Mystery of Prices (Solved by Reading!)

Would this plan (boycotting Exxon and Mobile) be easier than all of us reading a basic economics textbook, say, "Basic Economimcs", by Standford economist Thomas Sowell, or "Free to Choose", by Nobel economist Milton Friedman? Or maybe just a few weekly columns by George Mason economist Walter Williams.

An understanding of economics won't bring down petro prices; but neither will this boycott plan. However, an undestanding of basic economics will enable interested people to understand how prices work (including why any price has its value on any given day) and to understand why the proposed boycott won't work.

(Hint: If our demand shifts from Exxon-Mobile to its competitors, you are correct that Exxon-Mobile's prices will drop. But what will happen to the prices at its competetors? Read an economics textbook this summer to find out!)

Don't worry, friends; I used to be conspiracy theorizing leftist, too. Oh, back when I thought that "the government" could "control prices". How righteous and cocksure I was. Those were the days!

For those angry about the profits earned by these evil petro companies, you might find some succor in a few FACTS:

- The PROFIT MARGIN of petro has not increased. The evil oil companies make the same profit per dollar as they always have, about 8 cents per gallon. However, thanks to newly freed markets in China and India, people there instead of starving and begging for international handouts, are now consuming and producing goods and services, which requires and includes purchasing petro. Your summer economics reading will reveal the shocking result of INCREASED DEMAND. By how much would you like the petro companies to cut their profits? If you'd like zero profits (that'll show those evil petro barrons!), that'll bring down a $3 gallon down to just $2.76. But that's still too high, isn't it? Worse, according to your economics textbook, something you'll really hate results from LOWERED PROFITS (hint: keep your eco text in your car, as you'll need something to do while waiting in the gas lines).

- Your government makes several times more in taxes than the wicked petro companies do in profits on each dollar that you spend at the pump, between 40 and 60 cents per gallon go to taxes; yes, 60 cents in New York state! Lowering those taxes can cut your $3 gallon down to $1.50. Now we're getting somewhere. Your textbook will have something amazing to say about what happens when you cut taxes on over-taxed elements of the economy. Shockingly, reducing tax rates on over-taxed elements results in INCREASE of tax revenues! How about organizing to reduce the taxation of petro?

- Do you imagine that the evil oil companies are any more powerful than the other evil companies, such as WalMart, Merk, Microsoft, Dell, Disney, etc.? These companies are all hurt by high petro prices, and benefit from low petro prices. To the extent that petro prices result from the evil, behind-the-curtain machinations of wicked, greedy corporations, do you imagine that the evil non-petro companies have worked to minimize the cost of petro?

- Maybe you'd like to regulate petro prices, or impose price controls. Your eco textbook will explain what happens in such a case, and will use famous examples of implementing such a notion in the 1970s; you can read about this while burning gas waiting in the petro line.

After reading an economics book, perhaps a history of Cuba. Those evil, profiteering petro companies aren't "exploiting" "the Cuban people", no siree! Good luck purchasing petro there, though.

Free People = Free Markets Free Markets = Free People

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