Independent Christian Voice

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Big rise in profit places oil giants on the defensive

From The New York Times:

A sudden interruption in oil supplies sent prices and profits skyrocketing, prompting Exxon's chief executive to call a news conference right after his company announced that it had chalked up record earnings.

"I am not embarrassed," he said. "This is no windfall."

That was January 1974, a few months after Arab oil producers cut back on supplies and imposed their short-lived embargo on exports to the United States. Oil executives, including J. K. Jamieson, Exxon's chief executive at the time, were put on the defensive, forced to justify their soaring profits while the nation was facing its first energy crisis.

Three decades later, their successors are again facing contentions that oil companies are making too much money and have failed to expand production.

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These record profits are not reflective of a free market, in my non-expert opinion. Oil companies enjoy a captive consumer base. They know that they hold us all by the proverbial balls. What incentive do they have to increase their production capacity? They make more money now on each drop of oil with the demand high and the supply low. And since oil and gas consumption is not something quickly or easily remedied, they can enjoy record profits and there's little we can do about it in a "free market" system. In Oklahoma City, we're spread out. You can't get very far without a car. Car companies have done little to improve fuel efficiency; there's little incentive for them to spend the R&D dollars to make any real innovative breakthrough. And let's face it, we consumers have done little to give them incentive. That's where government should help look out for our long-term welfare as a country; that includes reducing our dependence on dwindling resources and looking for real solutions. We've not held our political leaders accountable. We're as much to blame. I don't claim to be an economist and there may be flaws in my supply-demand arguments. But as a layman, it seems that the laws of supply and demand can be manipulated or misapplied in certain instances. When consumers have no other viable alternative, the demand seems somewhat forced; supply can then be manipulated. This creates an unfair imbalance which reaps a windfall of obscene profits for one side and hardship for the other.

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