Big Oil Companies, Free Markets, Gas Prices

Here it is, plain and simple. In the U.S., the term "free market economy" is only a popular and useful term. The U. S. has a managed economy with significant free market influences. Free market forces need to be distinguished from the term "free market economy." Free market forces drive everyone's behavior where commerce is concerned, whether they live in Russia, China, the United States or anywhere else. Self interest is what causes individuals to do what they do. Self interest causes corporations to do what they do.

In dictatorships like North Korea and Cuba, the state directly restricts free market forces. In democracy-based countries different players use the government as a means of gaining an economic advantage, thus restricting free market forces. The closer a country comes to achieving the status of a complete democracy, the more the government is used as an economic tool, by various powerful interests. Every business would like to get a subsidy from the government, and many do. Subsidies can be direct cash payments or indirect. How the government chooses to spend its huge budget can greatly influence the fortunes of entire industries.  An example of an indirect subsidy is the interstate highway program. Oil companies and auto manufacturers have never been sorry about money spent on roads and highways. The government cannot spend without benefiting some groups out of proportion to others. The true beneficiaries of big government are the biggest players in the economic arena. Over the years, tax dollars have been of great assistance to corporations in numerous industries, not excluding the oil companies. Consumers are not without power. They can use their political influence to attach, through government,  parts of the fortunes of corporations, and they do.

As of late it has become fashionable to blame big oil companies for high gas prices.  They have made good use of government to gain an economic advantage, but they don't have the pricing power that is often attributed to them. Any edge that oil companies have comes from knowing how to run businesses within the constructs of a democratic government.

Not even monopolies have complete pricing power but they can maintain healthy profit margins. The modest profit margins of big oil companies would be much larger if they were exercising pricing power.

Ragging on oil companies as a means of bringing down gas prices will accomplish no more than fighting the high prices with a stick. Anything other than letting gas prices float in the market place will do more harm than good.