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Old 05-13-2006, 11:38 PM   #1 (permalink)
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The Nation's Pulse -- Stop the Scapegoating

Stop the Scapegoating

By Ben Stein

Published 5/9/2006 12:09:42 AM


There is something profoundly disturbing about the national craze to blame the oil companies for higher gasoline prices. It's not disturbing that people are upset about having to pay hugely more for gasoline and oil products. It's not disturbing that they are looking for someone to blame. The disturbing part is that we as a nation and as a government are blaming entities that have absolutely nothing or next to nothing to do with causing the high oil prices. It is as if we just arbitrarily decided that all left-handed people were to blame for the oil prices. That's how crazy it is.

Oil companies do not set oil prices. Oil prices are set on gigantic world markets by young millionaire hedge fund traders, by university endowments speculating in commodities, by Chinese importers seeking new sources of oil for their red hot economy, by India doing the same thing, by us Americans needing cars to make us feel big and tough.

The American oil companies pay these high prices by and large, add in the costs of refining and transporting, tack on the taxes we need to build our roads, and then sell us our gasoline. We in turn suck it down our throats and zoom around in our big huge cars as if gasoline were still $1.50 a gallon.

Yes, some of the oil the oil companies sell is in fields they bought years ago and paid a lot less per barrel for than today's prices. When the price of oil skyrockets, the oil companies make money. Lots of money. But this is how corporations are supposed to work: when prices for things they already own go up, they make money. They're not charities and we wouldn't be able to drive for long if they were. And the money the companies make goes to the shareholders, which is basically everyone in the nation with a pension plan, and most of the rest goes to find new oil for us to guzzle down in our 500-horsepower chariots of the future.

Where's the harm? There's no price fixing. There's no stealing. There are just a lot of traders getting very rich driving up the price of oil and a lot of legitimate forces making buyers willing to pay it.

You may not like it and I certainly hate paying four bucks a gallon at my local station in Malibu. But blaming the oil companies is pure scapegoating. Immense world-wide forces are at work. Immense markets are at work. The oil companies are corks in the ocean compared with those forces.

By all means, let's conserve. By all means, let's drill off the coast of Malibu. It would give me some pretty lights to look at by night. Let's also use ethanol and used cooking oil. But let's get something straight. We won't solve a single thing by blaming the wrong people for the problem. Seeing things plain is the first step to salvation. It's high time to stop blaming the messenger -- the oil companies -- and the first step to seeing things plain.


Ben Stein is a writer, actor, economist, and lawyer living in Beverly Hills and Malibu. He also writes "Ben Stein's Diary" in every issue of The American Spectator.
You can email Ben at [email protected]
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Old 05-14-2006, 01:17 AM   #2 (permalink)
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Ben continues to be a voice of logic. For whatever reason, perception is reality to the public though and people will continue to focus on big oil profits rather than developing and implementing alternative energy sources.
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Old 05-14-2006, 06:01 AM   #3 (permalink)
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YankeeBob is reading this now saying WTF is this?
The math is very simple:

If I sell a widget for a dollar, that cost me 70 cents to manufacture, I just made a 30% profit (30 cents). If the cost to manufacture that widget suddenly costs $1.40, and my profit remains at 30%, I sell that widget for $2.00 (60 cent profit). My profit MARGIN remains the same, yet my actual profit DOUBLED!

Its the same math for the oil companies.

Some people just don't get it!
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Old 05-14-2006, 07:47 AM   #4 (permalink)
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Quote:
Originally Posted by YankeeBob
The math is very simple:

If I sell a widget for a dollar, that cost me 70 cents to manufacture, I just made a 30% profit (30 cents). If the cost to manufacture that widget suddenly costs $1.40, and my profit remains at 30%, I sell that widget for $2.00 (60 cent profit). My profit MARGIN remains the same, yet my actual profit DOUBLED!

Its the same math for the oil companies.

Some people just don't get it!
Bob, math is apparently not as simple as you think. Selling a widgit for $1 that cost you $.70 to make is almost 43% profit. Additionally, if $.30 per gallon (for discussion sake) was a workable profit margin, then why would a company suddenly need to make $.60 per gallon profit. The word "windfall" comes to mind. And, BTW, Ben Stein has been a shill for shysters back to Tricky Dick Nixon for whom he used to write speeches.

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Old 05-14-2006, 10:52 AM   #5 (permalink)
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"The American oil companies pay these high prices by and large, add in the costs of refining and transporting, tack on the taxes we need to build our roads, and then sell us our gasoline."


Does this mean as the price of gas goes up we get better roads for folks that eventually cannot afford to use them?
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Old 05-14-2006, 01:35 PM   #6 (permalink)
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Stein is just a lovable "water boy" for the Right / GOP

Bottom line is-

-Three things effect gas prices
- Geo-Politics (stability) in the ME
- Oil Futures Trading
- Global Demand

The ME is totally fu(ked up -- Primarily Iraq (thanks GW for a unneeded war and poor forgien policy)
Oil Traders are nervous as long tailed cats
Demand is way up as China "wakes up" and Asia grows up - this will only increase

Oil companies are happy to pass energy increases on to the customer .. BUT DO NOT LOOSE TRACK OF ONE FACT ---- IS COSTS THEM NO MORE TO PRODUCE (REFINE) A GALLON OF GAS TODAY THAN IT DID A FEW YEARS AGO. Hence the f'ing huge profits they are seeing --- thats plain and simple math.
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Old 05-14-2006, 07:11 PM   #7 (permalink)
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Quote:
Originally Posted by Lefty
Bob, math is apparently not as simple as you think. Selling a widgit for $1 that cost you $.70 to make is almost 43% profit.
Lefty
I still think that 30 cents on a dollar is a 30% profit.
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Old 05-14-2006, 08:01 PM   #8 (permalink)
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Quote:
Originally Posted by YankeeBob
I still think that 30 cents on a dollar is a 30% profit.
It's 30 cents on the 70 cent investment. Like Lefty said.....43%
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Old 05-14-2006, 08:39 PM   #9 (permalink)
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Is thinking obsolete?

