Lets say an individual opens a sandwich shop in a small town. He sells a variety of sandwiches to local patrons and tourists. The shop owner sells each sandwich for $3 a piece. The cost to produce each sandwich is about $1.85, which means the shop earns $1.15 profit on the sale of each sandwich. What does the shop owner do with their profit? Whatever they desire. They can expand their business, invest it, save for the children’s college fund, use it to purchase a house in the mountains, etc…Now lets suppose, that a rival sandwich shop closes down, or lets suppose the population doubles in the town, all of a sudden the demand for sandwiches doubles. More and more people are coming in to the sandwich shop, buying more and more sandwiches as lines wrap around the corner. Because demand has doubled, so too have the shop owner’s profits. Now should the shop owner charge less and earn less simply because more people want his product? No…of course not. The same can be said of a person’s labor. Labor, is like a product, we sell that labor to an employer in return, they pay us an agreed upon wage, after cost of living, transportation, food, etc…anything left over can be considered profit. Lets suppose there is a labor shortage at Company X and they simply can’t find enough software programmers or garment makers or crane operators, those they interview demand 25% more in salary. Should these potential employees lower their salary demand simply because there is a labor shortage? No…of course not. By the same token, the oil companies shouldn’t be compelled to lower their prices because demand has increased. Oil prices have increased because of the shear-increased volume in demand from China, India, Eastern Europe and right here in our own backyard. As demand increases oil companies will sell more barrels of oil and thus their profits will inexorably increase. This is known simply as the law of supply and demand. The oil companies, like any businesses are in business to make money, they aren’t charities or governments giving away a product or service. This message, however, is lost on politicians today, who look upon the oil companies as easy targets as they seek to score political points with the voters. No one likes to pay high prices so why not attack the oil companies and thus politicians maneuver to craft proposals that would place caps of profits and other such foolhardy schemes. Make no mistake about it…as soon as we allow the government to dictate what a business (large or small) can charge for its services, its only a matter of time before the same government dictates what salaries we deserve, and how much we can spend on a new car or house or how much we can own or where we can own it. There’s a word for such forms of government, it starts with an “F” and ends with an “ascism.”
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/10/28/OIL.TMP