POST SCRIPTS

Nick, if everything in capitalism is done according to long established rules of good business, the system works pretty well. However, it seems each business sector, be it transportation, manufacturing, commodities, utilities or oil and gas, they all have this tendancy to drift towards unethical conduct in their pursuit of profits.

Sometimes this (flaw of human nature)is restrained by good, disciplined management or good watch dogs on the board of directors or when it's gets too out of whack, regulatory intervention.

We've seen plenty of bad examples of this when the utility group all but imploded. Consumers and investors lost billions when corruption got the best of corporate executives that were required to turn out more and more and more profit and when every legal angle was exhausted they turn to illegal methods. Round trip in house trading taht inflated sales by being both the buyers and the sellers or ficticious shell corporations to hide losses (Enron).

As the old saying goes, "Power corrupts and absolute power corrupts absolutely." Capitalism is not immune! Actually, we are up against at "power corrupts" bit at every level of life too. That's why we have to be constantly vigiliant everything we do; it's why our forefathers gave a government of checks and balances, knowing how people are when left to their own devices for too long!

As Americans, we have this passion for justice, influenced by our idealisism so abundant in our heritage and our culture. You might say, idealism is what we do best.

We want everyone to have a shot at grabbing the brass ring, yet we are also incredibly competitive, because their is so much opportunity around us and human nature drives us to pull out all the stops ( and more ) to reach what we consider success.

Sometimes these two concepts of idealism and competition take us in opposing directions and then life gets complicated. Right now, we see big oil getting too greedy simply because they can. They hold all the cards and this gives them an unfair advantage over the consumer.

When this happens the normal forces of "supply and demand" is compromised and tilted in favor of the monopoly. The oil companies have their big thumb on the scales. They have a suedo monopoly, powerful enough to influence the entire market and force prices artificially higher. Even with five major businesses controlling the bulk of oil and gasoline production, the competition among them just not there, there is no incentive to produce gasoline for lower pump price to undercut the competition.

So far they've gotten away with it because technically they are not a monopoly, but thats only because they don't need a close working relationship to cooperate as in a true monopoly, like we saw in Ma Bell.

This is an intuitive monopoly that works because they know a good deal when they see it! They know how to fix prices and control production. There is no need to have secret backroom deals, but there is still a need to have regulatory oversight to control their behavior when they go too far and profits turn into profiteering...exploitation.

Next week, I'm going to try to give a more indepth account of exactly what sort of unethical (illegal) conduct is causing the current price gouging. But, for now farm duty calls...I have to do some barn building!

Nick, well it's not exactly a monopoly, yet, there it is and what is happening is done with the sort of leverage only a monopoly can weild.

What is taking place is just as evil and unethical as a hotel renting a $50 room for $1000 a night after a nearby town has been destroyed by a hurricane because no other rooms are available.

However, at least the hurricane was a natural event and not a man made crisis as is this oil industry price gouging.

I agree, regulatory intervention would be a last step effort, but necessary, if the government can show there was profiteering taking place (and I believe they can).

MORE to follow soon...

Yes, I think it is a pretty clear-cut case of price gouging, monopolies, and price fixing. After the recent run-up in the price of oil per barrel and the price of gas at the pump, I got to wondering how many gallons of gas are derived from one barrel of oil and whether the increase is proportionate. The answer is, 20 gallons of gasoline per barrel of oil. Okay, do the math. If oil goes up a dollar per barrel, how much should the price of a gallon of gas go up? For those who have only studied under the new math system, where anything goes as long as you feel right about it, I will tell you the answer: 5 cents. According to the reports I have seen, in the past 3 weeks, a barrel of oil has gone from $72 to a "record high" of $75, causing gas at the pump to "soar." Really? Would 15 cents be soaring? Not unless the gas companies jacked it up to 30 or 40 cents. And before anyone starts bringing in extraneous data about the cost of refining, transportation, taxes, etc., remember, none of that has changed in the past 3 weeks. The oil companies justify their increases solely on the cost of crude oil per barrel. It's price gouging, pure and simple. That's why those CEO's are raking in hundreds of millions of dollars per year in salary and stock options.