05
May
10

I’m too fucking dumb to blog

As ably demonstrated by Austin Frakt —

One thing we’re hearing is that BP pledges to pay for the costs of the spill. Now, maybe they won’t really pay for everything and/or maybe doing so is rare for companies that are responsible for spills. I don’t know.

However, what do you expect is (or will be) the ultimate source of every dollar BP pays? I expect it will be consumers. The price of oil (and gasoline) sold by BP will have to reflect it. How could it not? Where else does BP get money to pay for the spill, or anything else? Fact is, if BP pays the cost then it is somehow built into the price of oil. But if BP doesn’t pay, and instead government does, then it could be said unambiguously that the cost isn’t reflected in oil prices.

— and Russ Roberts —

Food stamps are for poor people, I explain. I pay taxes to fund them even if I never have a poor month where I’m eligible and collect.

People think social security is different. I paid into the system all those year, people cry. But those taxes you paid went into a big pot with all the other taxes and funded all the things government does–wars and payments to farmers and food stamps and yes,  money for old people, poor or rich, who paid social security taxes in the past.

— knocking their respective pitches not only out of the park but out of the goddamn state.

Go.  Read.  You’ll learn something.

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3 Responses to “I’m too fucking dumb to blog”


  1. 1 aczarnowski
    May 5, 2010 at 06:44

    I was just wondering this morning, in fact, if the return to $3/gal gas in my area was still Bush’s fault. I concluded it must be. No media outlet is mentioning the rising prices so the underlying cause must be the same as before.

    Payouts for spills? Inflationary forces at work? *Pfft* Postmodern progressives didn’t write those into the script. The script clearly states it’s Bush’s fault along with the evil energy corps.

  2. May 5, 2010 at 09:45

    a slight quibble

    given that there is a choice, given the elasticity of demand for BP’s raw petroleum, how much of the increased costs to BP will in fact be borne by consumers, or result in depressed profits for BP, that is, borne by the investors?

    if BP does absorb the cost, to what extent, given the elasticity of demand, will that put pressure on BP’s stock?

    finally, how big a disaster must a company like BP face before the consequences for the company are catastrophic?

    the Exxon-Valdez experience would be instructive, perhaps. Yes, it is true that costs paid by a company are paid from revenues received from consumers, but that statement doesn’t reflect the effects on the company’s ability to either return profits to its investors or the stock price. Since I don’t believe that oil companies can unilaterally set prices, nor would they set them at artificially high prices in order to maximize profits even under monopoly conditions, it seems like the first observation is really an intellectual canard.

    • May 5, 2010 at 12:04

      Good points. BP can of course set whatever price they choose for their products, but may be entirely unable to sell oil at any price higher than pre-spill. The point I took from the first post isn’t so much that the per-gallon price of gas at BP stations will have to increase to cover the costs of the spill, but rather that real people (consumers, investors, etc) will bear the costs, not some abstract and easily-villified “corporate entity” called BP. The costs won’t be paid by Scrooge McDuck dipping into his swimming pool of gold coins.

      I suspect investors holding BP are going to take it in the shorts. So too might BP’s research and development programmes — their biobutanol development, say. Consumers won’t notice a $0.20/gal increase at the pump, but they may have to wait a few extra years for a biofuel that’s significantly less stupid than bioethanol.


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