Why Do I Bother- More About Gas Prices

June 17, 2007

I got a comment on my previous post that deserves another post.

Predictably, someone accused me of “not trusting the free market.”

Here’s the comment that was posted:

I don’t even know what party I am in now when I hear Conservatives that do not trust the market.
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I ask this person to go back and read what I just wrote and defend his statement.

I said that I trust the free market- but in the case of oil, the market IS NOT FREE.

Let me put it in the form of a question:

1. True of false: OPEC is an international oil cartel that has the power to lower the oil supply, thereby driving gas prices up when they do.

The correct answer is “true,” last time I checked.

When you have an international entity controlling oil supplies, how is that “free?” What’s “free market about it?” Can anyone explain that?

When the demand goes up, price goes up- that’s fair, and that’s the way the free market works.

But when the demand goes up, and a foreign entity intentionally lowers the supply, is that your idea of the free market?

It certainly isn’t mine.

My point is that gas prices are indeed at an all time high- the only people who aren’t upset fall into two categories:

A. People who work in the oil industry

B. People who make enough money to where it’s not impacting their life (yet)

And I didn’t call for any kind of big government solution or investigation into “price gouging.”

I didn’t blame oil companies!

I’m simply stating a matter of fact: if gas prices continue to soar, we’re dead in ’08.

I said the same thing about congress in ’06. I know that other factors contributed to congressional losses, but gas prices were one problem.

Reagan found a free-market solution to our energy problems- president Bush has done nothing- not one damn thing.

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21 comments
boomajoom
boomajoom

Chaddo wrote: "It’s impossible to debate anyone who really believes that, so I won’t try." Sorry? How do you figure OPEC isn't a company? They supply oil and sell it to people, and are driven by profits just like any other company. Just because they're backed by governments, or because they're a cartel? If the first, then companies are companies, even if they're state backed. Companies supply goods/services in exchange for other goods/services (like money). Just because a government or series of governments took over management doesn't mean that the company has stopped being a company. If the latter, then all I can say is that it's an economic principle. A monopoly by definition controls most or all of the market for a good and does its best to prevent other people from infringing on their business. A monopoly will determine the right amount to supply that will enable it to charge the most advantageous amount for their product. All a cartel does is gathers the biggest producers around the table and say "Ok, our total supply needs to be X and our price needs to be Y to make the highest profit. So company A, you'll supply this portion of X, company B, you'll supply another portion of X, and we'll all charge Y." A cartel is a collective monopoly...behaves exactly the same as if they were one company (assuming no one cheats). Daniel Z wrote: "Whatever Opec decides to charge for its oil, I will still have to drive from home home to my work every day. That is the majority of my gas usage. I have ZERO choice when it comes to gasoline. I must buy a certain amount of gasoline each week or else I get fired." True. So buy a smaller car. OR...get really angry for a while. Other companies will form to supply you with oil at a cheaper rate (if they're allowed to), or people will come up with cheaper alternatives to gas. If we allowed other oil companies to actually produce more oil, they would and the price would come down.

Daniel Z.
Daniel Z.

boomajoom: Whatever Opec decides to charge for its oil, I will still have to drive from home home to my work every day. That is the majority of my gas usage. I have ZERO choice when it comes to gasoline. I must buy a certain amount of gasoline each week or else I get fired.

Chaddo
Chaddo

You wrote: "(and OPEC constitutes a company in my mind since a cartel is nothing more than a collective monopoly)" It's impossible to debate anyone who really believes that, so I won't try.

boomajoom
boomajoom

You wrote: "Yes, I checked out your web site Charlie, and I know you are a small business man. YOU have to play by the rules of the free market. But does OPEC?" Yes, they do. The rules of the free market state that people will take action only when the benefit is equal to or greater than the cost. OPEC can only charge a price that people are willing to pay and not a cent more. People apparently are still willing to pay this much for gas so...companies will continue to charge that much. You wrote: "People say that gas prices are high because of taxes" I say gas prices are high because our own government, not OPEC, has limited the free market. Prices are high because demand is higher than supply. Maybe OPEC is holding back on their drilling, but this is what every company would do if in that position (and OPEC constitutes a company in my mind since a cartel is nothing more than a collective monopoly). When profits are high like that, then other people will want to enter the market and make money, or existing companies will want to get more oil so they can sell more and make a higher profit. The US government has placed a basic ban on increasing supply by refusing to allow drilling in Alaska and other parts of the country. Companies want to drill there because there's money to be made, and drilling there would lead to lower prices. Simple as that.

Daniel Z.
Daniel Z.

Dan X? LOL I feel the same thing sometimes in my party. Sometimes I question things and I get snapped at for not just following the party line. It can be frustrating sometimes. And I too have some libertarian tendencies and I am also questioning things.

Chaddo
Chaddo

Thanks Dan X. Charlie there's no need to feel bad about "egging me on." I find these conversations constructive. Don't get me wrong, I am a conservative with some libertarian tendencies, but I question everything. People are always pointing out differences between Reagan and Bush, and the one consistent thing I notice is this. Reagan saw America's problems, and he found free-market solutions to America's problems. Bush sees America's problems and he ignores them. I'm not saying Democrats have the answers (I don't think they do) but I do wonder sometimes if ANYONE of ANY PARTY is on "our side."

Daniel Z.
Daniel Z.

Chaddo: Thank you for bringing up a topic that I always try and bring up in my discussions about Gas prices. You can't have a free market when people artificially increase and decrease supply on a whim.