By Thomas Sowell

May 10, 2006


Amid all the hysteria among politicians and in the media over rising gasoline prices, and all the outraged indignation about oil company profits and their executives' high pay and lavish perks, has anybody bothered to even estimate how much effect any of this actually has on the price we pay at the pump?

If the profit per gallon of gas were reduced to zero, would that be enough to reduce the price by even a dime? If the oil company executives were to work free of charge, would that be enough to reduce the price of gasoline by even a penny a gallon?

Surely media loudmouths making millions of dollars a year and the multibillion dollar TV networks they work for can afford to get some statistics and buy a pocket calculator to do the arithmetic before spouting off nationwide.

But this is the age of emotion, not analysis.

Politicians are even more hypocritical. The government collects far more in taxes on every gallon of gasoline than the oil companies collect in profits. If oil company profits are "obscene," as some politicians claim, are the government's taxes PG-13?

The very politicians who have piled tax after tax on gasoline over the years, and voted to prohibit oil drilling offshore or in Alaska, and who have made it impossible to build a single oil refinery in decades, are all over the television screens denouncing the oil companies. In other words, those who supply oil are being denounced and demonized by those who have been blocking the supply of oil.

Given the vast amounts of gasoline sold across the length and breadth of this nation, and given the mega-billion dollars involved, whether or not some corporate executive has an inflated pay scale is unlikely to explain the price of gasoline.

It may allow some people in the media to vent their emotions and some politicians to create a bogeyman, since they can't play St. George without a dragon. But cheap demagoguery cannot explain expensive gas.

When the two most heavily populated nations on earth -- China and India -- have rapidly growing economies and rapidly escalating importations of oil, how could that not affect the world price of oil? After all, the price of oil is determined in the international markets, contrary to conspiracy theories that keep turning up whenever gas prices rise.

Those conspiracy theories have been investigated time and again, without uncovering anything. But it is still a clever political ploy to ask for more investigations when gas prices rise. If nothing else, it distracts attention from those who have been blocking all attempts to enable us to use our own oil.

Nothing is easier, or more emotionally satisfying, than blaming high prices on those who charge them, rather than on those who cause them. The same thing happens when stores in high-crime neighborhoods charge higher prices than stores in safer neighborhoods.

Both crime and precautions against crime add to the cost of doing business and this adds to the prices. But seldom, if ever, do those who decry the high prices blame those prices on the crime, vandalism, and violence committed by local inhabitants.

Where the stores are owned by a different ethnic group, such as Asians in black ghettoes, it is virtually guaranteed that the store owners will be denounced for "gouging," "discrimination" and whatever other political rhetoric will rouse the emotions.

People with no experience in business, no knowledge of history, and utterly ignorant of economics do not hesitate to leap from high prices to greedy profit-makers. Many of these ignorant people are on nationwide television and some are in Congress.

Many, if not most, of the great American fortunes -- Rockefeller, Carnegie, Ford -- have been made by finding ways to charge lower prices, not higher.

In the early 20th century, the A & P grocery chain became renowned for both its low prices and its high quality. Its profit rate never fell below 20 percent during the decade of the 1920s. That's a higher rate of profit than the oil companies make.

The relationship between prices and profit rates is not as simple as media hype or political demagoguery claims.
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Old 05-15-2006, 01:47 AM   #10 (permalink)
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As I mentioned --- China is waking up and Asia is growing up - thus putting more strain on oil prices.

But the NUMBER ONE reason oil is sky high is the high level uncertaincy in the ME (read that as --- IRAQ) --- and we all know how well thats going -- so until this region cools off (were talking years ) plan on a rollercoaster of oil prices.

And as the attached link shows --- we get only a fraction of our crude from the ME ---- which means that oil tensions in the ME tend to drive oil prices up world wide ---- or those countries that are not really "in the danger zone" just go along for the ride and sell their oil at a nice tasty profit -- just fcking great.

http://www.eia.doe.gov/pub/oil_gas/p...nt/import.html
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Old 05-15-2006, 02:13 AM   #11 (permalink)
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price of petrol in Peoria

Way back in 76 the Oil, Chemical and Atomic workers union had to negotiate a new contract. The union was all set to take out half page adds saying that if the price of gasoline was raised .1 (to make the .9 to the next penny), everybody in the industry from the C.E.O.s to the gas pump jockeys could double thier wage, with $ left over.
The oil companies could not sign quickly enough due to the political climate at the time. Petro-chemical labor costs are nothing compared to the volume of product. if thier aquisition costs rise, that is no reason to raise the final price by the same percentage. Maybe they have the right to set thier own price, but it is beginning to look like price fixing. These companies compete with each other just like the lakers compete against the other teams. The oil industry might have different teams, but they are all in the same league. No real competition equals higher prices!!!
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Old 05-15-2006, 09:27 AM   #12 (permalink)
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Originally Posted by nvsteve
It's 30 cents on the 70 cent investment. Like Lefty said.....43%
Hmpfffffff
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