Two Years Ago Today on GINA COBB: Good Way to Ensure High Gas Prices

Originally published on April 27, 2006:  Good Way to Ensure High Gas Prices

Here's a good way to ensure high gas prices: 

When oil company profits are normal, ignore them.  But do enact reams and reams of legislation and regulations so that you make it difficult for oil companies to jump through all the hoops without extraordinary care and expense.  This will discourage new companies from entering the business.

If an oil company finally makes an outstanding profit one year, don't congratulate the company for having successfully navigated its way through the thicket of regulations and for actually providing a product while realizing excellent profits for the benefit of its shareholders and employees -- a "win-win" if ever there was one.

Instead, disparage the company for making "too much" profit (even though making profits and maximizing profits is the entire purpose of existence for any for-profit company.) 

Call company executives before Congress for a public grilling.  Accuse them of price "gouging" in the media (and everywhere else).  Ignore the fact that combined state and federal taxes on gasoline are several multiples of oil company profits. 

Treat the oil company executives like criminals; in fact, scour the law books looking for any way to sock it to them.

And, last but certainly not least, impose extra taxes to take away some of their profits.

If we follow this plan carefully, next time anyone even thinks about entering the oil business, they'll realize it's not worth it.  Who in their right mind ever starts a for-profit business in the hopes that they will never realize more than mediocre profits, and that they cannot ever enjoy excellent profits without abuse and demands to turn over the profits to someone else?  Who is crazy enough to go into business knowing that if they ever succeed well enough to reap excellent profits, their hard-earned profits will be taken away?   Why bother?

And if all of your efforts have their inevitable effect and nobody new is interested in entering the oil business, leaving only a few suppliers to deal with all that demand, what do you suppose will happen to oil prices?

A high profit is not a crime.  It's not even a bad thing.  When profits are high, new companies are encouraged to enter the fray and compete for your business.  When enough companies enter an industry, prices inevitably fall based on the reliable economic law of supply and demand.

Here are some things that might actually reduce gas prices:  Open up domestic oil production.  Suspend non-essential environmental regulations.  Let the oil companies enjoy their profitable year.  Review the regulatory scheme and remove unnecessary barriers to entry of new companies into the oil business.  Conserve energy.  Try out some of the alternatives to using lots of gasoline, such as telecommuting, combining errands, working a four-day week instead of a five-day week, and the like.  Be a little bit more price-sensitive in deciding how much you are willing to pay for gas.

There are many ways to make the situtation better.  But biting the hand that feeds your gas tank is not one of them.  That's just bad manners, and nothing good will come from it.

Originally published on April 27, 2006:  Good Way to Ensure High Gas Prices

Here's a good way to ensure high gas prices: 

When oil company profits are normal, ignore them.  But do enact reams and reams of legislation and regulations so that you make it difficult for oil companies to jump through all the hoops without extraordinary care and expense.  This will discourage new companies from entering the business.

If an oil company finally makes an outstanding profit one year, don't congratulate the company for having successfully navigated its way through the thicket of regulations and for actually providing a product while realizing excellent profits for the benefit of its shareholders and employees -- a "win-win" if ever there was one.

Instead, disparage the company for making "too much" profit (even though making profits and maximizing profits is the entire purpose of existence for any for-profit company.) 

Call company executives before Congress for a public grilling.  Accuse them of price "gouging" in the media (and everywhere else).  Ignore the fact that combined state and federal taxes on gasoline are several multiples of oil company profits. 

Treat the oil company executives like criminals; in fact, scour the law books looking for any way to sock it to them.

And, last but certainly not least, impose extra taxes to take away some of their profits.

If we follow this plan carefully, next time anyone even thinks about entering the oil business, they'll realize it's not worth it.  Who in their right mind ever starts a for-profit business in the hopes that they will never realize more than mediocre profits, and that they cannot ever enjoy excellent profits without abuse and demands to turn over the profits to someone else?  Who is crazy enough to go into business knowing that if they ever succeed well enough to reap excellent profits, their hard-earned profits will be taken away?   Why bother?

And if all of your efforts have their inevitable effect and nobody new is interested in entering the oil business, leaving only a few suppliers to deal with all that demand, what do you suppose will happen to oil prices?

A high profit is not a crime.  It's not even a bad thing.  When profits are high, new companies are encouraged to enter the fray and compete for your business.  When enough companies enter an industry, prices inevitably fall based on the reliable economic law of supply and demand.

Here are some things that might actually reduce gas prices:  Open up domestic oil production.  Suspend non-essential environmental regulations.  Let the oil companies enjoy their profitable year.  Review the regulatory scheme and remove unnecessary barriers to entry of new companies into the oil business.  Conserve energy.  Try out some of the alternatives to using lots of gasoline, such as telecommuting, combining errands, working a four-day week instead of a five-day week, and the like.  Be a little bit more price-sensitive in deciding how much you are willing to pay for gas.

There are many ways to make the situtation better.  But biting the hand that feeds your gas tank is not one of them.  That's just bad manners, and nothing good will come from it.