How many times have you heard the phrase that “there is no such thing as a stupid question?” You have probably heard it a hundred times and we generally agree that if someone doesn’t know about a subject the question cannot be stupid. The following comment was posted on a website and while you may allow that the question is not stupid, the person asking is either stupid or lacks intellectual honesty by not doing a little homework before expressing his opinion in the form of questions.
“The price of oil rises and the price of gas goes up the next day [oil/gas is a commodity and prices are based on what it costs to purchase the next amount of that commodity. Gasoline is not tagged and dated like a gallon of milk. Lest you forget that when George W. Bush ended the Executive Order banning offshore drilling on July 14, 2008 the oil prices dropped precipitating a similar drop in gasoline prices.] Wait a minute that gas was sitting in the gas station’s tank [Does he really think that gasoline just sits in their storage tanks for months? Once again the price at the pump generally reflects the cost of the next delivery. Gas prices go up and gas prices go down – though not lately. This person probably does not complain when the station owner looses money when the price drops and he is forced to sell the gasoline “sitting in the gas station’s tank” for less than he paid.] the day before and sitting in an oil company’s storage tank for months before that. [Oil sitting in tanks for months does not make money for the owner and as such is probably not practiced as a business strategy. The oil companies make money by selling the product while storing it costs money. I can see how one might expect that storing low cost oil and selling it when the cost is high might work, but how does one know when it is the time to sell? If it were that easy everybody would be doing it – sort of like dabbling in the stock market] Indeed that high-priced gas we are pumping today was probably taken out of the ground last year at a much lower price. Think about it. We pay inflated prices on oil that was bought last year. [Some industries benefit by entering into long-term contracts specifying the price of fuels as it helps them plan. It is again speculative as prices can go up (to their benefit) or go down (to their detriment), but they need that stability. This “futures” market is often criticized when prices no longer seem to reflect the supply/demand principles, but it is rather silly to again suggest that oil is just sitting around in storage. Time costs money and most companies are looking for way to minimize inventory.]
Using BP as an example (which posted record profits even after the Gulf spill): BP owns the drilling rig, owns the ships, owns the refinery and owns the gas station. When did it buy the oil? From who? It contracts with foreign countries for the right to drill for years ahead. Yes, before the crude gets to the refinery, BP must buy the oil from themselves. [BP is a multi-national corporation that sells petroleum products. They sell a lot of petroleum products and make a lot of money doing it. To suggest that they somehow collude to set market prices is just silly. If they could do it why does the price ever go down? Why isn’t gasoline prices $8.00 per gallon or more? Since they have those powers why not make even more money? Perhaps the amount of money BP makes is only newsworthy when gasoline prices are high. Is there any chance that news outlets pick and choose when to print stories to prey on our misconceptions? There are other oil companies that you could support if you don’t like BP. I don’t’ suggest Citgo unless you favor Hugo Chavez’s desire to see America brought to its knees. I don’t use BP because they contributed lots and lots of money to Obama’s campaign and seemed to benefit from this friendship.]
How do they get away with this? Ask congressmen. And ask them why as this gas crisis has happened something like a dozen times before, they don’t do something about it.” [I am like most people and hate these gasoline prices, but the only thing that I want Congress and Obama to do is getting the hell out of the way of oil companies and let them produce. Increasing supply begets decreasing costs. Perhaps rather than calling their congressmen wanting them to do something we should SCREAM for them to stop doing things like putting oil fields off limits, increasing environmental restrictions, etc. How about asking them why there has not been a new refinery built in the last 50 years? While you’re at it ask why we don’t allow new nuclear power plants to be built making us rely on 30+ year old facilities.]
The questioner didn’t mention another liberal favorite talking point when discussing gasoline prices so I’ll beat him to it. Many in Congress are complaining about “tax breaks” for oil companies. These “tax breaks” are the same breaks available to most industry in the United States. Some include depreciation on equipment and deductions for research and exploration costs. It seems like a new tactic to call “deductions” which most taxpayers understand and like “tax breaks” which have a highly negative connotation. This is very slick wording and very misleading wording. Let’s see them propose to stop tax breaks for big corn, big farm, big everything and see the spit hit the fan.
Is the thinking that cutting into a company’s profits will somehow bring the price down? Perhaps folks should take a look at how much big government takes for every gallon of gasoline sold.
Perhaps Congress should provide a good economics book for each and every family. I would recommend Economics In One Lesson by Henry Hazlitt which is easy to read and full of examples. That would probably cost around a billion dollars, but the ROI would be a more educated population which is, perhaps, what elected officials do not want. A much cheaper program would be to give each elected official, journalist, economics teacher, and community organizer a copy. Oh and there will be a test on the material.