Can Conspiracists Ever Be Dissuaded?

Perception: Oil companies are manipulating prices and President Bush won’t do anything about it.

Economic Reality: Since demand is exceeding supply, prices are rising. Oil companies profits increase when they sell more of their product. See the column by Newsweek economist Robert Samuelson – excerpt below:

“It may surprise Americans to discover that the United States is the third-largest oil producer, behind Saudi Arabia and Russia. We could be producing more, but Congress has put large areas of potential supply off-limits. These include the Atlantic and Pacific coasts and parts of Alaska and the Gulf of Mexico. By government estimates, these areas may contain 25-30 billion barrels of oil (against about 30 billion of proven U.S. reserves today) and 80 trillion cubic feet or more of natural gas (compared with about 200 tcf of proven reserves). 

What keeps these areas closed are exaggerated environmental fears, strong prejudice against oil companies and sheer stupidity. Americans favor both “energy independence” and cheap fuel. They deplore imports — who wants to pay foreigners? — but oppose more production in the United States. Got it?”

I was reading the column thinking how depressing this must be for an oil conspiracist to read about. Which naturally raises the question; Can conspiracists ever be dissuaded?

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About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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One Response to Can Conspiracists Ever Be Dissuaded?

  1. No, it’s been my experience that they can’t. I recently had an email debate with fellow member of a classic car group about gas stations. He believed the fact that retail gasoline prices in his town were within a couple of pennies of each other at every gas station was evidence of collusion. I tried to explain to him that it was the exact opposite. Retail gasoline is about the most perfectly competitive market we can observe at work. It’s a fungible commodity and its sellers must post their prices visibly. The buyers are mobile and have perfect pricing information. A gas station can’t be much more expensive than the one across the street or down the block or he’ll lose all of his business. That’s why there is very little profit margin for the gas station owners on a gallon of gas.There’s a simple fact that most people ignore. That’s that gasoline is a multi-tiered industry. The oil companies shouldn’t really be called oil companies, they are oil refiners. The cost of the oil which they refine is largely out of their hands. It’s just easy to demagogue then oil companies’ profits though they typically book about 10% which is very healthy but not excessive by any measure. They just sell SO MUCH that each quarter they break records.

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