As to the price increases and supply/demand, the problem with your scenario is twofold: first, the prices shot up before the hurricanes struck, since prices are based on futures, not current conditions. Second, the actual increases do not match increases that would have been reasonable for a supply/demand situation — with increases of over 50 cents a gallon overnight in some places before the effects could have been felt locally.

Bob Slaughter, President of the NPRA, argues this is because the market pricing system failed due to the extremes of the Katrina situation, and I’m willing to accept that possibility. However, the economic realities simply don’t match the supply/demand scenario you provide as an explanation.

Indeed, some of the firms — including Exxon Mobil — have reported lower profit margins in their retail operations than Wall Street expected, Vital said. That suggests those companies didn’t pass on to customers the full crude-oil price increase, keeping gasoline prices at their service stations lower than they might have been.

They had to pay more to get crude oil, but they didn’t pass the entire cost of that price increase on to consumers, and thus kept prices lower at the pump than they would have been had they passed on the entire price increase.

There are plenty of unanswered questions yet that a congressional investigation of the issue should hopefully bring to light to resolve the situation, and bring some sort of answers regarding the sudden, unwarranted price explosions, the profit margins, and the sudden and precipitious recent drop in those same prices.

Hurricane comes, crippling production and transportation capacity. Supply down, demand up. Prices go up as a result.

Production gets back into full swing, and demand falls as people see how expensive gas has gotten. Supply up, demand down. Prices fall as a result.

The price explosions weren’t unwarranted… supply was down and demand was up! That’s two reasons for prices to go up. And once again, prices didn’t rise as much as they would have if the oil companies had passed on the full price increase to consumers.

There are plenty of unanswered questions yet that a congressional investigation of the issue should hopefully bring to light to resolve the situation, and bring some sort of answers regarding the sudden, unwarranted price explosions, the profit margins, and the sudden and precipitious recent drop in those same prices.

Basic economics, Mark: when you run a business with multiple income sources, and one of your sources is struggling while another is making record profits, you use money from the second source to bolster the first source.

Yeah. THAT’S WHAT THEY DID!

Indeed, some of the firms — including Exxon Mobil — have reported lower profit margins in their retail operations than Wall Street expected, Vital said. That suggests those companies didn’t pass on to customers the full crude-oil price increase, keeping gasoline prices at their service stations lower than they might have been.

“It does appear that they ate a bit of the cost on the marketing side,” she said.

To be sure, the industry’s profit margins have swelled in recent years. But that increase has roughly followed, and even lagged, the rise in crude oil prices.

SFGate.com

Your “modest profit” rhetoric is transparent. We’re talking about companies that made record profits this year — r e c o r d — not companies that are suddenly being made to suffer financially by the big, bad government.

I don’t really care that they only make 9 cents profit per gallon. Cry me a river. They make record profits in a year where consumers are being reamed by the prices of a necessity (gasoline is no longer a commodity, given its centrality to the functioning of our society and economy) and the corporate shell-game is not going to save them.

Basic economics, Mark: when you run a business with multiple income sources, and one of your sources is struggling while another is making record profits, you use money from the second source to bolster the first source.

You do this particularly when that under-performing source is a necessity required by millions, and knowing that when the millions find out you’re rolling in record amounts of cash while they’re scraping for change to pay your (needlessly) exorbiant prices, you’ll be put on the sacrificial altar where apologetics won’t save you.

You also don’t spend billions of dollars fighting new energy initiatives so you can maintain a death-grip on the fuel economy and its income.

Sorry, but we all have to live here together, and if you’re a big link in the chain like this, and your greed (and slavish devotion to shareholders over everyone-and-everything else) impacts everyone on down the line from you, then everyone else has the right to take you to task for it. We sink or swim together, regardless of empty ideals about complete liberty.

(Note the economic downswing caused by rising energy costs as fewer small businesses can afford to stay in the black, retain employees, or expand.)

Your statement that oil companies don’t need to raise prices assumes that they don’t need to make a modest profit. They do. And if the government levies taxes that cause their profit to decrease, they’re going to raise their prices and try to regain that lost profit. They wouldn’t be serving the interests of their shareholders if they didn’t.

Your rhetoric is hollow, and without any basis in fact. It’s the USA Today “record profits” headline without any mention that the profit margin overall is only 10%, and is 3.5% for gasoline, and that much of the profit generated by Exxon was from investments they liquidated. It’s the tired old complaint that companies shouldn’t make profits when prices are high… that they should sacrifice their profits for the good of their comrades/customers. I get it. You don’t like capitalism. It doesn’t matter how low profits from gasoline are, you’re still going to complain because prices are high, and your only concern is for the “common good.”

2) They don’t HAVE to raise prices. See, that’s what “profit” means…making more money than is spent. They aren’t losing money because of the taxes, except from profits, so they wouldn’t need to raises prices to break even. They WILL raise prices, and SAY it’s because the taxes are causing a financial hardship, but that’s a wholly different issue.

Because, yeah, let’s defend the guys who needlessly jacked up gas prices to $3+ a gallon, and attack the people who are rightfully upset over this abuse of the public.

Not to mention, defending those who are causing winter heating bills to thus rise to insane levels (including mine…must be nice for you folks down in Florida not to have to worry about spending an extra $300 per month for heat in the winter).

As for communism…I know, it’s terrible! How dare we put people ahead of profits; those poor dollar bills and cuddly multi-million dollar salaried CEOs need someone to defend them from the eeeevil, hateful, greedy consumers and wicked, wicked government full of their representatives!

I’ve decided that Mark Jaquith is a genius. After talking with my wife this evening regarding the new legislation titled “Recapture Excess Profits and Invest in Relief Act”, I presented the argument of Communism. Apparently, Mark thi…

For a while there I thought it was all JRB all the time…

Apparently I was just giving the people what they want.