The Corner

Q&A Time

Q: A reader e-mails, with the subject line “Obscene Profits”:

I wonder if you could explain to me or perhaps Corner readers how exactly the high cost of procuring a barrel of oil enables “Big Oil” to earn “obscene profits”.

Granted, my only education in economics comes from actually participating in the economy, so I might be a bit daft compared to a genius like Mr. Obama.

But I once worked in a pizza place — and we made great pies.

If the price of pizza sauce had spiked, I can’t imagine how that would have helped our profits.

Granted gasoline is (only) slightly more of a necessity than pizza — though many would disagree (!) — what incentive do the oil companies have to “gouge” when prices are high that they don’t have when prices are lower?

For that matter, what incentive is there to “collude” that doesn’t exist at lower prices?

It would be interesting — and entertaining — to see some of the hand-wringers pool their considerable assets, purchase an oil (or pharmaceutical) company and voluntarily run it at a loss.

A: My reply (not really an “A”, more of an “I’ll see your rhetorical questions and raise you some preaching to the choir”):

You’re so right. Look, the bottom line is that the Democrats don’t mind high energy prices; a substantial number of Democratic voters want energy prices to be very high, and want oil companies to go out of business, because they are obsessed with global warming and believe an aggressive reduction of carbon dioxide emissions is the only way to stop it. A windfall profits tax is a win-win, from their point of view: Oil companies suffer, domestic production declines, the price of gasoline goes up, people drive less to save money, and the government realizes a new revenue stream with which to subsidize solar panels and windmills. There’s no downside here for anti-oil Democrats. Only they shouldn’t pretend it has anything to do with making gas less expensive.

I should add that among that substantial number is the Democrats’ presidential nominee, who “would have preferred a gradual adjustment” toward $4-per-gallon gasoline, but thinks we could manage it if we just “took some steps to help people make the adjustment.”


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