[QUOTE=treis]
Ok… You got an example of price gouging for us as a comparison?
[/QUOTE]
Sign of the mentally challenged: not only does he vehemently denounce your position, but he petulantly demands that you spoon feed him facts so he can defend his own position.
Why don’t you go chew on some wooden blocks in the nursery, treis?
Again, go fuck yourself. Just because you think you are right doesn’t make it so. Nor does it give you the right to act like a self righteous dick.
[QUOTE=treis]
Ok… You got an example of price gouging for us as a comparison?
[/QUOTE]
No, I don’t. Price gouging is nothing more than code for “the big meanies want too much money, it’s so unfair!” It is nothing more than an emotional response to a perceived injustice.
Since I am on the poor side of the spectrum, I could reasonably assert that everybody is price gouging on everything because it requires me to expend a higher fraction of my income than you have to.
“Fairness” is a myth. For all intents and purposes, it doesn’t exist. If it did I’d be driving an M5 sipping on my $10 premium coffee and listening to my 80G iPod. Of course, I can’t afford any of that, so I must be getting cheated.
See, this is how it actually works: the market responds to a shortage by raising prices, thus reducing demand. In theory, this is supposed to allow the resources to be more efficiently allocated. In other words, the putz that drives the SUV has to either reduce their driving or pay out the nose for the privilege. If they reduce their driving, the fuel is reallocated elsewhere where it is more efficiently put to use. The problem is that the putz in the SUV doesn’t want to reduce his driving, so he claims that he’s being cheated based upon what he feels because he can’t be troubled to look at the numbers. Thus we have the completely unprovable assertion of price gouging and unenforceable feel-good legislation to attempt to defy reality, because we want it to work, we want cheap gas.
Well, I don’t know how to tell you this, but those days are over. In fact, just the other day I saw an assertion by an economist that there is the distinct possibility that gas will achieve the lofty price of $12 a gallon by 2012. I can’t wait to see what you say then.
[QUOTE=Airman Doors, USAF]
No, I don’t. Price gouging is nothing more than code for “the big meanies want too much money, it’s so unfair!” It is nothing more than an emotional response to a perceived injustice.
[/quote]
This thread is odd given your opinion that there is no such thing a price gouging. Why single it out to oil companies, instead of simply going after the phrase.
[QUOTE=Airman Doors, USAF]
Since I am on the poor side of the spectrum, I could reasonably assert that everybody is price gouging on everything because it requires me to expend a higher fraction of my income than you have to.
[/quote]
That’s not anything close to price gouging.
[QUOTE=Airman Doors, USAF]
See, this is how it actually works: the market responds to a shortage by raising prices, thus reducing demand. In theory, this is supposed to allow the resources to be more efficiently allocated. In other words, the putz that drives the SUV has to either reduce their driving or pay out the nose for the privilege. If they reduce their driving, the fuel is reallocated elsewhere where it is more efficiently put to use. The problem is that the putz in the SUV doesn’t want to reduce his driving, so he claims that he’s being cheated based upon what he feels because he can’t be troubled to look at the numbers. Thus we have the completely unprovable assertion of price gouging and unenforceable feel-good legislation to attempt to defy reality, because we want it to work, we want cheap gas.
Well, I don’t know how to tell you this, but those days are over. In fact, just the other day I saw an assertion by an economist that there is the distinct possibility that gas will achieve the lofty price of $12 a gallon by 2012. I can’t wait to see what you say then.
[/QUOTE]
In general rising commodity prices cut into the margins and profits of companies. If coffee goes way up in price, Starbucks doesn’t double their profits. They get their margins squeezed, and profits go down. It’s the same for bakers, restaurants, and everyone else that is subjected to rising material cost. The situation of the oil companies is reversed simply because they have us by the balls. To a lot of people increasing your profit because people have (essentially) no other choice is price gouging. Doesn’t make them pinheads.
People will piss and moan about the profit margin Exxon makes on their $3 a gallon gas. They will happily shell out $4 a gallon for their bottled water at the gas station convenience store.
Why is there no outrage at Big Water?
[QUOTE=treis]
(snip)The situation of the oil companies is reversed simply because they have us by the balls. To a lot of people increasing your profit because people have (essentially) no other choice is price gouging. Doesn’t make them pinheads.
[/QUOTE]
Well, in fact it does. They put their balls in the oil companies grip. Did they expect them not to sqeeze? Europeans have been dealing with $6.00 a gallon gasoline prices for years, and guess what? It doesn’t crush their economy, because they live a lifestyle that reduces their use of gasoline. It’s your right not to live that lifestyle, but what you don’t get to do is complain that it costs you more money to live the life you choose.
