Gas Prices Are Down So How Is Exxon Gouging?

When gas prices were at all time highs (for the US) and Exxon made 11 billion dollars in profit we were inundated with complaints of price gouging. Democrats in Congress rode two blocks in gas guzzling cars to a gas station, got out leaving the cars running to stay cool and went before the cameras to tell us how evil the oil companies are. We were exposed to these horrible stories of price gouging and calls for Congressional investigations as well as, guess what, taxes. Yes, there were some in Congress who wanted to slap windfall profit taxes on the oil companies.

Fast forward to now and gas prices are down. The hurricane season has been mild, or George Bush has not conjured up any like he did Katrina. The consumption of gasoline is down and the price of oil is falling. Welcome to Economics 101. Supply and demand is what regulates a market and its prices. Now though, we have a real conundrum and that is, Exxon has made a 10 billion third quarter profit and the price of gasoline is down. I paid $2.13 today and in some places I have seen it around $2.09. These prices are down and yet Exxon still made billions in profit. How can it be? They must still be gouging us.

Amazingly, we do not have politicians out in front of gas stations crying foul over these newest profit numbers. They would have a hard time convincing people they were being gouged on two dollar a gallon gas. So, the political opportunity is not there. The question still remains though and that is, how did Exxon make so much money if they are not gouging poor Joe six pack?

Perhaps it is because Exxon sells a lot of petroleum products that are not gas, on which it makes little profit. Perhaps it is because they are a strong company and have world wide entities. Whatever the reason, they are not gouging us and they were not gouging us when gas was over three dollars a gallon. If we had gone with the windfall taxes we would have forced the company to pay more money that it should and costs would have been passed on to consumers. If we had tried many of the other hair brained schemes that were proposed we would have artificially lowered the price without a commensurate increase in supply. People would have used more and depleted an already shallow supply.

Thank goodness that cooler heads prevailed and we are now able to pay lower prices. The time tested principles of economics work well when government does not interfere.

Source: My Way News



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