Thursday, May 22, 2008

Profit and Loss, Theirs and Ours

This weekend is the Memorial Day holiday here in the United States. It's the traditional beginning of summer and a major weekend for picnics and travel to visit family and friends.

Well, not so fast on the "travel to visit family and friends part."

With the price of gasoline (and everything related to it) going through the roof, many individuals and families won't be traveling this year. Long-distance driving has priced itself out of many families' budgets, and the airlines are starting to pile on the additional fees - American Airlines announced yesterday that they will start charging $15 for the first checked bag beginning on June 15th (just imagine what the competition for those overhead bins will look like now!)...most airlines are now charging for the second checked bag already.

Now let's move to the next ring of this circus - Congress.

Yesterday our elected reprehensives, ever anxious to give the appearance of actually doing something to justify their jobs, summoned the executives of the major oil companies to Capitol Hill to be grilled on the high price of gasoline and that curious byproduct thereof, their all-time record high profits. The results were predictable:

1. The oil company execs said it's not their fault; that the factors driving the price of oil are beyond their control.

2. The members of Congress sternly said, "Blah, blah, blah." Republicans blamed Democrats and Democrats blamed Republicans.

3. The price of gasoline continues to soar, enriching odious buffoons like Hugo Chavez of Venezuela and useless parasites like the Saudi royal family.

4. You and I take the kick to the financial crotch.

In the flood of words coming out of Congress on the topic of soaring energy prices, and all the self-justifying pleas of the oil execs, one question continues to puzzle me. I haven't seen anyone else - no talking head on TV, no editorial columnist, no "investigative journalist" - ask it, either. Riddle me this, Batman:

If the factors affecting the cost of a gallon of gasoline are beyond the ability of the oil companies to control, why are profits so high?

This is a deceptively simple question. If profit can be simplistically viewed as a function of the difference between income and expenses, you might expect that the profit ratio would stay constant as the expenses rose; that is, the cost of gasoline would go up, but the amount of profit made on the same amount of sales would remain relatively constant. But somehow, profits are going through the proverbial roof along with the cost to the consumer.

Why is this?

I have often freely admitted that I don't really understand economics much beyond those that directly affect my checkbook, and I'm not too sure about those, either. But beyond all the arcane technobabble of the economists, the full-page "please-love-us-it's-not-our-fault" newspaper ads published by the oil lobby, and the "things are rosy, just let the market straighten it all out" approach of the Administration lies the simple fact that the economy is in crisis and average Americans are getting pounded worse every day.

So...

If you are an oil executive, a shill for an oil executive, or one of my elected reprehensives, please scroll back up to the italicized question and answer it for me, if you would. Or if you can.

But don't worry, it's not your fault. Never fear, though! That reliable money spigot, the American taxpayer and consumer, will always be available to help you out.

And you can always count on the generosity of spirit of good samaritans like Mr Chavez and the Saudis.

Have a good day. More thoughts tomorrow.

Bilbo

8 comments:

The Mistress of the Dark said...

I'm going to buy a horse I tell you. Except I'd probably get thrown. But I think it would be cheaper travel for me in the long run.

Amanda said...

LOL! To the first comment from the mistress.

Oil prices really are crazy now. Luckily, we're not really feeling the pinch so much over here....perhaps because we don't go out that much in the first place. I can't imagine what its going to be like when I get to Brisbane in September. Perhaps I should just get one of those baby seats to attach to a bicycle.

zero_zero_one said...

Petrol prices have always been higher in the UK than they are in the US - if you're feeling the pinch, imagine how we're doing...

Despite being a mathematician, I can't help but wonder why the profit from these oil companies can't be viewed as the difference between income and expense... One would think that it was just scalable - despite taxation from whatever source an increase should more or less lead to the same profits or possibly reduced, that's how the mind thinks about it.

But we're not talking about maths. We're talking about corporations, and like the excellent documentary "The Corporation" (if you've not seen it or read the book you really should, it will open your eyes to so much) says, the guiding principle, the mandate, the raison d'etre for every corporation is to make as much profit as possible. That's the only consideration.

Price goes up: governments benefit from taxes, producers have greater initial profits, oil companies have record profits and the consumer really gets it stuck to them.

John said...

Mistress,
I have two that I'll sell you. Talk about you money pit! I'd suggest a bicycle instead the horse!

Bilbo said...

Andrea, if you get that horse, can I have dibs on the manure for my garden? I could just drive up to Capitol Hill and get all I want, but somehow I'd rather have yours. Zero_zero_one, I've lived in Germany and paid through the nose for gas...I feel your pain.

Mike said...

It's a trick. Bush and Cheney are making one last ditch effort to get to the last of the oil fields in Alaska. I'll bet they have a backdoor deal with Chavez and the useless parasites.

lacochran said...

"elected reprehensives"

:)

I like that. Nice one.

ssgreylord said...

Your sarcasm, your brilliance and your ability to communicate on such interesting, important topics continues to amaze me. I wish you were one of our "elected reprehensives". But maybe not, you probably wouldn't be so cool and honest...