Thursday, April 27, 2006


Cavuto Clobbers Durbin

I wish I knew more about economics--all I have read is Marx. But I like Neal Cavuto and I like him even more for this take down of short-on-logic Senator Dick Durbin (D-IL) on gas prices. You can watch the demolition here.

The main reason gasoline is approaching $3.00 per gallon, is that oil, before you refine it and deliver it, is over $70 a barrel and it's not a 55 gallon barrel either.

$.09 per gallon is the average oil company profit and $.50 is the average tax on a gallon. Who's gouging whom?

And I can answer Durbin's lamest question--the reason oil company profits are so high is that they're selling a lot of gasoline Du-uh.

Durbin said: "There is no correlation between the increase in the price of a barrel of oil and what we're paying at the pump." You know, there's common, ordinary idiocy and then there's Senate level idiocy.

UPDATE: The good sense of Thomas Sowell provides a wise second opinion.

UPDATE II: Charles Krauthammer is quite good on the subject as well.


Say it w/ me: "The increase of the price of gasoline that we are currently experiencing profits no one but oil company shareholders, is bad for average Americans, and bad for the economy."

Exxon Mobile has reported the 5th highest quarterly profits ever reported by a publicly traded company. It's quarterly earnings are up 7% in what analysts believe may its weakest quarter of the year and, oh yeah, its quarterly profit was 8.4 billion dollars.

Do you know how much $8.4 billion dollars is? If my math is correct, if you placed 8.4 billion one dollar bills end to end, the line of dollars bills would circle the earth @ the equater almost 32 times. I mean it's only 31.99759875 times, but 32 is close enough for governemnt work, don't you think?

Meanwhile, you and I see it @ the pump. We also see it @ the grocery store b/c let's face it, the only thing we might be eating @ this time of year that is semi local is bread (maybe), beef (again maybe), and a few other items. So we pay more @ the pump, more @ the store, and more everywhere else that involves transportation or the use of fuel somewhere in the line of the production of goods and the provision of services.

This does not affect fat cat Charles Krauthammer. He is wealthy. This affects you and me, who between us, have 5 children in college, 4 of whom are in NY and may want to return to CO sometime this summer. I mean are we able to increase the price of the services we provide or provide more of them to cover the rising cost of everything that is realted or connected to the price of fuel?

The platitutes regarding supply economics are, in this instance, the southern product of a north walking horse. You may say, "Well, when the price gets too high, peeople will use less fuel and the price will drop."

I may say, "When the price of heroin gets too high, the addict will shoot up less and the price will drop." Or will the addict break into my house or hold up a 7-11?

Figuratively speaking, this is what we are confronting.

Of course one reason the supply of crude oil is tight is that China, notably, is consuming a lot of it. Hu's no longer on first. I'm not sure where he is now, but he was in Saudi Arabia b/f he went to Nigeria. I wonder what these countries have in common?

Meanwhile the Chinese government is suppressing the price of fuel so that a gallon of gas in Beijing costs about half of what it does in Denver, maybe less. Th eChinese governement is also suppressing the value of its currency, but that is a subject for a different comment.

Just remember one of the premises in one of our favorite books, Neal Stephenson's Snow Crash in which the U.S. has become an also ran economy that does only three thind well: produces Rock 'n Roll; computer code; and pizza. It's not so far fetch the way the Chinese are controlling the market as Exxon fiddles while our economy burns fuel.

Can you blame anyone in Congress who tries to do something about this situation? Quite probably, nothing can be done. So "people of your ilk" may indeed find this situation a bit uncomfortable come November. Hmmmm. Let's see. The War, Katrina, Jack Abramoff, Tom Delay, and the price of gas is north of $3.00 a gallon and the fat cats are getting fatter.

Of course an election won't change things but the average guy or gal on the street is not feeling very empowered right about now.

This keeps up, Wednesday, November 8, who is going to be dancing the Kozachok and who is going to sitting around saying, "Shut up and deal?"

"The increase of the price of gasoline that we are currently experiencing profits no one but oil company shareholders, is bad for average Americans, and bad for the economy."

Can I add that invading Iraq and pressuring Iran are not helping to aleviate this situation?

Go Tony, Go!
First, on China:

If the Chinese are subsidizing the price of fuel for their people, then increasing the price of the rootstock (crude oil) will force them to spend more of their money in subsidies and less in attempts to threaten the US. In that regard, increased oil prices and continued subsidies should be a good thing, no?

Second, I note that you don't address Roger's point that our aggregated governments are taking more than 5 times as much profit from each gallon of gas than the oil companies. And please note that this is only direct taxation on the gas at the point of retail sale. It doesn't address taxes on the profits of the gas station, the gas wholesaler, the gas refiner, and the gas driller. Nor does it address the property taxes on each of those entities' land and buildings. Nor does it address the taxes on capital gains in the stocks of those entities. Who, exactly, is the profiteer here?

The oil companies (to use an imprecise term) are selling a product at the price they can get for that product. If a company likes its products more than you do, you should not buy them, or you should reduce your consumption. I expect that would be inconvenient, but inconvenience isn't much on which to base outrage.

In selling products at the market price, the oil companies are directly analogous to the owner of a home (say, you or me) who sells that home for what he can get for it.

"The increase of the price of [houses] that we are currently experiencing profits no one but [owners of those houses], is bad for average Americans, and bad for the economy."

I assume you wouldn't mind if the gov. were to decide to impose a confiscatory tax on the profits when you sell your home. After all, everyone has to live somewhere. It's not as though houses were luxury goods.

I disagree w/ your logic and reasoning here.

So far as the Chinese are concerned, they have lots of $. By keeping the value of their currency tied to the dollar and artificially low, they have managed to be on the surplus side of a huge trade imbalance w/ the U.S. Go to Wal Mart and see how much of the goods on display are manufactured in China. At this juncture, China can afford to keep suppressing the cost of fuel.

For our sake, I hope the market place levels the playing field but blind worship of market place forces is not necessarily a good thing. Remeber the Tragedy of the Commons.

I am certain you agree that a rise in the price of gasoline has a ripple effect and that, as I said yesterday, Roger and I can't really change what we charge for services. We can try and provide more of them, which will adversely affect the quality of our lives. Do I want to work more just so I can afford the same goods and services I am consuming now? Please understand that my family lives frugally in many ways. Suure we can cut back. So I cut back and Exxon Mobile makes 8.4 billion dollars in a quarter.

Consumption of energy is not like selling or buying a house. I think that is a bad analogy.

I don't necessarily advocate taxing the profits b/c I agree that taxing the profits will have the same ripple effect that the increase in the price of gas has.

I think that Exxon Mobile is squeezing the consumer. I have no power to squeeze back.
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