Swift Economics: Oil Company Altruism

Somehow I missed this rather sarcastic piece I wrote for SwiftEconomics when republishing many of its old articles last year.

No one will deny that our country is in a deep and severe recession. Major banks have failed, the government has unwisely bailed out large financial institutions to the tune of 700 billion dollars, the Dow Jones is about half of what it was a year ago, housing prices have drastically fallen, foreclosures have skyrocketed and unemployment numbers are up to 8.1%. It is unquestionably getting ugly out there.
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So isn’t it nice of our leading energy companies to come along and offer us such charitable prices at the pump? Last year at this time, gas was hovering between $4.40 and $4.60 in Salem, Oregon, where I live. Salem is a boring town unfortunately, so each weekend I wanted to leave for Portland or Eugene (each an hour away). But with those kinds of gas prices, I weighed the pros and cons very carefully each time. Sitting alone in my apartment on a Saturday night isn’t that bad compared to purging my wallet at the gas station.

​Nationally, things were a little better as the average price hit a record $3.24 a gallon in May of last year. But then Christmas came early. Apparently the oil executives felt guilty about their record setting profits and felt like they should give some of it back to us less fortunate. This massive outpouring of altruism has lead gas prices to plummet. In Salem gas has been around $1.85 a gallon, the cheapest I’ve seen since I was in high school. And this hasn’t been a short lived phenomenon, it’s been that way for many months. Nationally gas prices have fallen to $1.96 a gallon. For those of us struggling to pay rent on time, the oil companies may be all that’s keeping us afloat. Thank you BP. Thank you Exxon.  Thank you Chevron. And the thanks shouldn’t end there. Oil, which was close to $150 a barrel, has plummeted to $52.77. Apparently OPEC has gotten into the giving spirit too. Thank you OPEC.

Now unless you are on a record setting pace for denseness, you realize I’m joking around. The oil companies are still as greedy as ever. It’s simply they can’t charge as much because of good old supply and demand. Honestly, think about it: why did the oil executives all of a sudden start to raise prices around the turn of the century? Did they just up and become greedy? Of course not, they’ve been greedy the whole time, they were just restricted by the market. The greed explanation for price fluctuations is nothing more than circular reasoning. The real explanation for the lower gas prices is our inflationary boom has collapsed (financial crisis, housing bubble) and the deflationary adjustment has come. This is bad, but it does have a silver lining. Sure investment and wages will go down, and unemployment will go up, but prices should go down as well (that is unless the government tries to keep prices from adjusting, like they did in the Great Depression). Eventually (again under the delusional, and now incorrect, assumption that the government stays out) the economy will stabilize and everything should return to normal relatively quickly.

Now remember before the financial crisis and bailouts and change talk and all that. Remember back to last summer when all the talk was about the housing crisis and oil prices. The oil companies were gouging us! Hang the CEO’s from the gallows! The hysteria was completely out of control. It should be no surprise that those leftists at the DailyKos jumped into the muck, but so did Bill O’Reilly and many other outraged social conservatives and right wing populists. Congresswoman Maxine Waters even, to her eternal shame, threatened to nationalize the entire oil industry!

Well what now Maxine? What now Bill? What now left wing nuts at the DailyKos? Will you thank the oil companies for their collective generosity? Will you take a quick break from your current outrage over the supposed lack of regulation in our financial markets, to apologize for all the bad things you said about them? You know what, save the apologies and save the gratitude. Here’s another idea, why don’t you all just realize you don’t know the first thing about economics and shut up!