and California is exempted from everything I’ve said above, because they’ve all but killed competition between gas stations and oil companies in that state.
‘Thatâ??s a helluvan assumption there’
No it’s not an assumption, it’s how the employment market works.
Mark Jaquith:
Well, pardon the living hell out of me, I didn’t realize that you were an economics GURU and 80% of the American people are just plain stupid.
Now Mark, let me tell you just how stupid you are. Most everyone American knows when he’s getting gouged by someone. When people like you support such gouging practices, you are part of the problem and are just as guilty of cheating the American people as those who engage in the practice of gouging. Big Companies have been putting it to the American consumer since time began and most people recognize it. They usually take corrective action and don’t purchase their products thereby hurting the big company financially. That usually puts them back on a straight course.
With Big oil, where should the consumer go. shall he go to another source to make his purchase, Where? Big oil has everyone by the you know what and they know it. They control the gasoline supply and the price and if you are just to dumb to realize that, then you should keep you supportive words to yourself and start supporting the American people instead. Guys like you, who think they are so damn smart make me sick. I have dealt with guys like you many many times in my lifetime and have always been able to beat them at their own “high Intellect” game by using something that you totally lack
COMMON SENCE
At one time? But how likely is that too happen? Your 80% is also one helluvan assumption.
Really? You can’t carpool to work? You can’t take the bus? You can’t change your driving habits on the weekends to use less gasoline? There is nothing you can’t do?
This is quite simply false. Even a pure monopolist doesn’t have 100% over the price in that the price is also dependent on demand. This can be seen in CA during the electricity crisis where the demand component was missing.
Further, how much production does Exxon have? 2.5 million BPD? How much is world production? 85 million BPD. Yep, that sure is some good data.
Oh…I forgot you don’t look at data Herb, you just go with your feelings.
No they don’t they charge the price that people are willing to pay. That the price is high does not necessarily mean they are ripping people off.
Frankly I think programs to help people buy medication are part of the reason why health care spending is skyrocketing. I’d be quite willing to kill the existing programs dead.
As for the gov making more on a gallon of gas than Exxon, when is the last time Exxon filled a pothole in your neighborhood or defended your constitutional rights? ( I know, when is the last time the gov did that also, well at least they are charged with that, Exxon is not ) So that argument is lame. In a recent interview of an Oil Co Executive he was asked if he thought that it had anything to do with the fact that 5 years ago there were 11 major oil companies but through mergers and acquisitions there are only 5 now, he responded no, he thought it was more a matter of supply and demand. Hmmm, seems like his answer contradicted itself, of course the interviewer went on happily about his business with the next question. Supply and demand?? I don’t see any gas stations out of gas, but I have seen many gas stations over the last 5 years just closed down. Now they are used car lots or something. I think to myself, how can you not make money selling gas?? As for profits, the only way they can rise 27 percent if is you sell that much more product plus an amount to cover the additional production cost or raise your margins. I don’t think they are selling 30% more gas last year than in 2004. Still only cost 20$ a barrel at the wellhead. Some say that it is speculation that is causing the high prices, I suspect that the Oil companies themselves are involved in this speculation.
I guess it could boil down to the people arguing in favor of these kinda of profits are either profiting from them or hoping to. The rest of us can’t believe this much wealth is being sucked up by so few. (the “gatesfactor” or “walmartsyndrom”)