The post had a great breakdown on where all the
money from increased costs of gas goes. It turns out that it is the
refiners that have captured the lion’s share of the profits. The actual
gas stations look as though they are making about as much as before.
Why is this? The simple answer is competition. There are what seems
like endless gas stations. Any possible huge profits to be had are
erased by competition among themselves for customers. There are
relatively few refineries. There will always be enough gas stations
around to supply consumers, but it looks as though there aren’t enough
refineries to maintain the lower prices that we’d like to.
The article has the usual quotes from politicians
that advocate price controls, taxes, etc to eliminate “excess” profits
(whatever those are). The only way to bring down the price without
adverse effects to the rest of the economy is through competition. I guarantee
you that if profits remain sky high, other companies will
come into the refining business to capture some of that profit.
Companies such as 3M, DuPont, etc are certainly capable of doing it, it
just hasn’t been profitable for them to do so, until now. If things are
allowed to work themselves out, without meddling from congress (and
that includes laws excluding entry into the business), overall prices
will come down assuming that the oil supply doesn’t dry up.
Another definite result of high gas prices (separate
from oil prices) will be a more aggressive pursuit of alternative
fuels. The more gas costs, the more lucrative things such as hydrogen,
ethanol, solar, hamster wheels, etc. become. The key is to let people
and corporations pursue that potential profit. This is the only proven
way to advance technology. Human ingenuity will find solutions to
problems if it is profitable to do so. The newest alternative fuel will
find its place along side all the other technological advances made
over the last 100 years that have made our life so good.
Isaac