Charlie LeBlanc
Charlie LeBlanc

Mr. Rogers, I have not had a day off in about 90 days. Today I cooked, had some freinds and family over. Sorry I egged you on about your article. I had just read CB's latest post before I came here, and being short 1400 dollars on my State taxes, it just rubbed me wrong. It has been really nice to chat in here.

Charlie LeBlanc
Charlie LeBlanc

It is true that China is sending weapons and ammo into Iran. That is causing the problems in Irag right know. All high end stuff too. Hey we did it too. We won the war in Iraq is what I always say. If the Iraq people can't hang on to it, that does not take away from our military victory. We can crush China in a month by just not buying anything that is made there. They are depended on us, nice.

Chaddo
Chaddo

Uh, no sir. I'm not talking about Mexicans. I am talking about illegal aliens. Mexicans are citizens of Mexico. Illegal aliens are CRIMINALS. There is a difference.

Charlie LeBlanc
Charlie LeBlanc

Conservatives can not change to win elections. We need to change the minds of the American people. On every issue, we are right. I never hired an illegal alien. Let's just say Mexicans. That's what we are really talking about. I'm in the trenches every day with these folks and even went so far a take consulting fees to train them. Bring the material for a wall, hire mexicans to build it and hopefully we can stop the bleeding in 50 years or so.

Chaddo
Chaddo

If I were president I would seal the borders, bring home troops from places like Korea and Germany, get America out of the U.N., and break off most of our cold-war treaty commitments.

Chaddo
Chaddo

You know that cheap imported crap that you buy at Wal-Mart? That stuff is making China richer and richer and is going toward building their economy- which is why they are draining the world's fuel supplies. It's also funding their military which threatens the United States. Lastly, American jobs are being shipped over there thanks to these trade deals.

Charlie LeBlanc
Charlie LeBlanc

All I know is China is linked up with Iran. China's demand on oil is growing. When Iran runs out of oil, American needs be ready for the Chi-coms. We need a leader that will stand up to China.

Ray
Ray

Venezuela was the first country to move towards the establishment of OPEC by approaching Iran, Iraq, Kuwait and Saudi Arabia in 1949, suggesting that they exchange views and explore avenues for regular and closer communications between them. In September 1960, the governments of Iraq, Iran, Kuwait, Saudi Arabia and Venezuela met in Baghdad to discuss the reduction in price of crude oil produced by their respective countries. As a result, OPEC was founded to unify and coordinate members' petroleum policies. Original OPEC members include Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Between 1960 and 1975, the organization expanded to include Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), and Nigeria (1971). Ecuador and Gabon were members of OPEC, but Ecuador withdrew on December 31st, 1992[7] because they were unwilling or unable to pay a $2 million dollar membership fee and felt that they needed to produce more oil than they were allowed to under the OPEC quota. [8] Similar concerns prompted Gabon to follow suit in January 1995 [2]. Angola joined on the first day of 2007. [9]) Indonesia is reconsidering its membership having become a net importer and being unable to meet its production quota. Indicating that OPEC is not averse to further expansion, Mohammed Barkindo, OPEC's Secretary General, recently asked Sudan to join.[10] Iraq remains a member of OPEC, Iraqi production has not been a part of any OPEC quota agreements since March 1998. [edit] The oil weapon

Chaddo
Chaddo

I'm just getting sick of hearing about how everything is "our fault." Gas prices are too high because we drive too much or because we drive the wrong vehicle. We don't want amnesty for illegal aliens because we're "bigots." We need illegal aliens because Americans are too lazy to do certain jobs. I'm really sick of it.

Charlie LeBlanc
Charlie LeBlanc

Listen, the American people will solve this problem, they always do. My buddy is working on a motor right now in his garage that just may solve this problem. It's going to be a blue collor mechanic working in an hot garage, I would love to be a part of that.

Chaddo
Chaddo

Yes, I checked out your web site Charlie, and I know you are a small business man. YOU have to play by the rules of the free market. But does OPEC? And you're talking about Louisiana taxes, and I agree about all that stuff. But I'm talking about a national issue of gas prices. It's the ONLY area of conservatism where I am forced to question traditional orthodoxy because it does not compute. It just doesn't. And neither does that stuff about us having to change our behavior. You drive a four cylinder- so do I. On the whole, ALL vehicles burn less gas than they did 20 years ago. In high school, I drove a Mustang LX that got 12 MPG. That wasn't uncommon back then. People say that gas prices are high because of taxes- when is the last time taxes on gas have been raised? President bush hasn't raised gas taxes, and than God for that- because they'd be even worse.

Charlie LeBlanc
Charlie LeBlanc

I'm just egging ya on, Mr. Rogers. Hope to hear more comments. "He who dares not offend cannot be honest." -- Thomas Paine

Charlie LeBlanc
Charlie LeBlanc

Oh ya, let's blame President Bush for all our problems. He as done a great job as our President, but is not running for office again.

Charlie LeBlanc
Charlie LeBlanc

Yes sir, I did read your article. Opic releys on speculation for oil pricing. They are speculating that we a will not change our behavior. I am neither in the oil field or have buckets of money. I work out of my garage and employed 22 folks last. Our government makes more money on the sale of gas than the oil companies and does nothing to to get into our tanks. The fastest way to lower gas prices is to lower taxes on gas, that would lower prices now. Second, let oil companies drill for oil right here in the good ole USA. We bought Alaska from Russia just for the oil, now the do gooders will not let us go get it. We can not control other folks behavior only our own. I made the move 4 years ago, and bought 4 cylinder vehicles with a trailer to haul material to my job locations.. Until our behavior changes, nothing else will.

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