Oil Company Execs Defend Profits to Senate

From Yahoo! News:

WASHINGTON - Oil executives sought to justify their huge profits under tough questioning Wednesday, but they found little sympathy from senators who said their constituents are suffering from high energy prices.

[...]

There is a "growing suspicion that oil companies are taking unfair advantage," said Sen. Pete Domenici, R-N.M. "The oil companies owe the American people an explanation."

[...]

The head of the Federal Trade Commission said a federal price-gouging law "likely will do more harm than good."

"While no consumers like price increases, in fact, price increases lower demand and help make the shortage shorter-lived than it otherwise would have been," FTC Chairman Deborah Platt Majoras told the hearing.

[...]

Shell earned $9 billion in the third quarter, said John Hofmeister, president of Shell Oil Co., but he said the company's investment in U.S. operations over the last five years was equal to its income from U.S. sales.

"We respectfully request that Congress do no harm by distorting markets or seeking punitive taxes on an industry working hard to respond to high prices and supply shortfalls," said Hofmeister.

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I want to comment on what FTC chairman Deborah Platt Majoras said.

She said that price increases lower demand, which is true, if the demand is elastic, and the demand for gasoline is most certainly inelastic, meaning that because of gasoline's vitality to our daily life, consumers will buy it no matter how high the price gets.

Of course she knows this good and well. It is the inelasticity of the demand of gasoline that causes these companies to profit even during a supply shortage.

Enough is never enough for these fat cats and its no suprise to me that they feel the need to set their prices in a manner that profits them, while everyone else struggles.