Do oil companies profit “at the expense” of consumers?
“Windfall profits” tax proponents frequently imply and sometimes even claim that gasoline prices are high because oil company profits are high. They have it exactly backwards. Profits are high because prices are high. Wittingly or otherwise, they confuse cause and effect a poor basis for legislating energy policy. High energy-prices do hurt the economy. However, those prices would hurt the economy a lot more if nobody profited from them. The economy has remained strong in spite of high energy-prices partly because the energy sector is flourishing. Also, oil companies invest today’s profits in tomorrow’s energy infrastructure. That will help expand supply and lower consumer prices. 4. Why are gasoline prices high? Price is a function of supply and demand. During 2004, thanks partly to U.S.-led global economic growth, world petroleum demand grew by 3.2 percent[10] more than twice as fast as most experts predicted.[11] Demand remained strong through most of 2005. That is the main reason c
