"Obscene" Oil Company Profits
If you know much about economics, you know that the state of Economic Education in our nation's schools is deplorable. Because of this, many people who think they understand the subject of economics are, in fact, economically illiterate. Some of these people should know better, but instead choose to wallow in their ignorance. One such person is Dick "Turban" Durbin, Democratic Senator from the state of Illinois.
If you did not see it, I recommend that you read this transcript of Neil Cavuto's interview with Senator "Turban" on April 27. (As I am not clear as to copyright laws and what I'm able to excerpt here on my blog, you'll have to read it in order to know what I'm writing about.)
Neil begins the interview with simple softball questions about who is to blame for high gas prices and what party has done what about high gas prices. Then Neil attempts to get at one of the stealth causes of those gas prices, taxes. But it seems that Senator "Turban" just can't wait to get to his sound bite about ExxonMobil's record profit. And Senator "Turban" can't wait to avoid more questions when Neil points out that average profits account for about 9 cents of the price of a gallon of gas while Federal Taxes account for about 50 cents of that price.
But, to the point of this post, Senator "Turban" makes this breathtaking statement during the course of the interview:
There's no correlation between the increase in the price of a barrel of oil and what we are paying at the pump.Ladies and gentlemen, I give you an epitome of economic illiteracy. This man, who should certainly know better by this time in his life, cannot seem to understand that oil is bought and sold in a market. He seems to not understand that neither ExxonMobil nor any other oil company can set the price of a barrel of oil in this market. He seems to not understand that oil is purchased from other companies, and that these suppliers—not the purchasers—set the sales price. Moreover, he seems to not understand that this price is set by the suppliers based on the demand for oil in the market, and that in the last few years India and China have begun to demand a lot more oil.
How sad for Senator "Turban" and for other economic illiterates like him who cannot comprehend these simple market principles. For a much more educated and in-depth discussion of this subject, I recommend this article by Tom Lehman at the Ludwig von Mises Institute.
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7 comments:
Great points. Thank the Lord, I was motivated by the time Texas got around to teaching me economics. It's not the easiest course in high school--but at least it wasn't so watered-down as to be irrelevant.
Isn't the tax thing about 25 cents per gallon federal and up to another 25+ in various states?
I'll read the Mises thing. In person one day, you'll have to give me your gloss on the institute.... I know a disciple for whom it is a religion, so any insight would be welcome.
One more thing--what's the third flag in the margin? Are you a member of some secret society, Mr. Lightbulb?
The third flag is the flag of the City of Houston.
At least you aren't paying $4 a gallon like I am in NZ. ANd it's way worse in the UK- close to $8 a gallon.
But you're right about the ignorance of certain polical figures...
Just so long as everyone remembers how much of that price is taxes. (You never hear politicians offering to give citizens relief by cutting the gasoline tax, you know? Wonder why not?)
It's an interesting point--liberals want to tax gasoline not so much to fill the coffers (supposedly) as to discourage driving and somehow save the environment. How do you spell Cockamamie?
the Dems are doing exactly that right now, Steven. They want to propose a 60 day reduction (read switcheroo- the tax would then be imposed on the oil companies- who would likely pass it on to us anyway) to relieve the burden. That would never work though. The Mises report summarized this point brilliantly (no pun intended, Mr Light Bulb).
I dug my Christmas-gift books out of the closet the other day (M's party now concluded) and began reading HOW CAPITALISM SAVED AMERICA (or the US), by DeLorenzo. It looks like an incredible book, and the author dedicates it to none other than Ludwig von Mises.
Thoughts?
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