Soaring Gas Prices

So... theoretically speaking if a company took as signficant hit to its manufacturing base one would think it would be in for financial hard times. One might indeed think that but if one were to think that is the case which faced the Oil companies last year one would be gravely mistaken. In last years 4th quarter, which featured one of Mother Natures most spectacular temper tantrums (Katrina), which was responsible for impacting gulf oil production capacity by a 1/3rd. Exxon Mobile posted some 9 Billion dollars of profit. The Oil companies as a whole last year posted some 110 billion dollars in profit despite the worst Hurricane record on season.

Now something is wrong here. Profits are not a bad thing, far from it. But profits like this in the face of the current turmoil of the US is beyond wrong. It enters into the realm of profiteering. So of course lots of folks are out for blood and demanding the oil comapnies take a hit for these profits. The thing that sucks ? Who the hell do you think is going to end up paying for those penalties ? Thats right... Us! The poor schleps that have to tank up every week to go to work. Oh the irony. Folks I hate to say it but the solution here are not penalties to the oil companies. The solution is tieing the price of a gallon of gas to a reasonable level of profit. IE a Gallon costs X amount to produce there for costs X + Y at the pump. Supply and demand is all good and well but sometimes protective measures must be taken. For example in pure supply and demand it is perfectly reasonable to jack the price of plywood up into the stratosphere when a hurricane threatens a coastal area. Yet the practice is rightfully limited by law to make sure that folks can purchase a necessity at a fair price in a time of need.

Oil is a necessity of modern life. If demand outstrips supply then a better solution than supply and demand market forces would be to ration. Pure market forces in the face of a shortage of a necessity cannot be left to simple supply and demand else you will wind up wtih oil companies gouging oil prices because folks have to buy it.

The really dumb thing about all this? Current oil supplies are not short. The market has pushed the price up based on POSSIBLE shortages due to POTENTIAL military actions. Prices of a necessity should not rise at the pump because something may or may not happen. Prices should rise for tangible reasons. You notice that nobody really bitched about the rise in oil prices due to Katrina because they understood oil manufacturing took a hit. But the current increase is due to unease over a possible Iranian invasion. Nothing has affected the production levels or the cost of production or shipping or ability to refine. Instead there is the potential for such problems and because the potential exists the price has risen and we are paying through the nose just like we would if it were real.

Hence the fact people are PISSED. We are paying high prices not because something happend to cause them but because something might happen. That is something which rightfully should be curtailed.