"Nothing is easier than to blame high prices on whoever charges those high prices, regardless of what the underlying cause is. It doesn't matter whether you are talking about Big Oil or little stores in poor, high-crime neighborhoods that charge higher prices growing out of the economic consequences of poverty and crime.
In these and other cases, the economics behind the high prices is of far less interest politically than denouncing the sellers for "greed," "exploitation," "gouging" and the whole political vocabulary of undefined rhetoric and unsubstantiated notions.Much is made of the fact that gasoline prices go up before the higher priced oil is turned into gasoline. What something cost is history, what it is worth now is economics."
"Prices need to ration all oil according to existing supply and demand. At the same time, prices need to provide incentives to produce more oil or less oil, according to the same supply and demand conditions.
"Windfall" profits and windfall losses are all part of the same adjustment process. If politicians seize the windfall profits and leave windfall losses alone, what that means over a cycle of years is that the average rate of return on oil production falls below what is needed to attract the investments that greater oil exploration and production require."
2006-04-28
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4 comments:
Bullshit. ExxonMobil's record profits are being drained from my wallet and oil prices are being manipulated by the oil companies and the oil-soaked pirates in the Bush administration.
Who else is to blame? God? Saddam Hussein? Osama Bin Laden? Martha Stewart?
Bullshit, I say.
Nadir: If you eliminated Exxon's profits, you would eliminate about 10 cents for every gallon. And you'd reduce supply, because you'd have eliminated incentive. If you cut Exxon's profits by half, you'll save consumers a nickel for every gallong, but cut supplies by approximatly half the damaged caused by eliminating all profits.
Nadir: The profits of oil companies, in addition to increasing supply, also stuff the pockets of Americans who have retirement accounts.
Reading through these observations by Thomas Sowell remind me of what a clear-thinking, rational person he is; a genius, one of the primary thinkers who transformed me from a Leftist into a Reformed Leftist.
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