Thursday, July 03, 2008

Exxon

Costs don't have to go up for Exxon to legitimately charge more. More demand drives prices up regardless of costs. This is Econ 101. Now, I don't know how much greater demand is. I suspect it is growing fairly rapidly in places like China and India as their economies grow and their people have more income as many economists are saying. There are other factors driving up the price of gas too, most of which have little to do with what Exxon wants to make today. China subsidizes gasoline purchasing. Thus, demand is higher than it would be if the consumer were paying full price. Here, we tax gasoline, thus we purchase less than we would without the tax. Again, remember your high school supply/demand graphs.

I'm no economist, but oil companies are always the bad guy when prices go up. Congress investigates to please their angry constituents, and no collusion or price fixing/gouging or even much evidence is ever found. This is not to say it doesn't exist, but it seems unlikely to me.