Should Oil Executives Be Blamed for Current Gasoline and Natural Gas Prices?
Executives from five major US based oil companies testified before the Senate Judiciary Committee yesterday. I am sure they were well prepared for the questions; they have been making similar journeys to Capitol Hill since at least 2005 when their profits soared and gasoline prices temporarily touched $3.00 per gallon in the wake of Hurricane Katrina. (See, for example On Profit and Pump Prices dated November 10, 2005.)
The executives in both hearings tried to explain that their companies do not really have an excessive profit margin since their final profit is only a small percentage of their total revenue. They also tried to explain that they do not set their prices; for a commodity with a world market like oil, the prices are set on transparent exchanges where anyone is free to buy the product at whatever price they can find a willing seller. They also claim that they have been restricted from developing oil production in high potential areas and that those restrictions have prevented them from being able to produce enough additional oil to have much effect on the supply-demand balance.