[QUOTE=Airman Doors, USAF]
As of right now, the price of a barrel of oil is $111.76 per barrel. There are 42 US (never mind Imperial) gallons per barrel. Therefore, before anything else happens, oil costs the oil companies $2.66 per gallon.
[/QUOTE]
I would think that you are ignoring the profits made by the oil companies on the price of a barrel of crude. There’s a reason they are pouring billions into Alberta to develop the tar sands.
[QUOTE=treis]
In general rising commodity prices cut into the margins and profits of companies. If coffee goes way up in price, Starbucks doesn’t double their profits. They get their margins squeezed, and profits go down. It’s the same for bakers, restaurants, and everyone else that is subjected to rising material cost.
[/QUOTE]
I know it’s hopeless to talk to you, treis, but for anyone else reading the thread, I’d reiterate Airman’s point earlier that bakers, restaurants and what-not are a fundamentally different kind of biz providing a price-elastic service or value-added product, not a commodity. There are companies other than the eeeevil oil co’s that do pass along rising costs to the consumer all the time. If the price of coffee or milk goes up, I pay more for coffee or milk at the grocery store.
You might have a baker across the street that you can look at through the nursery window, but not every. single. company. in. the. world. does business the way friendly Mr. Baker does.
You’re being unfair to Treis. I know its the Pit, but it did seem like you wanted to have a rational debate. He is making a perfectly logical argument that you have not yet refuted in this thread. It may yet be false, but you’ve not refuted it.
The oil companies are making record profits, in the absolute sense. Indeed, you concede that the profit is a “windfall” in that it was not the result of anything the oil firms did better than when they weren’t earning record profits. The rationale of a windfall tax is that if we have to raise money somehow, it is better to tax luck than to tax productive work.
Nothing you’ve said about profit margins challenges that idea. As I said only a few posts into the thread, in order to challenge the idea of a windfall tax you have to say something to refute one of two premises: 1) this profit isn’t a windfall or 2) we ought not tax windfalls.
As should be obvious, profit margins are irrelevant as to whether something is a windfall. Do we at least agree on that much?
[QUOTE=Koxinga]
…You might have a baker across the street that you can look at through the nursery window, but not every. single. company. in. the. world. does business the way friendly Mr. Baker does.
[/QUOTE]
For instance, friendly Mr. Baker does not have teams of highly paid lobbyists to present the obvious truths, that free market principles and a minimum of regulation is clearly the best solution to any doughnut production question. And how much money does the kindly Mr. Baker contribute to politicians, politicians who embrace these obvious truths? Has Mr Baker been invited to a secret confab with Darth Cheney? How many lawyers does Mr. Baker employ?
Airman Doors, i’d be interested to a more explicit take on the principle of price gouging.
In the OP, you dispute the notion that the oil companies are price gouging. In support of this opinion, you note that the most profitable oil company shows a net profit of just over 11%. You argue that this profit is not excessive.
Your claim that 11% profit is not excessive seems to imply that there would be some level of profit that you might consider excessive.
But then, in post #103, you make an absolute rejection of the very idea of price gouging, arguing that it’s simply code for calling companies greedy, and that it is simply an emotional response.
I’m interested to know whether you believe that there is, in fact, any such thing as price gouging or excessive profit. If, for argument’s sake, the oil companies decided tomorrow that they were going to set a price for gasoline that would raise their profit level to 25%, or 50%, or 100%, would you have a philosophical objection to any or all of those levels? Would any of these profit levels be excessive, in your opinion? If not, then what was the point of using the 11% figure in support of your OP? After all, if any profit level is reasonable, then there’s no need to defend a company by pointing to how low its profit level is.
If, on the other hand, you would argue that profit above a certain level is excessive, what criteria do you use in making that evaluation? Is it some arbitrary mark based on the companies’ profit levels, or is it tied to the level of hardship inflicted on the end user of gasoline?
I guess, in some ways, i’m asking a variation on treis’s question. If this is, for you, a matter of basic moral and ethical principles, then why focus on one particular industry, and why worry at all about defending them based on their current level of profit?
Not to answer for Airman, but for me it’s not so much a matter of exceeding some allowable profit benchmark but rather how companies attain the profits they do. If Maeglin’s making a correct implication that price zoning = price fixing, then yeah, that’s definitely a problem. Not really necessarily “gouging”, but uncompetitive. I’d be interested to learn more.
ETA to elaborate: In principle, no, there’s no such thing as “excessive” profit per se. But even if we were to get all Scandanavian on their ass and forbid profit margins above a certain level, there would be a lot of non-oil companies in line ahead of Exxon. (29% vs. 11%)
As for elucidator’s points about lobbyists, yeah, that’s distasteful, but you could make much the same points about (say) Vermont dairy farmers or any other organized industry.
