Working-class people struggle to fill their gas tanks at nearly $3 a gallon while oil company executives help their companies rake in profits of figures in the billions – something seems off-kilter in this situation.
During a Senate hearing on Wednesday, oil company executives defended their companies against accusations of price gouging. The executives said profit fluctuations, which have gone up as of late, are normal in their industry and are not a result of price gouging.
In the third quarter, four of the nation’s top oil companies, including Chevron Corp. and Shell Oil Company, earned $25 billion in combined earnings while crude oil was priced at $70 a barrel, according to an Associated Press story. Again, something does not seem quite right here.
After Hurricane Katrina, which left damaged refineries in its wake, the challenge oil companies faced was “to minimize the increase in price while at the same time recognizing if we kept the price too low we would quickly run out (of fuel) at the service stations. It was a tough balancing act,” Lee Raymond, chairman of Exxon Mobil Corp. was quoted as saying to the Senate in the AP story.
What the executives are telling is a story of basic economics: Supply and demand will be affected if there is no supply to sell to people. It seems that rather than miss out on any type of profits from not having a supply after Katrina, they went ahead and raised the price of the supply they did have to make a larger-than-normal profit.
Through the hearings, some members of Congress are attempting to hold the oil industry accountable for raising their prices, putting pressure on them to provide an explanation to the American public as they are, in turn, placing financial pressure on Americans with regard to putting gas in their cars and heating their homes.
It was suggested by some senators that a “windfall tax” be placed on oil company profits, which would be given to consumers struggling with the high cost of energy. Executives decry that this would create in people a fear of investing in the petroleum market. They also say that the implementation of a tax would be too hasty of an action.
However, it is not quite logical that people would be able to invest money in petroleum if those same people are already spending money on petroleum products for their cars and homes.
Also, executives may be right: A tax at this time might be too hasty of an action. Yet the government should not wait too long to take action. The longer they wait to impose restrictions on these companies, the longer that working-class person struggles at the pump.