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Free Market Price of Gas

The Free Market Price of Gas (Part 2)

(08/23/2006): Having just watched a Senate Commerce Committee hearing on C-SPAN that took place on 05/23/2006, I wanted to thank the Committee for holding one of the very few informative discussions of the the so-called Free Market Price of Gas. It also very clearly demonstrated FTC complicity in the fleecing of the American Public.

At the crux of the debate, was a report generated by the FTC summarizing the FTC's investigation into the so-called price gouging or price manipulation of gas prices. The hearing confirmed my previous post that investigating price gouging was a meaningless gesture and serves a microcosm, for all to see, that the American Public is facing a constant barrage of misleading disinformation from our current Administration. Deborah Majoras, the Chairman of the FTC, was so harshly criticized over the report, by both sides of the aisle, that she was reduced to constant head shaking, rolling of the eyes, and tsk, tsk, tsking!

The Committee clearly identified that the report, in which Majoras proudly reported, took 1000s of hours of FTC investigation time, simply addressed the wrong questions. Furthermore, the FTC failed to investigate the real problems in which it was fully aware. It was not a surprise, that the report concluded, that if all oil companies raised their prices, then no one single company was in violation of any anti-trust law!

It was very clear to me, that Majoras clearly knew that the question of price gouging was irrelevant, and she actually displayed immense pride in the fact, that the FTC had been tasked to investigate this meaningless question.

The truth is, that the price of a barrel of oil is not set by the free market, it is set by an oil cartel.

The truth is, that gasoline prices are not determined by the free market, but by huge vertically integrated companies whom do not need to collude with each other to raise the price of gasoline.

The truth is, that our oil oligopoly is raising the price of gasoline by implementing policies of "thin capacity", "just in time supply lines", and by maintaining refining capacity reserves less than 1/5 of those required to prevent supply disruptions.

These policies are directly responsible for creating a unique business model in which, when the cost of raw materials increases, profits increase many-fold. No other industry can claim this remarkable achievement, better described as, exploitation.

I also wanted to thank Mark Cooper, the Research Director of the Consumer Federation of America for proposing real solutions designed to break the oligopoly strangle hold. Mr. Cooper suggested that we take a slice of the current demand and direct it to alternative energy sources. Thus corn would compete with oil, and ethanol refineries would compete with gasoline refiners.

I would also like to thank California Senator Barbara Boxer for her fiery, if not somewhat over the top, scathing criticism of Deborah Majoras and the FTC for lying about and whitewashing the truth over Shell Oil's depiction of their need to close their refinery in Bakersfield. The lack of conscious that is on display by corporate America is simply disgusting.

The Free Market Price of Gas

(04/25/2006): Yesterday I paid $3.299 per gallon for regular unleaded gas to fill up my gas tank in Tahoe City. Just 20 days ago the price per gallon was $2.899. What happened? Apparently a switch over from MTBE to Ethanol was botched on the east coast, creating shortages on the east coast. Mind you, California made this change long ago. In fact, Shell Oil completely moved out of the Tahoe Basin over this single issue.

So why are Californians and others paying the price? No one, including our President wants you to know. Time after time, oil executives have appeared before congress and declared that it is the free market that determines both the price of oil and the price at the pump.

Capital really does believe the American people are stupid. Basic economic theory defines a free market as a market whereby no single supplier, or a relatively few group of suppliers can effect the price of a good or service on their own. In other words, if you make widgets and raise your prices, the average price of a widget remains unchanged. The same is true if you stop making widgets, the average price is unaffected.

If the price of crude and if the price at the pump are really determined by the free market, then the price at the pump would have remained unchanged in California. Basic economic theory goes on to describe other market conditions, that of monopolies and oligopolies.

An oligopoly is a market place whereby a relatively few suppliers can and do control both the supply and therefore the price of a commodity or service. Generally, if 4 suppliers control 40% or more of a market, then you have, by definition, an oligopoly. Clearly both crude oil and gasoline are commodities that fit this description. Suppliers of crude oil and gasoline do manipulate supply and prices to increase their profits.

It is high time that our President, our congress, and oil executives stop lying to the American public. Investigations into price gouging, stopping the flow of oil into our strategic reserves and passing new laws punishing big oil are meaningless political gestures. Nothing short of dismantling these oligopolies will change the pain the American people feel every time they fill up. The War on the great American middle class continues.

There are a few who realize the truth, the Democratic Blue Dog Coalition is one such group. They are staging debate in the house tonight, working through midnight and can be currently seen live on C-SPAN. Much of tonight's debate can be viewed at the previously provided link.

Tonight, as United States Representative Debbie Wasserman Schultz describe the oil companies profits of $34 Billion in 2002, grow to $113 Billion in 2005, Congressman Bill Delahunt thoughtfully proclaimed that those profits were not those of free market companies, but those of oligopolies bordering on monopolies! Keep it up Blue Dogs, my heart goes out to you all!

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Last modified: November 16, 2006
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