Congressional inquiry of Oil industry profits

Ok, let's say then that monopolies are permitted to run amuck and the biggest of the big corporations all merge, until eventually, there is only one company that produces each good or service, and any company that tries to compete with them is simply bought-out or otherwise eliminated. Explain to me how that is a free-market. Explain to me where the competition that drives these companies to produce a better good or service exists.

 

if the governmentt manipulates....nevermind let me rephrase that.

if the government graciously protects consumers from oil companies prices and keep them low, dont you think that is helping eliminate the motives for alternative energies to be developed?

again, what do you think the guys trying to sell new alternative energies to us think when the government forces these evil monopolies not to raise prices? i bet they dont feel like they were given a fair shake at selling their product, when the government is interfering.

we certainly arent gonna come up with solutions any quicker if we tell energy providers we will cripple them the minute we dont like their profit margins.

if they cant make the profits they want, i would define that as crippling them.

then maybe those industries should find alternatives to oil. but why should they if the governemtn forces oil companies to do their bidding.

the eventual point we will get to here is that i trust the free market, while you need the government to protect you.

 

now you are asking smart questions.

the reason that doesnt happen is because someone would always refuse to merge because they can make more profits outside of the monopoly. you and i and some of my millionaire friends could recruit some investors and start selling oil (or some other energy) for less than the big guys sell it for. and when they tried to buy us out, we would refuse becaue we could make zillions by selling for a more reasonable price. and of course everyone would want to buy from us because we would be cheaper. the space would always be there for endless profits for the guys who didnt join the monopoly.

 

Government.

Did I ever say that the government should have any influence on market prices? No. Monopolies, collusion? Yes.

The transition to alternate energies is a natural progression since crude oil is a finite quantity. It began happening well before this past year. As things like the environment, safety, and cost become of increasing concern to the consumer, so goes the desire to seek out alternates. Of course, if the oil companies are hording the patents to the most viable options, the process is severely hindered.

 

you are about to, watch:

stopping what you believe to be monopolies and collusion is influencing prices. are you not busting them up because you arent happy with prices and want them lower?

if you want to change the patent system, thats good, that is the government creating monopolies by restricting people from ideas. i honestly do not know how much of a factor that is in this oil question. intellectual property law is something i think about endlessly and discuss with my lawyer friends. my tentative conclusion is that information should almost always be free, with a few complicated constraints. i will bring it up and we can discuss it some time, because thats a very interesting and complicated topic.

 

Not necessarily. The competition permitted/promoted by anti-trust legislation will influence the prices. The government should not be able to say 'prices on X good must be below Y.' I'm a very firm believer in checks and balances. I am uncomfortable with the idea of any entity gaining too much unchecked power.

The fundamental difference between a government and a business is that a government typically has some vested interest in the welfare of its people (altough it can, oftentimes, have very bizarre ways of showing it). A business only cares about people to the extent that they can be patronized by those people. Don't read too much into this, it's just a random thought.

I've often wondered about that to some extent myself. Seems like an area with tons of room for interpretation.

 

martin, you're ignoring the element of barriers to entry in a market. Not all markets are open to rapid private investment and the corresponding market correction in pricing and/or supply.

 

even if we assume that the barriers to entry in the oil industry, as well as the energy sources are so high that nobody could ever start anything that would compete with the colluding companies, i would expect that some company would refuse to collude because the profits to make are too great. if i am british petroleum, and exxon and amoco and whoever else have all decided to raise prices to ridiculous levels, i would be happy, because that would send everyone to my station. (assuming the government wouldnt prevent you from selling below whatever everyone else is. that sounds like something they would do)

and even if everyone in oil colludes, i dont really care, because we would quickly reduce our oil consumption by a massive amount. all sorts of things would start happening. car companies that dont make hybrids would start, people who use heating oil might start using electric heat or one of those new biodeisel things. new nuclear plants could be built. people would carpool and take public transportation. alternative energy sources would be flooded with massive amounts of capital. somebody would probably figure out cold fusion. maybe thye crazy hydrogen fuel cells. maybe something else that is cool that it would seem like magic.

all signs point to awesome.

and also i still wonder what level of profits you think is an acceptable amount for oil companies to make before you think the government should protect us from voluntary purchasing it.

 

http://www.wired.com/wired/archive/13.12/gas.html

again, this is the article i was referring to in this thread, as well as the other i hijacked on to this topic. i like it. so i linked it again.

dont screw with the free market. the invisible hand of capitalism will solve our problems, not your big government intervening.

 

Oil prices are a function of the price of oil per barrel (OPEC sets this) and supply (drilling and refinery) and demand (consumer). Instead of looking at the profits, what people should be looking at is the profit margin. The profit margin for most oil companies is around 10% which is not outrageous. Shortly after Katrina and Rita politicians were trying to make political hay by pointing the the rise in gas prices, claiming the oil companies were taking advantage of the disaster. They completely ignored the fact that most rigs in the Gulf were lost and several refineries were knocked out, thereby negatively affecting supply. The oil companies usually get slammed because they are a popular target. People love to hate them. Forget logic.