[Previous entry: "CUPE is worried about propaganda?"] [Next entry: "Oh how I wish for a federal vacuum"]
06/11/2008: "McCain's shows off his economic ignorance"
In the news today, Republican John McCain is quoted as saying oil companies should return some profits to consumers.
What on earth for? By definition, consumers are the ones that are buying the oil companies' products. Also by definition, said consumers have already profited by buying the products. We have made the decision that the products are more valuable to us than other uses of the money, and so are better off for purchasing the products. That's profit.
See, there are only a handful of people in the world who could possibly produce the kinds of products that oil companies produce on their own. Even then, they would have to purchase billions of dollars of equipment, land rights, employees, and so on. For all the rest of us, we benefit from the incredible investment these companies have made in offering us a valuable product.
In fact, given all the competition in the oil product market, these products are being offered at razor thin margins. John Gormley, a local talk show host, calculated all the costs involved in delivering gasoline to the pumps. Despite all kinds of complaints that we are being gouged, or that oil companies are colluding to charge us more, the end number he comes up with is within a few pennies of the actual price at the pump.
No, companies are only obligated to return their monetary profits to those people who have shared in the risks they take. That would be the investors that have given the companies their money to use. That's right, the same shareholders that they already return profits to. Thanks to the wonders of modern investing, pretty near everybody who owns shares in a mutual fund probably is an effective shareholder in at least one oil company.
So, we can all profit from companies by sharing in their risk. Or we can profit by purchasing their products that we value. Either way, we can profit from companies without those companies being coerced to do something so counterproductive as what McCain is suggesting.