I thought it was a good OP, but if I can be excused a couple of pinheaded questions, they’d be along these lines:
ADUSAF appears to have taken it as axiomatic that a certain profit margin is necessary and justified. Why? If the oil companies are maintaining a certain profit margin when rising commodity prices have effectively doubled their turnover for no additional work, why is this OK? Other businesses usually have to take positive steps to increase their turnover. It’s generally as easy to deposit £50k with the bank as £25k, but if you want your coffee shop to do £50k worth of business with a 10% margin where it was formerly doing £25k worth (figures ex ano), it’s your responsibility to make it happen.
The inequity comes in, I suppose, if the oil companies are doing exactly what they were five years ago, but now twice as much of the GNP is ending up in their till - which, I think, may not necessarily be good for the economy, as well as not good for the consumer.
That, as far as I can tell, wasn’t adequately addressed in the OP and it’s a fair question if we don’t bandy around phrases like “price gouging”. IANAEconomist so by all means point out what’s wrong with these objections.
[QUOTE=Koxinga]
…As for elucidator’s points about lobbyists, yeah, that’s distasteful, but you could make much the same points about (say) Vermont dairy farmers or any other organized industry.
[/QUOTE]
Definitely equivalent, in the same way that the Geico Gecko and Godzilla are both reptiles. Outside of a million-to-one ratio of mass and power, that is.
[QUOTE=Euthanasiast]
**Not quite, unless you are including China and India into all of this, as their economic boom in the past ten years is what has driven up demand for oil in the first place. **
America is no longer the only big boy on the block looking to buy massive amounts of fuel.
[/QUOTE]
So if that demand were removed, then the pool of available oil and gas were to go up and our prices would come down , is that a fair assessment ?
Declan
[QUOTE=elucidator]
Definitely equivalent, in the same way that the Geico Gecko and Godzilla are both reptiles. Outside of a million-to-one ratio of mass and power, that is.
[/QUOTE]
But the same set of rules apply to both. If you forbid oil industry lobbying, you’ll have to do the same for other industries. Not only the dairy industry (which is hardly an insignificant little gecko ), but also finance/insurance, health, and communications/electronics, all of which outspend “Big Oil” by a wide margin .
Condemn the whole system if you like–I’ll probably join you. But concede that focusing on the oil industry as some kind of outlier is disingenuous at best.
Has anyone addressed the idea that a lot of the record profits are due to a First-In/First-Out accounting practices? I’m not sure if this is even the case, but I read somewhere that a lot of the profits posted by the Oil companies can be attributed to the fact that, on the books, they are selling oil reserves they bought at last year’s prices for this year’s prices.
I have no verification, which is why I’m asking if anyone here is able to confirm.
[QUOTE=Labrador Deceiver]
Has anyone addressed the idea that a lot of the record profits are due to a First-In/First-Out accounting practices? I’m not sure if this is even the case, but I read somewhere that a lot of the profits posted by the Oil companies can be attributed to the fact that, on the books, they are selling oil reserves they bought at last year’s prices for this year’s prices.
I have no verification, which is why I’m asking if anyone here is able to confirm.
[/QUOTE]
I have heard that too, but can’t remember where…
[QUOTE=phouka]
You know, I’m no huge fan of the oil companies. They irk me.
However, if the price of gas bugs me so much, I figure I should do something in my personal life so that I don’t buy as much gasoline.
Really not that hard to figure out.
[/QUOTE]
OK… so once you’ve stopped driving, will you then stop eating as well? 'Cuz if you weren’t aware, a large percentage of the oil you consume is in the form of food production and transport.
[QUOTE=Airman Doors, USAF]
Want to see a scary number? Check this out:
So, what corporate welfare do they receive? Is it in any way comparable to that? I see that asserted a lot as well, but that’s usually where it ends.
[/QUOTE]
Actually, that Seeking Alpha article is wrong. WAY wrong.
Cite: Exxon Corporations 10-k, published February 28, 2008.
The company had $390 billion in revenue, of which 26% went to pay its taxes and duties. The amount of taxes that the company had to spend dwarfed the amount of profit made by 263% ($2.63 of taxes paid for every $1 in profit).
So while the company made a nice profit for its shareholders, it made FAR MORE money for the various governments in the locations in which it does business. Proponents of the “windfall tax” conveniently ignore the fact (and want their constituents to remain unawares) that Exxon and other oil companies already have over 26% of all revenues going to taxes, a margin more than double that what they make in profit.