Monday, May 01, 2006

Gas prices

Great discussion on the Becker-Posner Blog on the phony gas price "crisis." Folks who want us to reduce our dependence on foreign oil should be thrilled over $ 3.00 gas. Higher gas prices make alternative technologies more attractive.

I went back and forth with my fellow panelists on Eric Von's show last week over Exxon's supposedly "obscne" $36 billion dollar profit last year. Exxon has revenues of somewhere around $ 350 billion, so we are talking an operating margin of approximately 10%. Good, but hardly drug dealer profits.

To say that Exxon can't possibly "deserve" a profit of $36 billion is like saying that the federal government can't conceivably require 2 trillion dollars in tax revenue. Its a big country and Exxon is a big company. It has a market cap of around $350 billion which means that its shareholders (and there are thousands of them) have that much wealth tied up in the company. There are a lot of claims on that $ 36 billion.

1 comment:

jp said...

The obscene part of the phony gas price “crisis” is the political rhetoric.