Oil and Gasoline Prices: Free Market Theory

Does free market theory operate in the present oil and gas market?  Sute it does; just not very efficiently.

For example, let us look at the way OPEC, Leftists (especially leftist environmentalists), the media and the U.S. Congress are COOPERATING to increase oil and fuel prices, and to keep the free market from operating. 

What happens if oil companies produce more oil?  They make more PROFIT (in the short run, although in the long run they might be better off with OPEC type output control and price fixing--the very things that CONGRESS, leftists, and the media are virtually forcing them to do).  As set forth in the previous entry, the private (freedom, remember?) search for PROFIT is the engine that makes a free amarket system go.  Resources are allocated where they need to go (to satisfy demand) because people (and companies, which are composed of people) see where there is more PROFIT to be made. 

Thus, it is perverse, and stupid, to worry about profit being made.  The whole idea of a free market is for people to see where more profit can be made, and to allocate resources there.  Sruprise!!!!  Guess where Congress (especially Democrats, but Repblicans were hardly conspicious in makkng the points I am making) and the media concentrated in recent hearings?  Right.  They concentrated on PROFITS, which I have labeled as perverse--because it is perverse 

The message Congress is sending to big oil companies is:  Don't make more profit.  We won't let you keep it.  That leads to the further messaste:  Don't produce more oil and gasolline, because that will give you more profit (over the relatively short run, but that is the time frame in which people operate, unless you distort the natural process), and we are not going to let lyou keep it.  Thus, when Hillary Clinton suggests that oil compnay profits are HERS (the government's, but to people like Hillary Clinton, Barack Obama, and other leftists, it is all the same thing), to dispose of, she is sending the meassage that oil companies should NOT produce more oil and fuel.  That is exactly the wrong message to send.  That is also why increased taxes on oil companies is exactly the wrong message, although (as with FARMERS), there is no reason to give oil companies special tax breaks when they should not need them.  The present market itself should be strong enough to provide incentive to produce more energy where it makes ECONOMIC SENSE,  (The only question here is what is a "special" tax break; for example there is the argument that "depletion" deductions are the equivalent of equipment depeciation, although that is an argument that seemignly applies to ALL natural resource commodities--gold, silver, potash, aluminum, etc.).

What is the REAL area Congress should be "grilling" oil compnay executives about?  There is really no question about this.  Congress SHOULD be "grilling" oil compnay executives (and "experts") about one thing:  HOW do we PRODUCE more oil and gasoline?  Have you seen any publicity about THAT? Of course not.  That is because leftist Democrats in Congress, and leftists elsewhere (such as in the media) are not interested in the real problem, from a free market point of view.  They are interested in the MARXIST (or whatever word you want to use for the central planning approach of Maxine Waters, et. al.) approach.  That means BASHING oil compnay profits and the free market system.

Of course, it is embarrassing for Congress to ask oil companies why they are not producing more oil and fuel.  That is because Congress and leftists (lawsuits, attempted state regulaton, etc.) won't let more oil be produced or more refinieries be built.  At the every least, ,Congress is keeping some 2/3's of the potential oil drilling areas, in and around the United States, off limits to drilling   WHY is there not more OUTRAGE at this?  After all, it is obvious that this is a major factor in restricting the efficiency of our free market system.  Remember, again, taht the whole idea is that more resources will be allocated to PRODUCE more product if the profit potential is there.  Well, the profti potential is there (although Congress and leftists are doing their best to remove it), but Congress is RESTRICTING the ability of people to allcate resources to take advatage of the profit seemingly available.  This has EXACTLY the same effect as OPEC.  It is a RESTRICTION ON OUTUPUT by the Congress of the United States.  Congress might as well be a part of OPEC.  They are helping OPEC operate.   In fact, there is some question about whether OPEC countries CAN produce much more oil at any price--meaningthat Congress may now be one of the main restrictors of output in the world today.  Leftists and Congress have tried to deflect their obvious responsibility for that by deflecting total blame to the evil oi companies, and OPEC--again the MARXIST technique.

Have I not said, however, that the free market system is not working well in the oil and fuel markets?  Indeed I have, but one of the reasons it has not been working well is CONGRESS (plus leftists and government in general).  Beyond that, even a free market system working BADLY works better than a central planning system.  That is because a central plainning system has no way of working well--no way to "work" in any manner but hopelessly badly (over any kind of long term). That is because there is no way for a few (relatively) fallible human beings to correctly allocate resources and control output and prices--the things a free market system does automatically.  That is why it compounds pererversity to suggest that the solution of failures/ineffeiciencies in a free market syste is central planning.  Central planning is the WORST, most hopeless "solution".  The only correct approach is to try to remove obstacles to the free market system working better (obstacles like the unreasonable restrictions on drilling), and to make sure that central planning is at a MINIMUM necessary to avoid predatory and destructive free market practices ("strip mining", environmentally unsafe drilling--as most drilling presently is NOT "unsafe", release of poisons--NOT CO2, etc.).   Perversely, of course, leftists (including those leftist Democrats now controlling Congress), want the MAXIMUM interference with the free market system, even though there is no doubt of the adverse consequences of that.  Even theoretically, IT DOES NOT WORK.  For leftists, if is a moral thing,  They don't care if central planning cannnot possibly work.  Theirs is the MARXIT idea that "profit" is immoral, and exploiting people.  That is what leads to the leftist approach that it is better for EVERYONE to be worse off rather than accept this "immorality".

 

Analysis to be CONTINUED in subsequent entries, as I have decided this is a convenient point to end this entry (sort of like a chapter ending)