everyone hates gas prices

October 29, 2005

A few weeks ago I filled up the tank in my Jeep to the tune of some $55. That was at $3.29 a gallon here in Metro-Detroit. This was the day after Katrina had struck, and my father who had talked to someone “in the know” reported that they were anticipating prices over $4 by the weekend. Everyone was saying this, on the news, on the radio, at the water-cooler… So I gassed up at $3.29 a gallon, and since then, gas prices have been falling, yesterday, I filled up on my way to class t $2.39 a gallon. That’s a 27% decrease in the price of gas in just a few weeks. Did Big Oil suddenly decide that they had enough profit, that they didn’t need more money?

Cafe Hayek has a nice piece re: falling gas prices. I take particular exception to this quote, “Exxon is a good corporate citizen but it does not work for the welfare of the country,” said oil analyst Fadel Gheit at Oppenheimer & Co. in New York. And, somehow we are to assume that providing the country with oil doesn’t serve the general welfare of the nation? For serious?

Exxon Mobil provides the nation with refined crude oil, in all of its various forms. I shudder to think where we would be without “profiteering corporations” like ExxonMobil. Today, at the newsstand, the headline of USA Today was something about a 75% increas in profits for Big Oil last quarter. And so what? Raw numbers like that are inflammatory, political devices, and utterly meaningless without the context of margins. David Masten at Catallarchy does a better job examining this than I can do here. Basically, ExxonMobil’s marginal profits are not anything to shake a stick at, maybe 9.25%. GE reported profits of 11%, Citigroup was over 15%, Pfizer reported over 21% and P&G was 12.61. Who’s clamoring for a “windfall profit” tax on the mortgage industry? or Big Pharma?

Despite the booms & busts of a cyclical oil industry, the government revenue from Gas Taxes has steadily increased since 1977, and - over that time period, the gas tax has loaded government coffers with more than twice as much than the net profit of the entire oil indusry. You can check my sources here if you’d like. Here is the graph:

this genius has the audacity to claim there are no such thing as “basic economic principles.” This is not even worthy of response, but i got a kick out of it. And this mental midget makes contradictory claims: that the supply/demand function wasn’t working, and proceeds to explain how consumer fears of shortages/supply shock caused a spike in demand. If that isn’t a textbook example of the supply/demand relation… To claim that the supply/demand isn’t working in a market-based economy, is admitting to economic ignorance. What he means is: I’m displeased with the current state of affairs, someone should do something about it. Who? blank out.

Maybe we should try out some form of price controls?

If you doubt me, take this quiz

and for the statistically gifted, a detailed paper re: gas price volatility, although it’s a little to mathematically oriented for my liking.


Posted in: Potpourri

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