You know, the more I listen to Democrats or the media or Jon Sewart or whoever talk about how the president isn't doing anything about gas prices, the more I wonder if anyone in this country actual understands anything about economics.
Lets look at the Democrat's charge that Bush has been ignoring the price of gas. How exactly can President Bush change the cost of gas? Gas is commodity. It is bid on by independent agents in a market. What should Bush do? Set a cap on the price of oil? <sarcasm>Oh there's a good idea. We all saw (ok, read) how well that worked in 70's. I want to massive lines and shortages as a rule when I go to the pump. Yes, lets do that.</sarcasm>
Or how about how every article on the rising price of fuel mentions how much money the oil companies are making? Again, are we as a nation just retarded? This is basic econ 101. Oil companies extract oil from the ground for a fixed price. They then put that oil up for auction (key word here) on the global market. The person who is willing to pay the highest amount gets said oil. If my costs are fixed (more or less) and the price people are willing to pay goes up, I make more money. What part of this is difficult to understand? No one is gaming the system. There is just more demand and less supply. That makes prices rise, especially commodities like oil where reducing consummation in the short term is very difficult.
I'm not happy about the price of gas anymore than the next guy, but that is the world we live in. Don't go blaming the people who are not at fault in this.
5 years ago
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Now oil is a commodity and so you would expect a sudden rise in crude prices to affect the profits that oil companies make.
Why? Oil companies pump oil for a fixed price. Oil prices rise because people are willing to pay more, not because their costs increased and are then passed on. I would agree that gas prices work that way. Don't confuse the two. Gas refining is a value add proposition, so in theory they should basically make the same amount of profit per gallon regardless of price of a barrel of oil (not perfect of course because passing those cost along takes a little time. But because gas is actually sold for delivery in 3 months, its usually very close).
So next up on the agenda is "What should the politicians do about this?"
I'm honestly not sure what they could do, even assuming as you said they wanted to (And to be fair, oil companies are publicily traded. You can buy oil stocks just like the politicians if you like).
What would you have them do?
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