I guess somebody should have the decency to state that the gasoline is the property of the gas companies, and they should remain at liberty to charge whatever they want for a gallon – $5, $10, $50, $1000….whatever.
We have no right to their product. We have no obligation to buy it. Somewhere between lies a price point that balances our sense of value with their desire for profitable reward.
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What O’Reilly doesn’t seem to get is that crude costs are only PART of the price of gasoline, and refining and transport costs and taxes don’t depend on the price of crude.
So if, for example, the crude used to make gasoline cost $3/gallon, and refining/transport/taxes/profits cost $1/gallon, gasoline would cost $4/gallon.
If crude prices dropped to $2/gallon, gasoline would cost $3/gallon.
In this example, crude costs would have dropped 33%, and gasoline costs would have dropped only 25%, and oil company profits would be unchanged.
A percent change is a fraction, and in any fraction, a bigger denominator makes the fraction smaller. But that’s too complicated and not pithy enough for O’Reilly.
Throw in two hurricanes that shut down lots of refineries, and that’s REALLY too complicated for O’Reilly. But Cavuto gets it, and maybe should get O’Reilly’s job.
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Oil companies didn’t raise prices to $7/gal because they don’t set the price at the pump…gas stations do. The price you pay at the pump is a reflection of the total costs in the gasoline supply chain (crude oil producers, refiners, wholesalers, taxes, etc) + the gas station owner’s take.
businesses charge what the market will bear. There is no “they”, because “they” is everyone. There is only the DEMAND of the market and the SUPPLY of the producers. You can’t have one without the other, nor can you separate one from the other – any change in either affects the price. If oil producers want to affect the price of gasoline, they can either raise or lower their production. If consumers want to affect the price of gasoline, they can either raise or lower their consumption. But either way, both have to dance. (…)
when oil crossed $140, those selling oil futures were finding fewer buyers who were willing to buy oil contracts at that price. IOW, buyers began to get very nervous about whether the price would continue rising – if it didn’t and started to fall, they wouldn’t be able to make a profit and would have to sell their contracts at a loss. So purchasing slows. Then stops. Then someone with those $140 contracts says, “OK, I want out of this. I’ll sell for $139 and cut my losses”…and prices begin the march back down.
you’re assigning moral attributes to an amoral system. There is no “right” or “wrong” in a free market – there is only the market and what the market will bear. “A little greed” and “Unrestrained greed” are relative terms, that will mean different things to different people according to their own moral views.
See also Thomas Sowell, “Defining Gasoline Price Gouging”:
What all this boils down to is that prices higher than what observers are used to are called “gouging.” In other words, prices under normal conditions are supposed to prevail under abnormal conditions. This completely misunderstands the role of prices.
