I attended a Business and Media Institute panel this morning on gas prices at the National Press Club. Our own Quin Hillyer moderated.
Cato Institute's Jerry Taylor had pointed and frank comments on just about every topic, but particularly price gouging. In short, either it exists everywhere or it doesn't exist at all. Consumers expect Congress to "do something" when gas prices jump, but say nothing about increases in the prices of T-shirts, cars, or beer at the bar. Why is gas different? It shouldn't be.
Usually the politicians and demagoguges (like Bill O'Reilly) hang their case on the large profits oil companies are seeing lately. A few strong points here: 1- Long term, the oil industry is not a smart buy for investors. Most years are tough, and these "windfall" years are important for the tough years. 2- The profit margins are slim compared to many industries. BP has a 6.8 percent profit margin, while Fox News makes 10.2 percent profit, and other media companies even higher.
But enormously profitable or not, for the government to go after one industry and not others is silly. This brings me back to Jerry Taylor. In his remarks, he said that if price gouging were illegal, the government would have to arrest nearly every realtor in the country. Why? Because they sell houses well above the cost of production at the price that the market will bear.
Speaking of which, Toyota recorded a $3.9 billion profit in the first quarter, we learn today. That's a 39 percent increase over the last quarter. Like the oil companies, that's a business succeeding in a tight market.
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