The American Spectator

Reader Mail

(Page 2 of 12)

br> Re: Doug Bandow's Pumping Prices : /p>

Interesting piece by Mr. Bandow. I agree with much of his analysis concerning the factors responsible for increases in the end cost of a commodity and for his argument against price controls. I would caution against rushing to the defense of the oil companies, however.

The Windfall Profits Act was passed for a reason. During the Oil Crisis of the late 1970's some oil companies posted net profit percentages two to three times as high as those posted just prior to the oil shortage. It may be helpful to remember that the Oil Crisis, at that time, was caused by OPEC restricting oil production. This would increase costs to the industry at all levels that would be passed along to the end user. Following a classic economic model, the profit margin of any level of the distribution system should not increase significantly. In this case, though, it did for the refining companies (i.e. Exxon, Amoco etc.). Hence, the passage of the WPA.

p>Now, it is unknown if oil companies are reaping windfall profits from the current disasters, at least at the present time. We will know the answer to that when quarterly profit and loss statements are published. Then we will know if the prices paid by consumers at the pump were simply increased business costs passed on or an attempt to gouge the end consumer for greater profit. Depending upon what information is revealed in time, it may be necessary to revisit the WPA. br> -- Michael Tobias br> Ft. Lauderdale, Florida /p> p> When my friends start complaining about the gas prices, I tell them to go thank a liberal environmental nut. br> -- Elaine Kyle /p>

topics:
Economics, Business, Environment, Movies, Law, Founding Fathers, Military, Conservatism, Oil