Oily Hand Waving

Oily Hand Waving

At the University of Washington when someone got up and tried to explain his scientific position, but didn’t have real information and facts to back their explanation up we called it hand waving.  Hand wavers didn’t last long in our group----and!!!!-----hand waving was a good indication that that they were trying to put something over on us.

Does anyone besides me feel like all the explanations and self serving discussions on why the price of gas has skyrocketed feel like world class hand waving?  It seems no one can present a lucid argument to explain why gas prices are rising.

Competition in our free market economy helps keep profits and prices down to a reasonable level.  We have three grocery stores in town that are easy to get to.  Consequently none of them can indulge in price gouging.  Grocery stores are a great example of how the free market is supposed to work.

Antique shops or teriyaki restaurants are another good example of competition in town.  As soon as it looks like teriyaki restaurants are making good money more open.  This cuts down the profits of the other ones.  Sometimes through competition one or more closes, but this process adjusts the prices and profits to a reasonable level.

I’ve included a graph of the oil companies profits from 2009-2011 along with the changing price of gas (the dashed orange line).  It’s no surprise that as the price of a barrel of oil rose so did the price of gas at the pump and------here is the shocker!!!!-----so did oil company profits.  And where did the record oil company profits come from?  Our pockets, either at the pump or through paying higher prices for products made using oil.

If oil companies were grocery stores in Enumclaw, competition would eliminate record profits.  Surprise, surprise---- because oil companies are few in number and have their hands in all aspects of the business from pumping oil out of the ground, refining and selling at the pump, competition is sorely lacking.

If one oil company raised the price at the pump and others didn’t, they would be soon forced to lower prices.  But if a juicy excuse comes along (summer consumption, normal Middle East turmoil, etc.) for all the companies to raise prices the whole network of oil companies and Wall Street speculators goes into gear to produce record profits at our expense. 

Unfortunately at this time there is really no solution to this lack of competition since the oil companies and their Wall Street colluders are protected by very powerful interests in Congress.

The only “bottom line” that matters is profits and record profits prove the lack of competition is real. Anyone for “oily hand waving”?